<PAGE>
LOGO
NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
NEW ENGLAND STAR ADVISERS FUND
PROSPECTUS AND APPLICATION
MAY 1, 1995
New England Star Advisers Fund (the "Fund") is a multi-manager, non-diversified
mutual fund that will allocate its investment capital on a substantially equal
basis among multiple independent investment management organizations that em-
ploy different investment styles and strategies. The Fund is a series of New
England Funds Trust I (the "Trust"), a registered open-end management invest-
ment company. Other series of the Trust are described in separate prospectuses.
The Fund's investment objective is long-term growth of capital. There can be no
assurance that the Fund will achieve its objective, which may be changed with-
out shareholder approval.
The Fund offers three classes of shares to the general public (Classes A, B and
C). The offering price is based on the net asset value per share next deter-
mined after an order is received. Class A share purchases generally involve a
sales charge at the time of purchase. No initial sales charge applies to Class
B share purchases. A contingent deferred sales charge ("CDSC"), however, is im-
posed upon certain redemptions of Class B shares. Class B shares automatically
convert to Class A shares eight years after purchase. No initial sales charge
or CDSC applies to purchases or redemptions of Class C shares which do not have
a conversion feature. Class B shares and Class C shares bear higher annual 12b-
1 fees than Class A shares. See "Buying Fund Shares--Sales Charges." Through a
separate prospectus, the Fund also offers Class Y shares to certain institu-
tional investors.
This prospectus sets forth information you should know before investing in the
Fund. Please read it carefully and keep it for future reference. A statement of
additional information in two parts (the "Statement") about the Fund dated May
1, 1995 has been filed with the Securities and Exchange Commission (the "SEC")
and is available free of charge. Write to New England Funds, L.P. (the "Dis-
tributor"), SAI Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or call
toll free at 1-800-225-5478. The Statement contains more detailed information
about the Fund and is incorporated into this prospectus by reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FOR GENERAL INFORMATION ON THE FUND OR ANY OF ITS SERVICES AND FOR ASSISTANCE
IN OPENING AN ACCOUNT, CONTACT YOUR INVESTMENT DEALER OR CALL THE DISTRIBUTOR
TOLL FREE AT 1-800-225-5478.
<PAGE>
Fund Expenses and Financial Information
SCHEDULE OF FEES
Expenses are one of several factors to consider when you invest in the Fund.
The following table summarizes your maximum transaction costs from investing in
the Fund and estimated annual expenses for each class of the Fund's shares. The
Example shows the cumulative expenses attributable to a hypothetical $1,000 in-
vestment in each class of shares of the Fund for the periods specified.
SHAREHOLDER TRANSACTION EXPENSES -- PAID DIRECTLY BY SHAREHOLDERS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as
a percentage of offering price)(1)(2)................. 5.75% None None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds, as applicable)(2)........................... (3) 4.00% None
Deferred Sales Charge.................................. None None None
Redemption Fee......................................... None None None
Exchange Fee........................................... None None None
</TABLE>
(1) A reduced sales charge on Class A shares applies in some cases.
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to any por-
tion of certain purchases of Class A shares greater than $1,000,000 re-
deemed within approximately 1 year after purchase. See "Sales Charges."
ANNUAL OPERATING EXPENSES -- PAID DIRECTLY BY THE FUND, AND INDIRECTLY BY ITS
SHAREHOLDERS(as a percentage of net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management Fees....................................... 1.05% 1.05% 1.05%
12b-1 Fees............................................ 0.25% 1.00%* 1.00%*
Administrative Services Fees.......................... None None None
Other Expenses**...................................... 0.44% 0.44% 0.44%
Total Expenses........................................ 1.74% 2.49% 2.49%
</TABLE>
* Because of the higher 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
rules of the National Association of Securities Dealers, Inc.
** Other Expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) unless otherwise noted, redemption at period end. The 5%
return and expenses in the Example should not be considered indicative of
actual or expected Fund performance or expenses, both of which will vary.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- -------- -------
(1) (2)
---- ---
<S> <C> <C> <C> <C>
1 Year................................................. $ 74 $ 65 $25 $25
3 Years................................................ $109 $108 $78 $78
</TABLE>
(1) Assumes redemption at end of period.
(2) Assumes no redemption.
The purpose of this fee schedule is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly if you invest in
the Fund.
For information about the expenses of the Fund's Class Y shares, which differ
from the expenses of the Class A, Class B and Class C shares, see "Additional
Facts about the Fund." To obtain more information about Class Y shares, please
call the Distributor toll-free at 1-800-225-5478.
For additional information about the Fund's fees and other expenses, please see
"Fund Management," "Additional Facts about the Fund" and "The Fund's Expenses."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect
to transfer redemption proceeds by wire.
Please keep in mind that the Example shown above is hypothetical. The informa-
tion above should not be considered a representation of past or future return
or expenses; actual return or expenses may be more or less than those shown.
1
<PAGE>
FINANCIAL HIGHLIGHTS
(For Class A, B and C shares of the Fund outstanding throughout the indicated
periods.)
The Financial Highlights presented below have been included in financial state-
ments for the Fund. The financial statements for the Fund's Class A, Class B
and Class C shares have been examined by Price Waterhouse LLP, independent ac-
countants. The Financial Highlights should be read in conjunction with the fi-
nancial statements and the notes thereto incorporated by reference in Part II
of the Statement.
<TABLE>
<CAPTION>
JULY 7, 1994(A)
THROUGH
DECEMBER 31, 1994
--------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of
period.......................... $12.50 $12.50 $12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income............ 0.05 0.02 0.02
Net gains or losses on
investments (both realized and
unrealized) .................... 0.75 0.73 0.74
------- ------- -------
Total income from investment
operations...................... 0.80 0.75 0.76
------- ------- -------
LESS DISTRIBUTIONS
Distributions (from net
investment income).............. (0.05) (0.02) (0.02)
------- ------- -------
Total distributions............. (0.05) (0.02) (0.02)
------- ------- -------
Net asset value, end of period... $13.25 $13.23 $13.24
------- ------- -------
Total return (%) (c)............. 6.4 6.0 6.0
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).. $91,218 $72,889 $20,096
Ratio of operating expenses to
average net assets (%) (d)...... 1.94(b) 2.69(b) 2.69(b)
Ratio of net investment income to
average net assets (%).......... 1.06(b) 0.31(b) 0.31(b)
Portfolio turnover rate (%)...... 100 100 100
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge of 5.75% (maximum) in the case of Class A shares and a con-
tingent deferred sales charge in the case of Class B shares are not re-
flected in total return calculations. Periods of less than one year are not
annualized.
(d) The ratio of operating expenses to average net assets (computed on an
annualized basis) for Class A, B and C shares without giving effect to the
voluntary expense limitations in effect from July 7, 1994 through December
31, 1994 would have been 1.98%, 2.75% and 2.75%, respectively.
2
<PAGE>
Investment Strategy
The Fund's objective is long term growth of capital.
HOW THE FUND PURSUES ITS INVESTMENT OBJECTIVE
The Fund seeks to attain its objective by investing primarily in equity securi-
ties. The Fund may also invest in other securities, as described below. Under
normal market conditions, however, at least 65% of the Fund's assets will be
invested in equity securities. The Fund may in the discretion of each
subadviser invest without limit in securities of foreign issuers (including is-
suers in emerging markets) as well as in securities of U.S. issuers. For more
information about investments in foreign securities, see the next section, "In-
vestment Risks--Foreign Securities."
Capital invested in the Fund will be allocated on a substantially equal basis
among four different subadvisers. Each subadviser will manage its segment of
the Fund's assets in accordance with that subadviser's own investment style and
strategy. The subadvisers' styles and strategies are as follows:
BERGER ASSOCIATES, INC. ("BERGER") places primary emphasis on established com-
panies which it believes have favorable growth prospects. Common stocks will
generally constitute all or most of the segment of the Fund managed by Berger,
but this segment of the portfolio may from time to time take substantial posi-
tions in securities convertible into common stocks, and may also purchase pre-
ferred stocks, government securities, zero-coupon securities and other senior
securities when Berger believes it is appropriate to do so. This segment of the
portfolio may also invest in Rule 144A securities (see "Investment Risks--Mis-
cellaneous" below) and may purchase put and call options on stock indices and
futures contracts and options thereon for the purpose of hedging.
FOUNDERS ASSET MANAGEMENT, INC.'S ("FOUNDERS") segment of the portfolio will
invest primarily in common stocks of well-established, high-quality growth com-
panies with mid or high market capitalization. These companies tend to have
strong performance records, with solid continuous operating records of three
years or more. Founders' approach to investment management gives greater empha-
sis to the fundamental financial, marketing and operating characteristics of
individual companies, and is less concerned with the short-term impact of
changes in macroeconomics and market conditions, than some other investment
firms. This segment of the portfolio may invest in bonds, debentures and other
corporate obligations when Founders believes that these investments offer op-
portunity for growth of capital. This segment of the portfolio may also invest
in Rule 144A securities and may enter into futures contracts or options thereon
for hedging purposes.
JANUS CAPITAL CORPORATION ("JANUS CAPITAL") pursues the Fund's investment ob-
jective by investing substantially all of Janus Capital's segment of the port-
folio in common stocks when its portfolio manager believes that the relevant
market environment favors profitable investing in such securities. Janus Capi-
tal emphasizes companies with earnings growth potential. This segment of the
portfolio may also invest in preferred stocks, warrants, government securities,
corporate bonds and debentures or other debt securities or repurchase agree-
ments when its portfolio manager perceives an opportunity for capital growth
from such securities or to receive a return on idle cash. Janus Capital's seg-
ment may also invest in Rule 144A securities and may enter into options,
futures and forward contracts.
Substantially all of LOOMIS, SAYLES & COMPANY, L.P.'S ("LOOMIS SAYLES") segment
of the portfolio will ordinarily be invested in equity securities, with an em-
phasis on securities of companies with market capitalizations of less than $500
million. A portion of the assets of this segment will be invested in companies
that Loomis Sayles believes have strong potential for earning growth. Another
portion of this segment will be invested in companies that have both value and
growth characteristics.
3
<PAGE>
Under unusual market conditions as determined by any of the four subadvisers,
all or any portion of the segment of the portfolio managed by that subadviser
may be invested, for temporary, defensive purposes, in short-term debt instru-
ments or in cash. In addition, under normal conditions, a portion of each seg-
ment's assets may be invested in short-term assets for liquidity purposes or
pending investment in other securities. Short-term investments may include U.S.
Government securities, obligations of corporate issuers rated in the top two
rating categories by two major rating agencies or, if unrated, determined to be
of comparable quality by the subadviser, and repurchase agreements that are
fully collateralized by U.S. Government securities.
4
<PAGE>
Investment Risks
It is important to understand the following risks inherent in the Fund before
you invest.
. EQUITY SECURITIES
Equity securities are securities that represent an ownership interest (or the
right to acquire such an interest) in a company, and include common and pre-
ferred stocks and securities exercisable for or convertible into common or
preferred stocks (such as warrants, convertible debt securities and convert-
ible preferred stock).
While offering greater potential for long-term growth, equity securities are
more volatile and more risky than some other forms of investment. Therefore
the value of your investment in the Fund may sometimes decrease instead of
increase. The Fund may invest in equity securities of companies with rela-
tively small market capitalization. Securities of such companies may be more
volatile than the securities of larger, more established companies and the
broad equity market indices. See "Small Companies" below. The Fund's invest-
ments may include securities traded "over-the-counter" as well as those traded
on a securities exchange. Some over-the-counter securities may be more
difficult to sell under some market conditions.
The Fund may invest in convertible securities, including corporate bonds,
notes or preferred stocks that can be converted into common stocks or other
equity securities. Convertible securities also include other securities, such
as warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally vary in some relationship with those of the underlying equity
securities. The value of convertible securities that pay dividends or inter-
est, like the value of all fixed-income securities, generally fluctuates in-
versely with changes in interest rates. Warrants have no voting rights, pay no
dividends and have no rights with respect to the assets of the corporation
issuing them. They do not represent ownership of the securities for which they
are exercisable, but only the right to buy such securities at a particular
price. The credit risk associated with convertible securities is generally
reflected by their being rated, if at all, below investment grade by or-
ganizations such as Moody's Investors Service, Inc. ("Moody's") and Standard
and Poor's Corporation ("S&P"). Less than 35% of the Fund's assets will be
invested in convertible or debt securities rated below investment grade and
unrated convertible or debt securities of comparable quality.
. FIXED-INCOME SECURITIES
Because interest rates vary, it is impossible to predict the income of a fund
that invests in fixed-income securities for any particular period. Fluctua-
tions in the value of the Fund's investments in fixed-income securities will
cause the Fund's net asset value to increase or decrease .
Fixed-income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. Credit risk relates to the ability of the issuer to make
payments of principal and interest.
. REPURCHASE AGREEMENTS
In repurchase agreements, the Fund buys securities from a seller, usually a
bank or brokerage firm, with the understanding that the seller will repur-
chase the securities at a higher price at a later date. Such transactions af-
ford an opportunity for the Fund to earn a return on available cash at mini-
mal market risk, although the Fund may be subject to various delays and risks
of loss if the seller is unable to meet its obligation to repurchase.
. SHORT-TERM TRADING
Although the Fund seeks long-term growth or return, the Fund may, consistent
with its investment objective, engage in portfolio trading in anticipation of,
or in response to, changing economic or market conditions and trends. These
policies may result in higher turnover rates in the Fund's portfolio which may
produce higher transaction costs and a higher level of taxable cap-ital gains.
Portfolio turnover considerations will not limit any subadviser's investment
discretion in managing the Fund's assets.
The Fund's recent portfolio turnover rate is set forth above under "Financial
Highlights."
. SMALL COMPANIES
The Fund, in the discretion of each subadviser, may invest without limit in
the securities of
5
<PAGE>
companies with smaller capitalization. Investments in companies with rela-
tively small capitalization may involve greater risk than is usually associ-
ated with more established companies. These companies often have sales and
earnings growth rates which exceed those of companies with larger capitaliza-
tion. Such growth rates may in turn be reflected in more rapid share price
appreciation. However, companies with smaller capitalization often have lim-
ited product lines, markets or financial resources and they may be dependent
upon a relatively small management group. The securities may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of companies with larger capitalization or the market aver-
ages in general. The net asset value of funds that invest in companies with
smaller capitalization therefore may fluctuate more widely than market
averages.
. LOWER QUALITY FIXED-INCOME SECURITIES
Fixed-income securities rated BB or lower by S&P or Ba or lower by Moody's
(and comparable unrated securities) are of below "investment grade" quality.
Lower quality fixed-income securities generally provide higher yields, but are
subject to greater credit and market risk, than higher quality fixed-income
securities. Lower quality fixed-income securities are considered predom-
inantly speculative with respect to the ability of the issuer to meet princi-
pal and interest payments. Achievement of the investment objective of a mu-
tual fund investing in lower quality fixed-income securities may be more de-
pendent on the fund's adviser's or sub-adviser's own credit analysis than for
a fund investing in higher quality bonds. The market for lower quality fixed-
income securities may be more severely affected than some other financial
markets by economic recession or substantial interest rate increases, by
changing public perceptions of this market or by legislation that limits the
ability of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for lower
rated fixed-income securities. This lack of liquidity at certain times may
affect the valuation of these securities and may make the valuation and sale
of these securities more difficult. During the fiscal year ended December 31,
1994, the Fund had no assets invested in fixed-income securities rated below
investment grade. Securities of below investment grade are commonly known as
"junk bonds." For more information, see the Statement's "Appendix A--Descrip-
tion of Bond Ratings."
. FOREIGN SECURITIES
Investments in foreign securities present risks not typically associated with
investments in comparable securities of U.S. issuers.
There may be less information publicly available about a foreign corporate or
government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting stan-
dards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than secu-
rities of comparable U.S. issuers. Foreign brokerage commissions and securi-
ties custody costs are often higher than those in the United States, and
judgments against foreign entities may be more difficult to obtain and en-
force. With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or fi-
nancial instability and diplomatic developments that could affect the value
of investments in those countries. The receipt of interest on foreign govern-
ment securities may depend on the availability of tax or other revenues to
satisfy the issuer's obligations.
The Fund's investments in foreign securities may include investments in coun-
tries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assis-
tance, currency transfer restrictions, highly limited numbers of potential
buyers for such securities and delays and disruptions in securities settle-
ment procedures.
Most foreign securities in the Fund's portfolio will be denominated in for-
eign currencies or
6
<PAGE>
traded in securities markets in which settlements are made in foreign curren-
cies. Similarly, any income on such securities is generally paid to the Fund
in foreign currencies. The value of these foreign currencies relative to the
U.S. dollar varies continually, causing changes in the dollar value of the
Fund's portfolio investments (even if the local market price of the invest-
ments is unchanged) and changes in the dollar value of the Fund's income
available for distribution to its shareholders. The effect of changes in the
dollar value of a foreign currency on the dollar value of the Fund's assets
and on the net investment income available for distribution may be favorable
or unfavorable.
The Fund may incur costs in connection with conversions between various cur-
rencies. In addition, the Fund may be required to liquidate portfolio assets,
or may incur increased currency conversion costs, to compensate for a decline
in the dollar value of a foreign currency occurring between the time when the
Fund declares and pays a dividend, or between the time when the Fund accrues
and pays an operating expense in U.S. dollars.
. OPTIONS
The Fund may seek to increase its current return by writing covered call op-
tions and covered put options, with respect to securities it holds or intends
to buy, through the facilities of options exchanges and directly with market
makers in the over-the-counter market. The Fund receives a premium from writ-
ing a call or put option, which increases the Fund's current return if the
option expires unexercised or is closed out at a net profit.
At times when the Fund has written call options on a substantial portion of
its portfolio, the Fund's ability to profit from changes in market prices of
portfolio securities will be limited. Appreciation in securities covering the
options would likely be partially or wholly offset by losses on the options.
The termination of options positions under such conditions would generally
result in the realization of short-term capital losses, which would reduce
the Fund's current return. Accordingly, the Fund may seek to realize capital
gains to offset realized losses by selling securities.
As described in Part II of the Statement, over-the-counter options involve
certain special risks (including liquidity and credit risks) not necessarily
present with exchange-listed options. The Fund will treat as illiquid any
over-the-counter options and assets maintained as "cover" for over-the-
counter options that the Fund has written.
The options markets of foreign countries are small compared to those of the
United States and consequently are characterized in most cases by less li-
quidity than are the U.S. markets. In addition, foreign markets may be sub-
ject to less detailed reporting requirements and regulatory controls than
U.S. markets. See "Foreign Securities" above.
. HEDGING TRANSACTIONS
Each segment of the Fund may, at the discretion of its subadviser, engage in
foreign currency exchange transactions, in connection with the purchase and
sale of portfolio securities, to protect the value of specific portfolio po-
sitions or in anticipation of changes in relative values of currencies in
which current or future Fund portfolio holdings are denominated or quoted.
For more information on foreign currency hedging transactions, see Part II of
the Statement.
For hedging purposes, the Fund may also buy put or call options on securities
that it holds or intends to buy. In addition to engaging in options transac-
tions on established exchanges, the Fund may purchase over-the-counter op-
tions from brokerage firms and other financial institutions.
The Fund may invest in options and futures contracts on various stock indices
to hedge against changes in the value of securities it holds or expects to
acquire. The Fund may also invest in options on stock index futures. The Fund
will not invest more than 5% of its net assets in stock index futures or op-
tions on stock index futures that are traded on a U.S. commodities exchange.
Certain asset segregation requirements apply when the Fund becomes obligated
under a
7
<PAGE>
hedging instrument. There is no assurance that the Fund's hedging strategies
will be effective. These strategies involve costs and the risk of loss to the
Fund. See Part II of the Statement for more information.
. ZERO COUPON BONDS
The Fund may invest in zero coupon bonds or "strips." Zero coupon bonds do
not make regular interest payments; rather, they are sold at a discount from
face value. Principal and accrued discount (representing interest accrued but
not paid) are paid at maturity. "Strips" are debt securities that are
stripped of their interest after the securities are issued, but otherwise are
comparable to zero coupon bonds. The market values of "strips" and zero cou-
pon bonds generally fluctuate in response to changes in interest rates to a
greater degree than do interest paying securities of comparable term and
quality. Under many market conditions, investments in stripped securities may
be illiquid, making it difficult for the Fund to dispose of them or determine
their current value.
. MISCELLANEOUS
The Fund will not invest more than 15% of its assets in "illiquid securi-
ties," that is, securities which are not readily resalable, which include se-
curities whose disposition is restricted by federal securities laws.
The Fund may purchase Rule 144A securities. These are privately offered secu-
rities that can be resold only to certain qualified institutional buyers.
Rule 144A securities are treated as illiquid, unless a subadviser has deter-
mined, under guidelines established by Trust's trustees, that the particular
issue of Rule 144A securities is liquid. Investment in restricted or other
illiquid securities involves the risk that the Fund may be unable to sell
such a security at the desired time. Also, the Fund may incur expenses,
losses or delays in the process of registering restricted securities prior to
resale.
The Fund may purchase securities on a "when-issued" or "delayed-delivery" ba-
sis. This means that the Fund enters into a commitment to buy the security
before the security has been issued, or, in the case of a security that has
already been issued, to accept delivery of the security on a date beyond the
usual settlement period. If the value of a security purchased on a "when-is-
sued" or "delayed delivery" basis falls or market rates of interest increase
between the time the Fund commits to buy the security and the delivery date,
the Fund may sustain a loss in value of or yield on the security. For more
information on "when-issued" and "delayed delivery" securities, see Part II
of the Statement.
To the extent the Fund may invest in derivative securities for other than
bona fide hedging purposes, such investments may be speculative in nature and
may involve additional risks.
The Fund is a "non-diversified" fund and as such is not required to meet any
diversification requirements under the Investment Company Act of 1940 (the
"1940 Act"), although the Fund must meet certain diversification standards to
qualify as a "regulated investment company" under the Internal Revenue Code.
Since the Fund may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the Fund may be more susceptible
than a more widely-diversified fund to any single economic, political or reg-
ulatory occurrence.
. SPECIAL CONSIDERATIONS REGARDING THE MULTI-ADVISER APPROACH
New England Investment Companies, L.P. (the "Adviser" or "NEIC") oversees the
portfolio management services provided to the Fund by each of the four
subadvisers. The Adviser does not, however, determine what investments will
be purchased or sold for any segment of the portfolio. Because each
subadviser will be managing its segment of the portfolio independently from
the other subadvisers, the same security may be held in two different seg-
ments of the portfolio, or may be acquired for one segment of the portfolio
at a time when another subadviser deems it appropriate to dispose of the se-
curity from another segment of the portfolio. Similarly, under some market
conditions, one or more of the subadvisers may believe that temporary, defen-
sive investments in short-term instruments or cash are appropriate when an-
other subadviser or subadvisers believe con-
8
<PAGE>
tinued exposure to the equity markets is appropriate for their segments of
the portfolio. Because each subadviser directs the trading for its own seg-
ment of the portfolio, and does not aggregate its transactions with those of
the other subadvisers, the Fund may incur higher brokerage costs than would
be the case if a single adviser or subadviser were managing the entire port-
folio. Also, because each segment of the portfolio will perform differently
from the other segments depending upon the investments it holds and changing
market conditions, the segment of the Fund's assets managed by a subadviser
may be larger or smaller at various times than the segments managed by other
subadvisers. Net cash inflows or outflows resulting from sales and redemp-
tions of the Fund's shares will, however, be allocated on a substantially
equal basis among the four segments of the portfolio.
9
<PAGE>
SubAdvisers' Investment Styles
The Adviser believes that a multi-adviser approach to equity investing--one
that combines the varied styles of a number of subadvisers in selecting securi-
ties for the Fund's portfolio--offers a different investment opportunity than
equity funds run by a single adviser using a single style.
Any given management style tends to produce better returns than other styles
under certain market and economic conditions, and to perform less well under
other conditions. Therefore, most single-adviser funds have not consistently
maintained superior performance rankings relative to their peers over long pe-
riods. The Adviser believes that consistency of results, minimizing under-per-
formance even at the cost of out-performance at times, is likely to produce
higher performance over time.
The Adviser believes that assigning portfolio management responsibility for the
Fund to four subadvisers, whose varying styles have resulted in records of suc-
cess, may increase the likelihood that the Fund may produce superior long-term
results for its shareholders, with less variability of return and less risk of
persistent under-performance than a single-adviser fund. Of course, past re-
sults should not be considered a prediction of future performance, and there is
no assurance that the Fund will in fact achieve superior results over any time
period. The investment styles described below will be those applied by each of
the subadvisers to the segment of the Fund's portfolio for which that
subadviser is responsible.
BERGER ASSOCIATES, INC.
Berger emphasizes stocks with potential for rapid earnings expansion. Berger
seeks companies with the capability to perform well under varying economic con-
ditions, including the ability to compete in the global marketplace. Berger
also seeks companies with the ability to market increasing amounts of products
or services, in order to increase shareholder equity at an above-average rate.
Berger also places considerable emphasis on the quality of the corporate lead-
ership of companies under consideration.
FOUNDERS ASSET MANAGEMENT, INC.
Founders manages its segment of the Fund's portfolio by investing primarily in
established companies with above-average prospects for growth in earnings per
share. This segment will invest primarily in mid-cap and large capitalization
stocks. Founders believes that mid-cap companies (companies with between $1.5
billion and $3.5 billion of market capitalization) can produce returns close to
those of smaller-cap companies, but with less risk because of their stronger
infrastructures and performance records and more solid market positions, and
that large-capitalization stocks add stability to the portfolio.
JANUS CAPITAL CORPORATION
Janus Capital manages its segment of the portfolio to seek long-term capital
growth primarily from investing in common stocks of companies of any size, in-
cluding large, well-established companies and smaller, emerging growth compa-
nies. Janus Capital's analysis and selection process focus on stocks with earn-
ings growth potential that may not be recognized by the market.
LOOMIS, SAYLES & COMPANY, L.P.
Loomis Sayles manages its segment of the portfolio in two distinctive styles.
One component of this segment, managed by Loomis Sayles' Boston Counseling
Group, focuses on companies whose earnings have the potential to increase sig-
nificantly over 3-5 years, in Loomis Sayles' view. Loomis Sayles' Detroit of-
fice manages the other component, using a value-growth approach, seeking compa-
nies with a market niche that limits competition and affords pricing flexibili-
ty. In addition, companies in the value-growth component typically have rela-
tively low price-earnings ratios, a dividend yield comparable to that of the
Standard and Poor's 500 Index, and superior projected returns as forecast by
Loomis Sayles. Both components invest primarily in securities of companies with
relatively small equity market capitalization (under $500 million).
10
<PAGE>
Fund Management
New England Investment Companies, L.P., 399 Boylston Street, Boston, Massachu-
setts 02116, serves as the Fund's adviser. The Adviser oversees, evaluates and
monitors the subadvisers' provision of subadvisory services to the Fund and
provides general business management and administration to the Fund. The Fund
pays the Adviser a management fee at the annual rate of 1.05% of the Fund's av-
erage daily net assets. This fee rate payable by the Fund is higher than that
paid by most other mutual funds. This difference in the fee rate is partially
due to the multi-adviser format. The Adviser pays each subadviser an advisory
fee at the annual rate of 0.55% of the first $50 million of the average daily
net assets of the segment of the Fund that the subadviser manages and 0.50% of
such assets in excess of $50 million.
The Distributor in its discretion may award an incentive bonus to the
subadviser whose segment of the Fund's portfolio has the highest total return
for the prior year.
Subject to the supervision of the Adviser, each subadviser manages its segment
of the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for that segment of the portfolio, places
orders to purchase and sell securities for that segment of the portfolio, and
employs professional advisers and securities analysts who provide research
services to that segment of the portfolio. The Fund pays no direct fees to any
of the subadvisers. Below is a brief description of the subadvisers.
BERGER, 210 University Boulevard, Suite 900, Denver, Colorado 80206, serves as
an investment adviser to mutual funds, pension and profit sharing plans and
other institutional and private investors. Rodney L. Linafelter, Vice President
of Berger, has day-to-day responsibility for the management of the segment of
the Fund managed by Berger. Kansas City Southern Industries, Inc. ("KCSI") con-
trols Berger.
FOUNDERS, 2930 East Third Avenue, Denver, Colorado 80206, has acted as an in-
vestment adviser since 1938. To facilitate day-to-day investment management,
Founders employs a unique team-and-lead-manager system. The management team for
a portfolio or fund is comprised of Founders' Chief Investment Officer Bjorn K.
Borgen, a lead portfolio manager, assistant portfolio managers, traders and re-
search analysts. Daily decisions on portfolio selection rest with the lead
portfolio manager, who, through participation in the committee process, util-
izes the input of other team members in making purchase and sale determina-
tions. Edward F. Keely is lead portfolio manager for the segment of the Fund
that is managed by Founders. Mr. Borgen has served as Founders' Chief Invest-
ment Officer since 1969 and owns all of Founders' outstanding shares.
JANUS CAPITAL, 100 Fillmore Street, Suite 300, Denver, Colorado 80206, has man-
aged mutual funds since 1969 and also advises individual, corporate, charitable
and retirement accounts. Warren B. Lammert has day-to-day management responsi-
bility for those assets of the Fund allocated to Janus Capital, where he serves
as a portfolio manager and Vice President of Investments. KCSI owns approxi-
mately 83% of Janus Capital.
LOOMIS SAYLES, One Financial Center, Boston, Massachusetts 02111, is one the
country's oldest and largest investment counsel firms. Barbara C. Friedman, who
is a Vice President of Loomis Sayles and the Trust, has day-to-day management
responsibility for the growth component of the segment of the Fund that is al-
located to Loomis Sayles, and Jeffrey C. Petherick, Vice President of Loomis
Sayles and the Trust, has day-to-day management responsibility for the value
component of that segment. Ms. Friedman was a partner and adviser at Harvard
Management Company prior to joining Loomis Sayles in 1990. Mr. Petherick was an
analyst at Masco Corporation prior to joining Loomis Sayles in 1990.
The general partners of Loomis Sayles and the Distributor are special purpose
corporations. These corporations are indirect wholly-owned subsidiaries of the
Adviser, whose sole general partner, New England Investment Companies, Inc., is
a wholly-owned subsidiary of New England Mutual Life Insurance Company ("The
New England").
In placing portfolio transactions for the Fund, each subadviser seeks the best
execution. Subject
11
<PAGE>
to this policy, each subadviser may consider sales of shares of the Fund and
other mutual funds they manage as a factor in the selection of broker-dealers.
Subject to procedures adopted by the trustees of the Trust, Fund brokerage
transactions may be executed by brokers that are affiliated with the Adviser or
any subadviser.
The Trust's Board of Trustees supervises the affairs of the Trust.
Under an agreement between the Adviser and the Distributor, the Distributor
provides certain administrative services to the Fund, at no extra cost to the
Fund.
12
<PAGE>
Buying Fund Shares
USING TELE#FACTS 1-800-346-5984
TELE#FACTS IS NEW ENGLAND FUNDS' AUTOMATED SERVICE SYSTEM THAT GIVES YOU 24-
HOUR ACCESS TO YOUR ACCOUNT. THROUGH YOUR TOUCH-TONE TELEPHONE, YOU CAN RECEIVE
YOUR CURRENT ACCOUNT BALANCE, YOUR LAST FIVE TRANSACTIONS, FUND PRICES AND RE-
CENT PERFORMANCE INFORMATION. YOU CAN ALSO PURCHASE, SELL OR EXCHANGE CLASS A
SHARES OF ANY NEW ENGLAND FUND. FOR A FREE BROCHURE ABOUT TELE#FACTS INCLUDING
A CONVENIENT WALLET CARD, CALL US AT 1-800-225-5478.
MINIMUM INVESTMENT
$2,500 is the minimum for an initial investment in the Fund and $50 is the min-
imum for each subsequent investment. There are special initial investment mini-
mums for the following plans:
. $25 (for initial and subsequent investments) for payroll deduction investment
programs for 401(k), SARSEP, 403(b) retirement plans and certain other retire-
ment plans.
. $50 for automatic investing through the Investment Builder program.
. $250 for retirement plans with tax benefits such as corporate pension and
profit sharing plans, IRAs and Keogh plans.
. $1,000 for accounts registered under the Uniform Gifts to Minors Act or the
Uniform Transfers to Minors Act.
. $1,000 (per Fund) for Portfolio 1,2,3 investment programs and New England
Funds All Weather Portfolio. Subsequent investment minimums are $50 per Fund.
See Part II of the Statement.
6 WAYS TO BUY FUND SHARES
You may purchase Class A, Class B and Class C shares of the Fund in the follow-
ing ways:
THROUGH YOUR INVESTMENT DEALER:
Many investment dealers have a sales agreement with the Distributor and would
be pleased to accept your order.
BY MAIL:
FOR AN INITIAL INVESTMENT, simply complete an application and return it, with a
check payable to New England Funds, P.O. Box 8551, Boston, MA 02266-8551. Pro-
ceeds of redemptions of Fund shares purchased by check may not be available for
up to ten days after the purchase date.
FOR SUBSEQUENT INVESTMENTS, please mail your check to New England Funds, P.O.
Box 8551, Boston, MA 02266-8551 along with a letter of instruction or an addi-
tional deposit slip from your statements. To make investing even easier, you
can also order personalized investment slips by calling 1-800-225-5478.
BY WIRE TRANSFER OF FEDERAL FUNDS:
FOR AN INITIAL INVESTMENT, call us at 1-800- 225-5478 between 8:00 a.m. and
6:00 p.m. (Eastern time) to obtain an account number and wire transfer instruc-
tions.
FOR SUBSEQUENT INVESTMENTS, direct your bank to transfer funds to State Street
Bank and Trust Company, ABA #011000028, DDA #99011538, Credit New England Star
Advisers Fund, Class of shares, Shareholder Name, Shareholder Account Number.
Funds may be transferred between 9:00 a.m. and 4:00 p.m. (Eastern time). Your
bank may charge a fee for this service.
BY INVESTMENT BUILDER:
Investment Builder is New England Funds' automatic investment plan. You may au-
thorize automatic monthly transfers of $50 or more from your bank checking or
savings account to purchase shares of one or more New England Funds.
FOR AN INITIAL INVESTMENT, please indicate that you would like to begin an au-
tomatic investment plan through Investment Builder on the enclosed application.
Indicate the amount of the monthly investment and enclose a void check from
your bank account.
TO ADD INVESTMENT BUILDER TO AN EXISTING ACCOUNT, please call us at 1-800-225-
5478 for a Service Options form.
BY ELECTRONIC PURCHASE THROUGH ACH:
You may purchase additional shares electronically through the Automated Clear-
ing House ("ACH") system as long as your bank or credit union is a member of
the ACH system and you have a completed, approved ACH application on file with
the Fund.
13
<PAGE>
TO MAKE INVESTING EVEN EASIER, YOU CAN ALSO ORDER PERSONALIZED INVESTMENT SLIPS
BY CALLING 1-800-225-5478.
To purchase through ACH, call us at 1-800- 225-5478 between 8 a.m. and 6 p.m.
(Eastern time) for instructions or call Tele#Facts at 1-800-346-5984 twenty-
four hours a day. If you purchase your shares through ACH, you will receive the
net asset value next determined after your order is received. Proceeds of re-
demptions of Fund shares purchased through ACH may not be available for up to
ten days after the purchase date.
BY EXCHANGE FROM ANOTHER NEW ENGLAND FUND:
You may also purchase shares of the Fund by exchanging shares from another New
England Fund. Please see "Exchanging Among New England Funds" for complete de-
tails.
GENERAL
All purchase orders are subject to acceptance by the Fund and will be effected
at the net asset value next determined after the order is received in proper
form by State Street Bank and Trust Company ("State Street Bank") (except or-
ders received by your investment dealer before the close of trading on the New
York Stock Exchange [the "Exchange"] and transmitted to the Distributor by 5:00
p.m. [Eastern time] on the same day, which will be effected at the net asset
value determined on that day). Although the Fund does not anticipate doing so,
it reserves the right to suspend or change the terms of sales of shares.
Class B shares and certain shareholder features may not be available to persons
whose shares are held in street name accounts.
You will not receive any certificates for your Class A shares unless you re-
quest them in writing from New England Funds, L.P. The Fund's "open account"
system for recording your investment eliminates the problems and expense of
handling and safekeeping certificates. Certificates will not be issued for
Class B shares or Class C shares. If you wish transactions in your account to
be effected by another person under a power of attorney from you, special rules
apply. Please contact your investment dealer or the Distributor for details.
SALES CHARGES
CLASS A SHARES
Shares are offered at net asset value plus a sales charge which varies depend-
ing on the size of your purchase. They are also subject to a 0.25% annual serv-
ice fee. The current sales charges are:
<TABLE>
<CAPTION>
SALES CHARGE AS A % OF DEALER'S
----------------------- CONCESSION
PUBLIC AS % OF
VALUE OF OFFERING AMOUNT OFFERING
TOTAL INVESTMENT PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than
$50,000 5.75% 6.10% 5.00%
$50,000 -
$99,999 4.50% 4.71% 4.00%
$100,000 -
$249,999 3.50% 3.63% 3.00%
$250,000 -
$499,999 2.50% 2.56% 2.15%
$500,000 -
$999,999 2.00% 2.04% 1.70%
$1,000,000 or
more None None *
</TABLE>
* The Distributor may, at its discretion, pay investment dealers who initiate
and are responsible for such purchases a commission of up to the following
amounts: 1% on the first $2 million invested; .80% on the next $1 million;
.20% on the next $2 million; and .08% on the excess over $5 million. These
commissions are not payable if the purchase represents the reinvestment of a
redemption made during the previous 12 calendar months.
CONTINGENT DEFERRED SALES CHARGE (CLASS A SHARES ONLY). For purchases of
$1,000,000 or more of Class A shares of the Fund, a CDSC, at the rate of 1% of
the lesser of the purchase price or the net asset value at the time of redemp-
tion, applies to redemptions of shares within one year after purchase. If an
exchange is made to Class A shares of any of the New England Cash Management
Trust Money Market Series or U.S. Government Series or the New England Tax Ex-
empt Money Market Trust (the "Money Market Funds"), then the one-year holding
period for purposes of determining the expiration of the CDSC will stop and
will resume only when an exchange is made back into Class A shares of a series
of New England Funds Trust I or New England Funds Trust II ("the Trusts"). For
purposes of the CDSC, it is assumed that the shares held the longest are the
first to be redeemed. No CDSC applies to a redemption of shares followed by a
reinvestment effected within 30 days after the date of the redemption.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales charge,
subject to a 0.25% annual service fee, a 0.75% annual distribution fee
14
<PAGE>
for 8 years (at which time they automatically convert to Class A shares) and to
a CDSC if they are redeemed within 5 years of purchase. The holding period for
purposes of timing the conversion to Class A shares and determining the CDSC
will continue to run after an exchange to Class B shares of any series of the
Trusts. If the exchange is made to Class B shares of a Money Market Fund, then
the holding period stops and will resume only when an exchange is made back
into Class B shares of a series of the Trusts. If the Money Market Fund shares
are redeemed rather than exchanged back into the Trusts, then a CDSC applies on
the redemptions, at the same rate as if the Class B shares of the Fund had been
redeemed at the time they were exchanged for Money Market Fund shares.
The CDSC will be assessed on an amount equal to the lesser of the cost of the
shares being redeemed or their net asset value at the time of redemption. Ac-
cordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on shares of the
same fund purchased with reinvested dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of re-
demption of such shares. The CDSC equals the following percentages of the dol-
lar amounts subject to the charge:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
- ------------------- ------------------------
<S> <C>
1st............. 4%
2nd............. 3%
3rd............. 3%
4th............. 2%
5th............. 1%
thereafter...... 0%
</TABLE>
Year one ends one year after the day on which the purchase was accepted, and so
on.
The CDSC is deducted from the proceeds of the redemption, unless otherwise re-
quested, and is paid to the Distributor. The CDSC may be eliminated for certain
persons and organizations. See "Sales Charges--General" below. At the time of
sale, the Distributor pays investment dealers a commission of 3.75% and ad-
vances the first year's service fee (up to 0.25%) on purchases of Class B
shares.
CLASS C SHARES
Class C shares are offered at net asset value, without an initial sales charge
or CDSC; are subject to a 0.25% annual service fee and a 0.75% annual distribu-
tion fee; and do not convert into another class.
CLASS Y SHARES
The Fund also offers a fourth class of shares (which are not available to the
general public) to certain qualified investors. See "Additional Facts About the
Fund" below.
DECIDING WHICH CLASS TO PURCHASE
The decision as to whether Class A, Class B or Class C shares are more appro-
priate for an investor depends on the amount and intended length of the invest-
ment. Investors making large investments, qualifying for a reduced initial
sales charge, might consider Class A shares because Class A shares have lower
12b-1 fees and pay correspondingly higher dividends per share. For these rea-
sons, the Distributor will treat any order of $1 million or more for Class B
shares as a Class A order. Any order of $1 million or more for Class C shares
will be treated as an order for Class A shares, unless you indicate on the rel-
evant section of your application that you have been informed of the relative
advantages and disadvantages of Class A and Class C shares. Investors making
smaller investments might consider Class B or Class C shares because 100% of
the purchase is invested immediately. Investors making smaller investments who
anticipate redeeming their shares within five years may find Class C shares
more favorable than Class B shares, because Class B shares are subject to a
CDSC on redemptions made within five years after purchase. Class B shares are
more favorable than Class C shares for investors who anticipate holding their
investment for more than eight years, since Class B shares convert to Class A
shares (and thus bear lower ongoing fees) after eight years. Consult your in-
vestment dealer for advice applicable to your particular circumstances.
A, B OR C SHARES -- WHICH SHOULD YOU CHOOSE?
YOUR CHOICE OF SHARE CLASS DEPENDS ON THE SIZE OF YOUR INVESTMENT AND HOW LONG
YOU INTEND TO HOLD YOUR SHARES. IN GENERAL, THERE ARE ONLY MINOR DIFFERENCES IN
PERFORMANCE RESULTS FOR THE DIFFERENT CLASSES IF HELD FOR THE LONG TERM. CON-
SULT YOUR FINANCIAL REPRESENTATIVE FOR HELP IN DECIDING WHICH CLASS IS APPRO-
PRIATE FOR YOU.
15
<PAGE>
GENERAL
NO CDSC ON ANY CLASS OF SHARES APPLIES in connection with (1) redemptions by
retirement plans qualified under Code Sections 401(a) or 403(b)(7) when such
redemptions are necessary to make distributions to plan participants; (2) dis-
tributions from an IRA due to death, disability or a tax-free return of an ex-
cess contribution; (3) distributions by other employee benefit plans to pay
benefits; and (4) distributions by a Section 401(a) plan due to death. For
403(b)(7) and IRA accounts established before January 3, 1995, the CDSC is
waived for redemptions made after attainment of age 59 1/2. The CDSC is waived
for redemptions made to make required minimum distributions after attainment of
age 70 1/2 for 403(b)(7) and IRA accounts established on or after January 3,
1995. There is also no CDSC on redemptions following the death or disability
(as defined in Section 72(m)(7) of the Internal Revenue Code) of a shareholder
if the redemption is made within one year after the shareholder's death or dis-
ability. Also, there is no CDSC on certain withdrawals pursuant to a Systematic
Withdrawal Plan. See "Systematic Withdrawal Plan" below.
The Fund receives the net asset value next determined after an order is re-
ceived on sales of each class of shares. The sales charge is allocated between
the investment dealer and the Distributor. The Distributor receives the CDSC.
For purposes of the CDSC, an exchange from one series of a Trust to another se-
ries of a Trust is not considered a redemption or a purchase. For federal tax
purposes, however, such an exchange is considered a redemption and a purchase
and, therefore, would be considered a taxable event on which you may recognize
a gain or a loss.
The Distributor may, at its discretion, reallow the entire sales charge imposed
on the sale of Class A shares to investment dealers from time to time. The
staff of the SEC is of the view that dealers receiving all or substantially all
of the sales charge may be deemed underwriters of a fund's shares.
For new amounts invested, the Distributor may, at its expense, pay investment
dealers who sell shares of the Fund at net asset value to an eligible govern-
mental authority .025% of the average daily net assets of an account at the end
of each calendar quarter for up to one year. These commissions are not payable
if the purchase represents the reinvestment of redemption proceeds from any se-
ries of the Trusts or if the account is registered in street name.
The Distributor may, at its expense, provide additional promotional incentives
or payments to dealers who sell shares of the Fund. In some instances these in-
centives are provided to certain dealers who achieve sales goals or who have
sold or may sell significant amounts of shares. New England Funds, L.P., from
time to time, may provide financial assistance programs to dealers in connec-
tion with conferences, sales or training programs, seminars, advertising and
sales campaigns and/or shareholder services arrangements. Certain dealers who
have sold or may sell significant amounts of shares also may receive compensa-
tion in the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by invited registered representatives to locations,
within or outside of the U. S., for educational seminars or meetings of a busi-
ness nature.
The Distributor may provide non-cash incentives for achievement of specified
sales levels by representatives of participating broker-dealers and financial
institutions. Such incentives include, but are not limited to, merchandise from
gift catalogues or other sources, gift certificates or vouchers through member-
ship in the New England Funds Flagship Club. The participation of representa-
tives in such incentive programs is at the discretion of the broker-dealer or
financial institution with which the representative is associated.
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
. LETTER OF INTENT -- if aggregate purchases of all series and classes of the
Trusts over a 13-month period will reach a breakpoint (a dollar amount at which
a lower sales charge applies), smaller individual amounts can be invested at
the sales charge applicable to that breakpoint.
16
<PAGE>
. COMBINING ACCOUNTS -- purchases by all qualifying accounts of all series and
classes of the Trusts (which do not include the Money Market Funds unless the
shares were purchased through an exchange from a series of the Trusts) may be
combined with purchases of qualifying accounts of a spouse, parents, children,
siblings, grandparents or grandchildren, individual fiduciary accounts, sole
proprietorships and/or single trust estates. The values of all accounts are
combined to determine the sales charge.
. UNIT HOLDERS OF UNIT INVESTMENT TRUSTS -- unit investment trust distributions
of less than $1 million may be invested in Class A shares of any Fund at a re-
duced sales charge of 1.50% of the public offering price (or 1.52% of the net
amount invested).
. ELIGIBLE GOVERNMENTAL AUTHORITIES -- no sales charge or CDSC applies to in-
vestments by any state, county or city or any instrumentality, department, au-
thority or agency thereof that has determined that the Fund is a legally per-
missible investment and that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of shares
of any registered investment company.
. CLIENTS OF AN ADVISER OR SUBADVISER (AFFILIATED WITH NEIC) -- no sales charge
or CDSC applies to investments of $100,000 or more in the Fund by (1) clients
of an adviser or subadviser (affiliated with NEIC) to any series of the Trusts;
any director, officer or partner of a client of an adviser or subadviser (af-
filiated with NEIC) to any series of the Trusts; and the parents, spouses and
children of the foregoing; (2) any individual who is a participant in a Keogh
or IRA Plan under a prototype Plan document of an adviser or subadviser (affil-
iated with NEIC) to any series of the Trusts if at least one participant in the
plan qualifies under category (1) above; and (3) an individual who invests
through an IRA and is a participant in an employee benefit plan that is a cli-
ent of an adviser or subadviser (affiliated with NEIC) to any series of the
Trusts. Any investor eligible for these arrangements should so indicate in
writing at the time of the purchase.
. Shares of the Fund may be purchased at net asset value with no sales charge
or CDSC by advisory accounts through investment advisers that are registered
under the Investment Advisers Act of 1940 and affiliated with broker-dealers.
. There is no sales charge or CDSC related to investments by 401(a), 401(k),
457 or 403(b) plans that have total investment assets equal to or in excess of
$5 million.
. There is no sales charge, CDSC or initial investment minimum related to in-
vestments by certain current and retired employees of the Trusts' investment
advisers or subadvisers (affiliated with NEIC), the Distributor or any other
company affiliated with The New England; current and former directors and
trustees of the Trusts or their predecessor companies; agents and general
agents of The New England and its insurance company subsidiaries; current and
retired employees of such agents and general agents; registered representatives
of broker-dealers that have selling arrangements with the Distributor; the
spouse, parents, children, siblings, grandparents or grandchildren of the per-
sons listed above; any trust, pension, profit sharing or other benefit plan for
any of the foregoing persons; and any separate account of The New England or of
any insurance company affiliated with The New England.
. Shareholders of Reich & Tang Government Securities Trust may exchange their
shares of that fund for Class A shares of any series of the Trusts at net asset
value and without the imposition of a sales charge.
The reduction or elimination of the sales charge in connection with sales de-
scribed above reflects the absence or reduction of sales expenses associated
with such sales.
17
<PAGE>
Owning Fund Shares
AUTOMATIC EXCHANGE PLAN
THE FUND HAS AN AUTOMATIC EXCHANGE PLAN UNDER WHICH SHARES OF A CLASS OF THE
FUND ARE AUTOMATICALLY EXCHANGED EACH MONTH FOR SHARES OF THE SAME CLASS OF
OTHER SERIES OF THE TRUSTS (OTHER THAN NEW ENGLAND GROWTH FUND, WHICH IS AVAIL-
ABLE ONLY TO CERTAIN ELIGIBLE INVESTORS). THE MINIMUM MONTHLY EXCHANGE AMOUNT
UNDER THE PLAN IS $50. THERE IS NO FEE FOR EXCHANGES MADE PURSUANT TO THIS PRO-
GRAM, BUT THERE MAY BE A SALES CHARGE AS DESCRIBED ON THIS PAGE.
EXCHANGING AMONG NEW ENGLAND FUNDS
CLASS A SHARES
Except as indicated in the next two sentences, you may exchange Class A shares
of any series of the Trusts (and Class A shares of the Money Market Funds ac-
quired through exchanges from any of the series of the Trusts) for the Class A
shares of any other series of the Trusts (except the New England Growth Fund,
which is subject to special eligibility restrictions) without paying a sales
charge. Class A shares of the New England Intermediate Term Tax Free Fund of
California and New England Intermediate Term Tax Free Fund of New York (and
shares of the Money Market Funds acquired through exchanges of such shares) may
be exchanged for Class A shares of the Fund at net asset value only if you have
held them for at least six months; otherwise, sales charges apply to the ex-
change. If you exchange your Class A shares of the New England Adjustable Rate
U.S. Government Fund (the "Adjustable Rate Fund") for shares of another fund
that has a higher sales charge, you will pay the difference between any sales
charge you have already paid on your Adjustable Rate Fund shares and the higher
sales charge of the fund into which you are exchanging. In addition, you may
redeem Class A shares of any Money Market Fund that were not acquired through
exchanges from any series of the Trusts and have the proceeds directly applied
to the purchase of Fund shares at the applicable sales charge.
CLASS B SHARES
You may exchange Class B shares of the Fund or any series of the Trusts (and
Class B shares of the Money Market Funds or Class A shares of the Money Market
Funds which have not been subject to a previous sales charge) for Class B
shares of any other series of the Trusts (except New England Growth Fund). Such
exchanges will be made at the next determined net asset value of the shares.
Class B shares will automatically convert on a tax-free basis to Class A shares
eight years after they are purchased (excluding the time the shares are held in
a Money Market Fund). See "Sales Charges -- Class B Shares" above.
CLASS C SHARES
You may exchange Class C shares of the Fund for Class C shares of any other se-
ries of the Trusts which offers Class C shares or for Class A shares of the
Money Market Funds.
TO MAKE AN EXCHANGE, please call 1-800-225-5478 between 8 a.m. and 6 p.m.
(Eastern time), call Tele#Facts at 1-800-346-5984 twenty-four hours a day or
write to New England Funds. The exchange must be for a minimum of $500 (or the
total net asset value of your account, whichever is less), except that under
the Automatic Exchange Plan the minimum is $50. All exchanges are subject to
the minimum investment and eligibility requirements of the series into which
you are exchanging. In connection with any exchange, you must receive a current
prospectus of the series into which you are exchanging. The exchange privilege
may be exercised only in those states where shares of such other series may be
legally sold.
You have the automatic privilege to exchange your Fund shares by telephone. New
England Funds, L.P. will employ reasonable procedures to confirm that your tel-
ephone instructions are genuine, and, if it does not, it may be liable for any
losses due to unauthorized or fraudulent instructions. New England Funds, L.P.
will require a form of personal identification prior to acting upon your tele-
phone instructions, will provide you with written confirmations of such trans-
actions and will record your instructions.
Except as otherwise permitted by SEC rule, shareholders will receive at least
60 days' advance notice of any material change to the exchange privilege.
FUND DIVIDEND PAYMENTS
The Fund pays dividends annually. The Fund pays as dividends substantially all
net investment income (other than long-term capital gains) each year and dis-
tributes annually all net realized long-term capital gains (after applying any
available capital loss carryovers). The trustees of the Trust may adopt a dif-
ferent schedule as long as payments are made at least annually. If you in-
18
<PAGE>
tend to purchase shares of the Fund shortly before it declares a dividend, you
should be aware that a portion of the purchase price may be returned to you as
a taxable dividend.
You have the option to reinvest all distributions in additional shares of the
same class of the Fund or in shares of the same class of other series of the
Trusts, to receive distributions from dividends and interest in cash while re-
investing distributions from capital gains in additional shares of the same
class of the Fund or the same class of shares of other series of the Trusts, or
to receive all distributions in cash. Income distributions and capital gains
distributions will be reinvested in shares of the same class of the Fund at net
asset value (without a sales charge or CDSC) unless you select another option.
You may change your distribution option by notifying New England Funds in writ-
ing or by calling 1-800-225-5478. If you elect to receive your dividends in
cash and the dividend checks sent to you are returned "undeliverable" to the
Fund or remain uncashed for six months, your cash election will automatically
be changed and your future dividends will be reinvested.
DIVIDEND DIVERSIFICATION PROGRAM
You may also establish a dividend diversification program that allows you to
have all dividends and any other distributions automatically invested in
shares of the same class of another New England Fund, subject to the investor
eligibility requirements of that other fund and to state securities law
requirements. For Class A shareholders, investments will be made at the appro-
priate offering price, which may include a sales charge. For Class B
shareholders, shares acquired through this program will be subject to a CDSC if
they are redeemed from the account. Dividends will be invested in the selected
fund's shares on the dividend record date. A dividend diversification account
must be in the same registration (shareholder name) as the distributing fund
account and, if a new account in the purchased fund is being established, the
purchased fund's minimum investment requirements must be met. Before
establishing a dividend diversification program into any other New England
Fund, you must obtain a copy of that fund's prospectus.
19
<PAGE>
Selling Fund Shares
4 WAYS TO SELL FUND SHARES
THROUGH YOUR INVESTMENT DEALER:
Call your authorized investment dealer for information.
BY TELEPHONE:
You or your investment dealer may redeem (sell) shares by telephone using any
of the three methods described below:
Wired to Your Bank Account -- If you have previously selected the telephone re-
demption privilege on your account, Class A, Class B and Class C shares may be
redeemed by calling 1-800-225-5478 between 8 a.m. and 6 p.m. (Eastern time).
Class A shares only may also be redeemed by calling Tele#Facts at 1-800-346-
5984 twenty-four hours a day. Redemption requests accepted after the Exchange
has closed (4:00 p.m. Eastern time) will be processed at the next-determined
net asset value. The proceeds (LESS ANY APPLICABLE CDSC) generally will be
wired on the next business day to the bank account previously chosen by you on
your application. A wire fee (currently $5.00) will be deducted from the pro-
ceeds.
Your bank must be a member of the Federal Reserve System or have a correspon-
dent bank that is a member. If your account is with a savings bank, it must
have only one correspondent bank that is a member of the System.
Mailed to Your Address of Record -- Shares may be redeemed by calling 1-800-
225-5478 and requesting that a check for the proceeds (LESS ANY APPLICABLE
CDSC) be mailed to the address on your account, provided that the address has
not changed over the previous month and that the proceeds are for $100,000 or
less. Generally, the check will be mailed to you on the business day after your
redemption request is received.
Through ACH -- Shares may be redeemed electronically through the ACH system,
provided that you have an approved ACH application on file with the Fund. To
redeem through ACH, call 1-800-225-5478 prior to 3:00 p.m. (Eastern time) on a
day when the Fund is open for business or call Tele#Facts at 1-800-346-5984
twenty-four hours a day. If your telephone call is made to Tele#Facts before
4:00 pm., the redemption will be processed the day the call is made, unless it
is a day when the Exchange closes before 4:00 p.m. and your call is made after
the Exchange closes. The proceeds (LESS ANY APPLICABLE CDSC) generally will ar-
rive at your bank within three business days; their availability will depend on
your bank's particular rule. If you have recently purchased your shares through
the ACH system, the Fund may withhold redemption proceeds until the funds have
cleared, which may take up to ten days.
BY MAIL:
You may redeem your shares at their net asset value (LESS ANY APPLICABLE CDSC)
next determined after receipt of your request in good order by sending a writ-
ten request (including any necessary special documentation) to New England
Funds, P.O. Box 8551, Boston, MA 02266-8551.
The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, the number of shares or the dollar
amount to be redeemed and whether you wish the proceeds mailed to your address
of record, wired to your bank account or transmitted through ACH. All owners of
the shares must sign the request in the exact names in which the shares are
registered (this appears on your confirmation statement) and indicate any spe-
cial capacity in which you are signing (such as trustee, custodian or under
power of attorney or on behalf of a partnership, corporation or other entity).
If you are redeeming shares worth less than $100,000 and the proceeds check is
made payable to the registered owner(s) and mailed to the record address, no
signature guarantee is required. Otherwise, you generally must have your signa-
ture guaranteed by an eligible guarantor institution in accordance with proce-
dures established by New England Funds, L.P. Signature guarantees by notaries
public are not acceptable.
Additional written information may be required for redemptions by certain bene-
fit plans and IRAs. Contact the Distributor or your investment dealer for de-
tails.
20
<PAGE>
If you hold certificates for your Class A shares, you must enclose them with
your redemption request or your request will not be honored. The Fund recom-
mends that certificates be sent by registered mail.
BY SYSTEMATIC WITHDRAWAL PLAN:
You may establish a Systematic Withdrawal Plan that allows you to redeem shares
and receive payments on a regular schedule. In the case of shares subject to a
CDSC, the amount or percentage you specify may not exceed, on an annualized ba-
sis, 10% of the value of your Fund account. Redemption of shares pursuant to
the Plan will not be subject to a CDSC. For information, contact the Distribu-
tor or your investment dealer. Since withdrawal payments may have tax conse-
quences, you should consult your tax adviser before establishing such a plan.
GENERAL. Redemption requests will be effected at the net asset value next de-
termined after your redemption request is received in proper form by State
Street Bank or your investment dealer (except that orders received by your in-
vestment dealer before the close of regular trading on the Exchange and trans-
mitted to the Distributor by 5:00 p.m. Eastern time on the same day will re-
ceive that day's net asset value). Redemption proceeds (LESS ANY APPLICABLE
CDSC) will normally be mailed to you within seven days after State Street Bank
or the Distributor receives your request in good order.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If you are unable to contact the Distributor by
telephone, shares may be redeemed by delivering the redemption request in per-
son to the Distributor or by mail as described above. Requests are processed at
the net asset value next determined after the request is received.
Special rules apply with respect to redemptions under powers of attorney.
Please call your investment dealer or the Distributor for more information.
Telephone redemptions are not available for tax qualified retirement plans or
for Fund shares held in certificate form. If certificates have been issued for
your investment, you must send them to New England Funds along with your re-
quest before a redemption request can be honored. See the instructions for re-
demption by mail above.
The Fund may suspend the right of redemption and may postpone payment for more
than seven days when the Exchange is closed for other than weekends or holi-
days, or if permitted by the rules of the SEC when trading on the Exchange is
restricted or during an emergency which makes it impracticable for the Fund to
dispose of its securities or to determine fairly the value of its net assets,
or during any other period permitted by the SEC for the protection of invest-
ors.
REPURCHASE OPTION (CLASS A SHARES ONLY)
You may apply your Class A share redemption proceeds (without a sales charge)
to the repurchase of Class A shares of any series of the Trusts. To qualify,
you must reinvest some or all of the proceeds within 120 days after your re-
demption and notify New England Funds or your investment dealer at the time of
reinvestment that you are taking advantage of this privilege. You may reinvest
the proceeds either by returning the redemption check or by sending your check
for some or all of the redemption amount. Please note: For federal income tax
purposes, a redemption is a sale that involves tax consequences (even if the
proceeds are later reinvested). Please consult your tax adviser.
21
<PAGE>
Fund Details
HOW FUND SHARE PRICE IS DETERMINED
The Fund's holdings of equity securities are valued at the most recent sales
prices on an applicable exchange or NASDAQ, or, in the case of unlisted securi-
ties (or listed securities which were not traded during the day), at the last
quoted bid prices. Price information on listed securities is generally taken
from the closing price on the exchange where the security is primarily traded.
Short-term notes are valued at cost, or, where applicable, amortized cost,
which method is intended to approximate market value. All other securities and
assets of each segment of the Fund's portfolio are valued at their fair market
value as determined in good faith by the subadviser of that segment (or a pric-
ing service selected by the subadviser) under the supervision of the Trust's
Board of Trustees. The net asset value of the Fund's shares is determined as of
the close of regular trading (normally 4:00 p.m. Eastern time) on the Exchange
each day it is open.
The net asset value per share of each class is determined by dividing the value
of each class's assets (the current U.S. dollar value, in the case of securi-
ties principally traded outside the United States) plus any cash and other as-
sets (including dividends and interest receivable but not collected) less all
liabilities (including accrued expenses), by the number of shares of such class
outstanding. The public offering price of the Fund's Class A shares is deter-
mined by adding the applicable sales charge to the net asset value. See "Buying
Fund Shares--Sales Charges" above. The public offering price of Class B and
Class C shares is the net asset value per share.
The price you pay for a share will be determined using the next set of calcula-
tions made after your order is accepted by the New England Funds, L.P. In other
words, if, on a Tuesday morning, your properly completed application is re-
ceived, your wire is received or your dealer places your trade for you, the
price you pay will be determined by the calculations made as of the close of
regular trading on the Exchange on Tuesday. If you buy shares through your in-
vestment dealer, the dealer must receive your order by the close of regular
trading on the Exchange and transmit it to the Distributor by 5:00 p.m. (East-
ern time) to receive that day's public offering price.
INCOME TAX CONSIDERATIONS
The Fund intends to meet all requirements of the Internal Revenue Code of 1986,
as amended, necessary to qualify as a "regulated investment company" and thus
does not expect to pay any federal income tax on investment income and capital
gains distributed to shareholders in cash or in additional shares. Unless you
are a tax-exempt entity, your distributions derived from the Fund's short-term
capital gains and ordinary income are taxable to you as ordinary income. (A
portion of these distributions may qualify for the dividends-received deduction
for corporations.) Distributions derived from the Fund's long-term capital
gains ("capital gains distributions"), if designated as such by the Fund, are
taxable to you as long-term capital gains, regardless of how long you have
owned shares in the Fund. Both income distribution and capital gains distribu-
tions are taxable whether you elected to receive them in cash or additional
shares.
To avoid an excise tax, the Fund intends to distribute prior to calendar year
end virtually all the Fund's ordinary income and net capital gains earned dur-
ing that calendar year. If declared in December to shareholders of record in
that month, and paid the following January, these distributions will be consid-
ered for federal income tax purposes to have been received by shareholders on
December 31.
CALCULATING THE PRICE OF SHARES
Total Market Value of Other Any
Portfolio Securities + Assets - Liabilities
----------------------------------------------- = Net Asset Value (NAV)
Total Number of Outstanding Shares in a Class
THE PUBLIC OFFERING PRICE FOR CLASS A SHARES IS THE NAV PLUS THE APPLICABLE
SALES CHARGE. THE PUBLIC OFFERING PRICE FOR CLASS B AND CLASS C SHARES IS THE
NAV.
22
<PAGE>
The Fund is required to withhold 31% of all income dividends and capital gains
distributions it pays to you if you do not provide a correct, certified tax-
payer identification number, if the Fund is notified that you have
underreported income in the past, or if you fail to certify to the Fund that
you are not subject to such withholding. In addition, the Fund will be required
to withhold 31% of the gross proceeds of Fund shares you redeem if you have not
provided a correct, certified taxpayer identification number. If you are a tax-
exempt shareholder, however, these back-up withholding rules will not apply so
long as you furnish the Fund with an appropriate certification.
Annually, if you earn more than $10 in taxable income from the Fund, you will
receive a Form 1099 to assist you in reporting the prior calendar year's dis-
tributions on your federal income tax return. You should consult your tax ad-
viser about any state or local taxes that may apply to such distributions. Be
sure to keep the Form 1099 as a permanent record. A fee may be charged for any
duplicate information requested.
The foregoing is a summary of certain federal income tax consequences of an in-
vestment in the Fund for shareholders who are U.S. citizens or corporations.
Shareholders should consult a competent tax adviser as to the effect of an in-
vestment in the Fund on their particular federal, state and local tax situa-
tions.
THE FUND'S EXPENSES
In addition to the management fee paid to the Adviser, the Fund pays all ex-
penses not borne by the Adviser, the subadvisers or the Distributor, including,
but not limited to, the charges and expenses of the Fund's custodian and trans-
fer agent, independent auditors and legal counsel, 12b-1 fees, all brokerage
commissions and transfer taxes in connection with portfolio transactions, all
taxes and filing fees, the fees and expenses for registration or qualification
of its shares under federal or state securities laws, all expenses of share-
holders' and trustees' meetings and preparing, printing and mailing prospec-
tuses and reports to shareholders and the compensation of trustees of the Trust
who are not directors, officers or employees of The New England or its affili-
ates, other than affiliated registered investment companies. Certain expenses
are allocated differently between the Fund's Class A, Class B and Class C
shares, on the one hand, and its Class Y shares, on the other hand. (See "Addi-
tional Facts about the Fund," below.)
Under a Service Plan in the case of Class A shares, and Service and Distribu-
tion Plans in the case of Class B and Class C shares, adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor a
monthly service fee at an annual rate not to exceed 0.25% of the Fund's average
daily net assets attributable to the Class A, Class B and Class C shares. The
Distributor may pay up to the entire amount of this fee to securities dealers
who are dealers of record with respect to the Fund's shares, for providing per-
sonal services to investors in shares of the Fund and/or the maintenance of
shareholder accounts. In the case of the Class B shares, the Distributor pays
investment dealers at the time of sale the first year's service fee, in the
amount of up to .25% of the amount invested. The Class A service fee is payable
only to reimburse the Distributor for amounts it pays or expends in connection
with the provision of personal services to investors and/or the maintenance of
shareholder accounts. To the extent that the Distributor's reimbursable ex-
penses in any year exceed the maximum amount payable under the relevant Service
Plan for that year, such expenses may be carried forward for reimbursement in
future years in which the Plan remains in effect. The Class B and C service
fees are payable regardless of the amount of the Distributor's related ex-
penses.
The Fund's Class B and Class C shares also pay the Distributor a monthly dis-
tribution fee at an annual rate not to exceed 0.75% of the average net assets
of the Fund's Class B and Class C shares. The Distributor may pay up to the en-
tire amount of this fee to securities dealers who are dealers of record with
respect to the Fund's shares, as distribution fees in connection with the sale
of the Fund's shares. The Distributor retains the balance of the fee as compen-
sation for its services as distributor of the Class B and Class C shares.
AVERAGE COST
STATEMENT
IF YOU HAVE EXCHANGED OR REDEEMED SHARES DURING THE YEAR, YOU WILL RECEIVE A
STATEMENT THAT SHOWS THE COST BASIS OF THOSE SHARES WHICH SHOULD HELP YOU DE-
TERMINE YOUR GAIN OR LOSS FOR TAX PURPOSES.
23
<PAGE>
PERFORMANCE CRITERIA
The Fund may include total return information for each class of shares in ad-
vertisements or other written sales material. The Fund will show each class's
average annual total return for the one-, five- and ten-year periods (or the
life of the class, if shorter) through the end of the most recent calendar
quarter. Total return is measured by comparing the value of a hypothetical
$1,000 investment in a class at the beginning of the relevant period to the
value of the investment at the end of the period (assuming deduction of the
current maximum sales charge on Class A shares, automatic reinvestment of all
dividends and capital gains distributions and, in the case of Class B shares,
imposition of the CDSC relevant to the period quoted). Total return may be
quoted with or without giving effect to any voluntary expense limitations in
effect for the class in question during the relevant period. The class may also
show total return over other periods, on an aggregate basis for the period pre-
sented, or without deduction of a sales charge. If a sales charge is not de-
ducted in calculating total return, the class's total return is higher.
Total return will generally be higher for Class A shares than for Class B and
Class C shares, because of the higher levels of expenses borne by the Class B
and Class C shares. An investor should balance this expected lower total return
against the benefit gained by 100% immediate investment of the purchase price
of Class B or Class C shares. As a result of lower operating expenses, Class Y
shares can be expected to achieve a higher investment return than the Fund's
Class A, Class B or Class C shares.
All performance information is based on past results and is not an indication
of likely future performance.
ADDITIONAL FACTS ABOUT THE FUND
. New England Funds Trust I was organized in 1985 as a Massachusetts business
trust and is authorized to issue an unlimited number of full and fractional
shares in multiple series. The Fund was organized as a series of the Trust in
1994.
. When you invest in the Fund, you acquire freely transferable shares of bene-
ficial interest that entitle you to receive dividends as determined by the
Trust's trustees and to cast a vote for each share you own at shareholder
meetings. Shares of the Fund vote separately from shares of other series of
the Trust, except as otherwise required by law. Shares of all classes of the
Fund vote together, except as to matters relating to a class's Rule 12b-1
plan, on which only shares of that class are entitled to vote.
. Except for matters that are explicitly identified as "fundamental" in this
prospectus or Part I of the Statement, the investment policies of the Fund may
be changed without shareholder approval or, in most cases, prior notice. The
investment objective of the Fund is not fundamental. If there is a change in
the Fund's objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their current financial position and needs.
. Class Y shares of the Fund may be purchased by endowments and foundations.
The minimum initial investment is $1 million for these entities and the mini-
mum for each subsequent investment is $100,000. Class Y shares may also be
purchased by plan sponsors of 401(a), 401(k), 457 or 403(b) plans ("Retirement
Plans") that have total investment assets in these plans of at least $10 mil-
lion. Plan sponsors' investment assets in multiple Retirement Plans can be ag-
gregated for purposes of meeting this minimum. Class Y shares may also be pur-
chased by any separate account of The New England or of any other insurance
company affiliated with The New England ("Separate Accounts"). There is no
minimum initial or subsequent investment amount for Retirement Plans or Sepa-
rate Accounts. Investments in Class Y shares may also be made by certain indi-
vidual retirement accounts if the amounts invested represent rollover distri-
butions from investments by any of the foregoing Retirement Plans of amounts
invested in Class Y shares.
24
<PAGE>
. Class Y shares are identical to Class A, Class B and Class C shares, except
that Class Y shares have no sales charge or CDSC, bear no Rule 12b-1 fees and
have separate voting rights in certain circumstances. Class Y bears its own
transfer agency and prospectus printing costs and does not bear any portion of
those costs relating to other classes of shares.
. The Trust does not generally hold regular shareholder meetings and will do so
only when required by law. Shareholders of the Trust may remove the trustees
of the Trust from office by votes cast at a shareholder meeting or by written
consent.
. The transfer and dividend paying agent for the Fund is New England Funds,
L.P., 399 Boylston Street, Boston, MA 02116. New England Funds, L.P. has sub-
contracted certain of its obligations as such to State Street Bank, 225 Frank-
lin Street, Boston, MA 02110.
. If the balance in your account with the Fund is less than a minimum amount
set by the trustees of the Trust from time to time (currently $500), the Fund
may close your account and send the proceeds to you. Shareholders who are af-
fected by this policy will be notified of the Fund's intention to close the
account and will have 60 days immediately following the notice to bring the
account up to the minimum. The minimum does not apply to tax-qualified plans
(such as IRAs, Keoghs and pension and profit sharing plans), automatic invest-
ment plans or accounts that have fallen below the minimum solely because of
fluctuations in the Fund's net asset value per share.
. The Fund's annual report contains additional performance information and will
be made available upon request and without charge.
. The Class A, Class B, Class C and Class Y structure could be terminated
should certain IRS rulings be rescinded. See Part II of the Statement for more
details.
25
<PAGE>
GLOSSARY OF TERMS
CAPITAL GAIN DISTRIBUTIONS -- Payments to shareholders of profits earned from
selling securities in a fund's portfolio. Capital gain distributions are usu-
ally paid once a year.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- A fee that may be charged when a
shareholder sells fund shares.
DISTRIBUTION FEE -- An annual asset-based sales charge that is used to pay for
sales-related expenses.
INCOME DISTRIBUTIONS -- Payments to shareholders resulting from interest or
dividend income earned by a fund's portfolio.
MUTUAL FUND -- The pooled assets of a group of investors, professionally man-
aged in pursuit of a specific objective.
NET ASSET VALUE (NAV) -- The market value of one share of a mutual fund on any
given day without sales charge or CDSC. Determined by dividing the fund's total
net assets by the number of fund shares outstanding.
NEW ENGLAND FUNDS, L.P. -- The distributor and transfer agent of the New En-
gland Funds.
OPEN END INVESTMENT MANAGEMENT COMPANY -- A mutual fund that allows investors
to redeem fund shares directly from the fund company on any business day.
PUBLIC OFFERING PRICE (POP) -- The price of one share of a mutual fund, includ-
ing its initial sales charge, if there is one.
RECORD DATE -- The date on which mutual fund investors must own a fund's shares
to be eligible to receive specific income or capital gain distributions.
SERVICE FEE -- Payments by a fund for personal service to investors and/or for
maintenance of shareholder accounts by the Distributor or a financial represen-
tative.
TOTAL RETURN -- The change in value of an investment in a fund investment over
a specific time period, assuming all earnings are reinvested in additional
shares of the fund. Expressed as a percentage.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Yield calculations are standardized among mutual funds, based on a formula de-
veloped by the Securities and Exchange Commission.
12B-1 FEES -- Fees paid by a mutual fund under a plan adopted under SEC Rule
12b-1. Can include both distribution fees and service fees.
LOGO printed on recycled paper
26 XA51
