NEW ENGLAND FUNDS
Class Y Shares of:
New England Star Advisers Fund
May 1, 1995
as Revised October 2, 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 employ different
investment styles and strategies. The Fund is a series of New
England Funds Trust I. New England Funds Trust I and New England
Funds Trust II are registered open-end management investment
companies and are referred to in this prospectus as the "Trusts."
The Fund offers four classes of shares: Class Y (for qualified
institutional investors) and Classes A, B and C (for other
investors). This prospectus sets forth information investors
should know before investing in Class Y shares. 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 "Distributor"), SAI
Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or call
toll free at 1-800-225-7670. The Statement contains more
detailed information about the Fund and is incorporated into this
prospectus by reference. Class A, B and C shares are described
in a separate prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED 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 ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Schedule of Fees 2
Financial Highlights 3
Investment Objective 5
How the Fund Pursues Its Objective 5
Investment Risks 6
Subadvisers' Investment Styles 9
Fund Management 10
Minimum Investment 11
Ways to Buy Fund Shares 12
Exchanging Among New England Funds 12
Ways to Sell Fund Shares 12
Determination of Net Asset Value 13
Dividends 14
Federal Income Taxes 14
Performance Criteria 14
Additional Facts About the Fund 15
<PAGE>
Fund Expense 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 the Fund's Class Y
shares. The Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class Y shares of the Fund for the
periods specified.
Shareholder transaction expenses
New England
Star Advisers Fund
Maximum Initial Sales Charge Imposed None
on a Purchase
(as a percentage of offering price)
Maximum Contingent Deferred Sales None
Charge (as a percentage of original
purchase price, or redemption
proceeds, as applicable)
Deferred Sales Charge None
Redemption Fees None
Exchange Fees None
Annual operating expenses +
(as a percentage of net assets)
New England
Star Advisers Fund
Management 1.05%
Fees
12b-1 Fees None
Other 0.44%
Expenses
Total 1.49%
Expenses
The percentages shown for Management Fees and Other Expenses are
annualized amounts based on the Distributor's estimates of the average
combined net assets of the Class A, B, C and Y shares of the Fund for
the Class Y shares' first fiscal year.
Example
A $1,000 investment would incur the following dollar amount of transaction
costs and operating expenses assuming a 5% annual return and, 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.
New England
Star Advisers Fund
1 year $15
3 years $47
5 years **
10 years **
**New England Star Advisers Fund is a recently organized fund. Federal
regulations require that examples for the Fund include information for 1
and 3 years only.
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 Funds.
For information about the expenses of the Fund's Class A, B and C shares,
which differ from the expenses of the Class Y shares, see "Additional Facts
About the Fund." To obtain more information about Class A, B and C 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 receive redemption proceeds by wire.
Please keep in mind that the Example shown above is hypothetical. The
information 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.
FINANCIAL HIGHLIGHTS
(For a Class Y share of the Fund outstanding throughout the indicated
period.)
The Financial Highlights presented below have been included in financial
statements for the Fund. The financial statements for the Fund for the
period July 7, through December 31, 1994 have been examined by Price
Waterhouse LLP, independent accountants. The Financial Highlights should
be read in conjunction with the financial statements and the notes thereto
incorporated by reference in Part II of the Statement.
New England Star Advisers Fund
Class Y
shares
November 15,
1994(a)
through
December 31,
1994
Net asset value, beginning of period $13.59
Income from investment operations
Net investment income 0.06
Net gains or losses on investments
(both realized and unrealized) (0.35)
Total income from investment (0.29)
operations
Less distributions
Distributions (from net investment (0.06)
income)
Total distributions (0.06)
Net asset value, end of period $13.24
Total return (%) (2.1) (c)
Ratios/Supplemental data
Net assets, end of period (000) 196
Ratio of operating expenses to 1.79 (b)
average net assets (%) (d)
Ratio of net investment income to 2.26 (b)
average net assets (%)
Portfolio turnover rate (%) 100
(a) Commencement of offering of Class Y shares.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets (computed on an
annualized basis) without giving effect to the voluntary expense
limitations in effect from November 15, 1994 through December 31, 1994
would have been 1.90% for the period ended December 31, 1994.
INVESTMENT OBJECTIVE
The Fund's objective is long term growth of capital.
HOW THE FUND PURSUES ITS OBJECTIVE
The Fund seeks to attain its objective by investing primarily in equity
securities. 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 issuers in emerging markets) as well as in securities
of U.S. issuers. For more information about investments in foreign
securities, see the next section "Investment 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
companies which it believes have favorable 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 positions in securities convertible into common stocks, and may
also purchase preferred stocks, government securities, including 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 -- Miscellaneous" 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 companies 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 emphasis 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 opportunity 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
objective by investing substantially all of Janus Capital's segment of the
portfolio in common stocks when its portfolio manager believes that the
relevant market environment favors profitable investing in such securities.
Janus Capital emphasizes companies with earning 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 agreements when its portfolio manager perceives an
opportunity for capital growth from such securities or to receive a return
on idle cash. Janus Capital's segment may also invest in Rule 144A
securities and may enter into options, futures and forward contracts.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") manages its segment of the
portfolio by investing primarily in stocks of small cap companies with good
earnings growth potential, that Loomis Sayles believes are undervalued by
the market. Typically, such companies range in size from $100 million to
$500 million in market capitalization, have better than average growth
rates at below average price/earnings ratios and have strong balance sheets
and cash flow.
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 instruments or in cash. In addition, under normal
conditions, a portion of each segment'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 valued in the top 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
INVESTMENT RISKS
It is important to understand the following risks inherent in investing 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
preferred stocks and securities exercisable for or convertible into common
or preferred stocks (such as warrants, convertible debt securities and
convertible 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 relatively 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 investments 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. The value of convertible securities that pay dividends
or interest, like the value of fixed-income securities generally, tends to
fluctuate inversely with changes in interest rates. The credit risk
associated with convertible securities is generally reflected by their
being rated, if at all, below investment grade by organizations such as
Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's
Corporation ("Standard and Poor's"). 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.
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.
[] 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.
Fluctuations 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. Fluctuations in the value of the
Fund's investments in fixed-income securities will cause the Fund's net
asset value to increase or decrease.
[] 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
repurchase the securities at a higher price at a later date. Such
transactions afford an opportunity for the Fund to earn a return on
available cash at minimal market risk, although the Fund may be subject to
various delays and risks of loss if the seller is unable to meet its
obligation to repurchase.
[] Short-Term Trading
Although the Fund seeks long-term growth of capital, it 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
capital gains. Portfolio turnover considerations will not limit any
subadviser's investment discretion in managing the Fund's assets.
The Fund's recent portfolio turnover is set forth above under "Financial
Highlights."
[] Small Companies
The Fund may, in the discretion of each subadviser, invest without limit in
the securities of companies with smaller capitalization. Investments in
companies with relatively small capitalization may involve greater risk
than is usually associated with more established companies. These
companies often have sales and earnings growth rates which exceed those of
companies with larger capitalization. Such growth rates may in turn be
reflected in more rapid share price appreciation. However, companies with
smaller capitalization often have limited 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 averages 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 Standard and Poor's or Ba or
lower by Moody's (and comparable unrated securities) are of below
"investment grade" quality. These 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 predominantly speculative with
respect to the ability of the issuer to meet principal and interest
payments. Achievement of the investment objective of a mutual fund
investing in lower quality fixed-income securities may be more dependent on
the fund's adviser's or subadvisers 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 quality 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 has 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 - Description 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 standards and practices comparable to those in the United States.
The securities of some foreign issuers are less liquid and at times more
volatile than securities of comparable U.S. issuers. Foreign brokerage
commissions and securities custody costs are often higher than those in the
United States, and judgments against foreign entities may be more difficult
to obtain and enforce. With respect to certain foreign countries, there is
a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments
that could affect the value of investments in those countries. The receipt
of interest on foreign government 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
countries 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 assistance, currency transfer restrictions, highly limited
numbers of potential buyers for such securities and delays and disruptions
in securities settlement procedures.
Most foreign securities in the Fund's portfolio will be denominated in
foreign currencies or traded in securities markets in which settlements are
made in foreign currencies. 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 investments 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
currencies. 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
options 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 writing 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 and its risk of loss 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
liquidity than are the U.S. markets. In addition, foreign markets may be
subject 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 positions or in anticipation of changes in relative values of
currencies in which current or future 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 transactions on established exchanges, the Fund may purchase over-
the-counter options 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 options 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 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 coupon 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
securities," that is, securities which are not readily resaleable, which
include securities whose disposition is restricted by federal securities
laws. The Fund may purchase Rule 144A securities. These are privately
offered securities that can be resold only to certain qualified
institutional buyers. Rule 144A securities are treated as illiquid, unless
a subadviser has determined, under guidelines established by the Trust's
trustees, that the particular issue of Rule 144A securities is liquid.
Investment in restricted 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 for its portfolio on a "when-issued" or
"delayed-delivery" basis. 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-issued" 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 at the time of delivery. For more information on
"when-issued" 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 regulatory occurrence.
[] Special Considerations Regarding the Multi-Adviser Approach
New England Investment Companies, L.P. (the "Adviser") 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
segments 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 security from another segment of the portfolio. Similarly, under
some market conditions, one or more of the subadvisers may believe that
temporary, defensive investments in short-term instruments or cash are
appropriate when another subadviser or subadvisers believe continued
exposure to the equity markets is appropriate for their segments of the
portfolio. Because each subadviser directs the trading for its own segment
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
portfolio. 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 redemptions of the Fund's shares will, however, be allocated on a
substantially equal basis among the four segments of the portfolio.
SUBADVISERS' INVESTMENT STYLES
The Adviser believes that a multi-adviser approach to equity investing _
one that combines the varied styles of a number of advisers in selecting
securities 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 periods. The Adviser believes that consistency of results,
minimizing under-performance 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 success, 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 results 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 conditions, 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 leadership 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, including large, well-established companies and smaller, emerging
growth companies. Janus Capital's analysis and selection process focus on
stocks with earnings growth potential that may not be recognized by the
market.
Loomis, Sayles & Company, L.P.
Loomis Sayles seeks to build a core small cap portfolio of solid growth
companies' stock, with a smaller emphasis on special situations and
turnarounds (companies that have experienced significant business problems
but which Loomis Sayles believes have favorable prospects for recovery), as
well as unrecognized stocks.
FUND MANAGEMENT
New England Investment Companies, L.P., 399 Boylston Street, Boston,
Massachusetts 02116, serves as the Fund's adviser. The Adviser's sole
general partner, New England Investment Companies, Inc., is a wholly-owned
subsidiary of The New England. 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 average 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 0.55% of the first $50 million of the average daily net
assets of the segment of the Fund that 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") controls Berger.
Founders, 2930 East Third Avenue, Denver, Colorado 80206, has acted as an
investment 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 research analysts. Daily decisions on
portfolio selection rest with the lead portfolio manager, who, through
participation in the committee process, utilizes the input of other team
members in making purchase and sale determinations. 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 Investment Officer
since 1969 and owns all of Founders' outstanding shares.
Janus Capital, 100 Fillmore Street, Suite 300, Denver, Colorado 80206, has
managed mutual funds since 1969 and also advises individual, corporate,
charitable and retirement accounts. Warren B. Lammert has day-to-day
management responsibility for those assets of the Fund allocated to Janus
Capital, where he serves as a portfolio manager and Vice President of
Investments. KCSI owns approximately 83% of Janus Capital.
Loomis Sayles, One Financial Center, Boston, Massachusetts 02111, is one of
the country's oldest and largest investment counsel firms. The general
partners of Loomis Sayles and the Distributor are special purpose
corporations which are wholly-owned subsidiaries of the adviser, whose sole
general partner, New England Investment Companies, Inc. is a wholly-owned
subsidiary of The New England. Jeffrey C. Petherick, Vice President of
Loomis Sayles and New England Funds Trust I, and Mary Champagne, Vice
President of Loomis Sayles, have day-to-day management responsibility for
the segment of the Fund that is allocated to Loomis Sayles. Mr. Petherick
has co-managed the Loomis Sayles segment of the Fund since the Fund's
inception. Mr. Petherick was an investment manager at Masco Corporation
prior to joining Loomis Sayles in 1990. Ms. Champagne has co-managed the
Loomis Sayles segment of the Fund since July 1995. Prior to joining Loomis
Sayles in 1993, Ms. Champagne served as a portfolio manager at NBD Bank for
10 years.
In placing portfolio transactions for the Fund, each subadviser seeks best
execution. Subject to this policy, each subadviser may consider sales of
shares of the Trust and other mutual funds they manage as a factor in the
selection of broker dealers. Subject to procedures adopted by the Trust's
trustees, Fund brokerage transactions may be executed by brokers that are
affiliated with the Adviser or any subadviser.
The Trust's Broad of Trustees supervises the affairs of the Trust.
Under an agreement between the Adviser and the Distributor, the Distributor
provides certain services to the Fund, at the Adviser's expense.
All expenses of the Fund are borne by the Class A, Class B, Class C and
Class Y shares on a pro rata basis, except for the 12b-1 fees (which are
borne only by Class A, Class B and Class C and are charged separately to
those classes), transfer agency fees and expenses of printing and mailing
prospectuses to shareholders which are separately allocated to each class.
MINIMUM INVESTMENT
Class Y shares of the Fund may be purchased by endowments and foundations.
The minimum initial investment is $1 million for these entities and
$100,000 for each subsequent investment. Class Y shares may also be
purchased by 401(a), 401(k), 457 or 403(b) plans ("Retirement Plans") that
have total investment assets equal to or in excess of $10 million. Plan
sponsors' investment assets in multiple Retirement Plans can be aggregated
for purposes of meeting this minimum. Class Y shares may also be purchased
by any separate account of New England Mutual Life Insurance Company ("The
New England") and any other insurance company affiliated with The New
England ("Separate Accounts"). There is no minimum initial or subsequent
investment amount for the Retirement Plans or Separate Accounts.
Investments in the Fund may also be made by certain individual retirement
accounts if the amounts invested represent rollover distributions from
investments by any of the foregoing plans of amounts invested in the Fund.
The Distributor serves as the principal underwriter on the Fund's shares.
Shares may be purchased on any day when the New York Stock Exchange (the
"Exchange") is open for business (a "business day"). Investors should
contact New England Funds before attempting to place an order for Fund
shares. The Fund and the Distributor reserve the right at any time to
reject a purchase order.
WAYS TO BUY FUND SHARES
A shareholder may purchase Class Y shares for cash on any business day by
the two methods described below:
BY WIRE TRANSFER: Prior to an initial investment, obtain an account number
and wire transfer instructions by calling 1-800-225-5478. All funds should
be transmitted to State Street Bank and Trust Company, ABA #011000028, DDA
#99011538, Credit: New England Star Advisers Fund, Class Y shares,
Shareholder Name, and Shareholder Account Number.
BY MAIL: For an initial investment, complete the attached application and
return it with a check payable to New England Funds and mailed to New
England Funds, L.P. P O. box 8551, Boston, MA 02266-8551. Proceeds of
redemptions of Fund shares purchased by check may not be available for up
to ten days after the purchase date.
General
The purchase price of shares of the Fund is the net asset value next
determined after a purchase order is received in good order by New England
Funds. For purposes of calculating the purchase price of Fund shares, a
purchase order is considered received by the Fund on the day that it is "in
good order" unless it is rejected by the Fund. For a purchase order to be
in "good order" on a particular day, the investor's securities must be
placed on deposit at a depository acceptable to the Fund's adviser or, in
the case of cash investments, Federal funds must be wired to the Fund
between 9:00 a.m. and 4:00 p.m. (Eastern Time) or a check for the purchase
price of the shares, accompanied by a completed application, must have been
received by New England Funds before 4:00 p.m. (Eastern Time) on that day.
In the case of an order being paid for by exchange of other securities, the
deadline for transferring securities to a depository acceptable to the
Fund's adviser is 4:00 p.m. (Eastern Time). Orders received after 4:00
p.m. (Eastern Time) will receive the next day's price.
Purchases will be made in full and fractional Class Y shares calculated to
three decimal places. The shareholder will receive a statement of Fund
shares owned following each transaction. Investors will not receive
certificates representing Class Y shares. The Trusts and the Distributor
reserve the right at any time to reject a purchase order.
EXCHANGING AMONG NEW ENGLAND FUNDS
A shareholder may exchange investments from the Class Y shares of one
series of the Trusts to the Class Y shares of another series of the Trusts
or to the Class A shares of New England Cash Management Trust or New
England Tax Exempt Money Market Trust (the "Money Market Funds").
WAYS TO SELL FUND SHARES
BY TELEPHONE: A shareholder may redeem shares of the Funds on any business
day in cash by the two methods described below:
1. Mailed to your address of record - Shares may be redeemed by calling 1-
800-225-5478.
2. Wired to your bank account - If you have previously selected the
telephone redemption privilege, shares may be redeemed by calling 1-800-225-
5478 between 8 a.m. and 6 p.m. (Eastern Time). The proceeds generally will
be wired on the next business day to the bank account previously designated
on a shareholder's account application. The bank must be a member of the
Federal Reserve System or have a correspondent bank that is a member.
Savings bank accounts must have only one correspondent bank that is a
member of the System. A wire fee (currently $5.00) will be deducted from
the proceeds. A telephone redemption request must be received by the close
of regular trading on the New York Stock Exchange. If the request is
received after that time or on a day when the Exchange is not open for
business, the request will be processed on the next business day.
New England Funds, L.P. will employ reasonable procedures to confirm that a
shareholder's telephone 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
identification prior to acting upon telephone instructions, will provide
shareholders with written confirmations of such transactions and will
record a shareholders' instructions.
BY MAIL: A shareholder may also redeem shares at their net asset value
next determined after receipt of the request in good order by sending a
written 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, the account number, the
exact name in which the shares are registered and the number of shares or
the dollar amount to be redeemed and must be signed exactly in accordance
with the form of registration. Persons acting in a fiduciary capacity, or
on behalf of a corporation, partnership or trust, must specify the capacity
in which they are acting. The signature must be guaranteed by an eligible
institution in accordance with procedures established by New England Funds,
L.P. Signature guarantees by notaries public are not acceptable.
General
If the Fund's subadvisers determine, in their sole discretion, that it
would be detrimental to the best interests of the remaining shareholders of
the Fund to make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by a distribution in kind of readily
marketable securities held by the Fund in lieu of cash. Securities used to
redeem Fund shares in kind will be valued in accordance with the Fund's
procedures for valuation described under "Determination of Net Asset
Value." Securities distributed by the Fund in kind will be selected by the
Fund's subadviser in light of the Fund's objective and will not generally
represent a pro rata distribution of each security held in the Fund's
portfolio. Investors may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. The Fund's right to pay
redemptions in kind is limited by an election made by the Fund under Rule
18f-1 under the Investment Company Act of 1940. See Part II of the
Statement.
Payment on redemption will be made as promptly as possible and in any event
within seven days after a written request for redemption is received by the
Fund in good order. The Trusts 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 holidays, or if permitted by the rules of the SEC
during periods 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 the net assets of the Fund,
or during any other period permitted by the SEC for the protection of
investors.
DETERMINATION OF NET ASSET VALUE
The price of the Fund's shares varies, depending on the value of the Fund's
assets and liabilities.
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 securities 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 stated 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 (or a pricing 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 net assets (the current U.S. dollar value, in the
case of securities principally traded outside the United States) plus any
cash and other assets (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 each
Fund's Class A shares is determined by adding the applicable sales charge
to the net asset value.
DIVIDENDS
The Fund pays dividends annually. The Fund pays as dividends substantially
all net investment income (tax exempt and taxable income other than long-
term capital gains) each year and distributes annually all net realized
long-term capital gains (after applying any applicable capital loss
carryovers). The trustees of the Trust may adopt a different schedule as
long as payments are made at least annually. If a shareholder intends to
purchase shares of the Fund shortly before it declares a dividend, he or
she should be aware that a portion of the purchase price may be returned as
a taxable dividend.
A shareholder has the option to reinvest all distributions in additional
Class Y shares of the Fund in which it has invested, to receive
distributions in cash or to receive distributions from dividends and
interest in cash while reinvesting distributions from capital gains in
additional Class Y shares of the Fund.
FEDERAL INCOME TAXES
The Fund intends 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. Unless a shareholder is a tax-exempt entity, its
dividend distributions derived from the Fund's short-term capital gains and
ordinary income are taxable to it 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 a shareholder as long-term capital gains, regardless of how
long a shareholder has owned shares in the Fund. Both dividends and
capital gains distributions are taxable whether a shareholder 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 during that calendar year. If declared in December to shareholders
of record in that month, and paid the following January, these
distributions will be considered for federal income tax purposes to have
been received by shareholders on December 31.
The Fund is required to withhold 31% of all income dividends and capital
gains distributions it pays to a shareholder if it does not provide a
correct, certified taxpayer identification number, if the Fund is notified
that a shareholder has underreported income in the past, or if a
shareholder fails to certify to the Fund that it is not subject to such
withholding. In addition, each Fund will be required to withhold 31% of
the gross proceeds of Fund shares a shareholder redeems if a shareholder
has not provided a correct, certified taxpayer identification number. If a
shareholder is a tax-exempt shareholder, however, these back-up withholding
rules will not apply so long as the shareholder furnishes the Fund with an
appropriate certification.
The foregoing is a summary of certain federal income tax consequences of an
investment 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 investment in the Fund on their particular federal, state
and local tax situations.
PERFORMANCE CRITERIA
The Fund may include total return information in advertisements or other
written sales material. The Fund will show its average annual total return
for the one-, five- and ten-year periods (or the life of the Fund, 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 automatic reinvestment of all
dividends and capital gains distributions). The Fund may also show total
return over other periods.
All performance information is based on past results and is not an
indication of likely future performance. See the Statement for more
detail. As a result of their lower operating expenses, Class Y shares of
the Fund can be expected to achieve higher investment returns than the
Fund's Class A, Class B and Class C shares. For Class A shares, if the
sales charge is excluded in calculating the total return, the rate will be
higher.
ADDITIONAL FACTS ABOUT THE FUND
[] The transfer and dividend paying agent for the Funds is New England
Funds, L.P., 399 Boylston Street, Boston, MA 02116. New England Funds,
L.P. has subcontracted certain responsibilities to State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110.
[] 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.
[] An investor in the Fund acquires freely transferable shares of
beneficial interest that entitle the investor to receive annual or
quarterly dividends as determined by the Trust's trustees and to cast a
vote for each share owned at shareholder meetings. Shares of each
series of the Trusts vote separately from shares of other series of the
Trusts, except as otherwise required by law. Shares of all classes of a
Fund vote together, except that only Class A, Class B and Class C shares
may vote with respect to the Rule 12b-1 plans that apply to those
classes. No Rule 12b-1 plan applies to the Class Y shares of the Fund.
[] Class A, Class B and Class C shares are identical to Class Y shares,
except that Class A and Class B shares are subject to a sales charge or
CDSC, Class A, Class B and Class C shares bear a service fee at the
annual rate of .25% of average net assets and Class B and Class C shares
bear a .75% distribution fee. Class Y bears its own transfer agency and
prospectus printing costs. The minimum investment in Class A, Class B
and Class C shares is $2,500 (but lower minimums apply to purchases
under certain special programs).
Sales charges for Class A and Class B shares are as follows:
Class A Shares
The sales charge imposed on purchases of Class A shares of the Fund is
5.75% of investments less than $50,000, 4.50% on investments of $50,000
or more but less than $100,000, 3.50% on investments of $100,000 or more
but less than $250,000, 2.50% on investments of $250,000 or more but
less than $500,000 and 2.00% on investments of $500,000 or more but less
than $1,000,000. No sales charge applies at the time of purchase to
purchases of $1,000,000 or more, but certain redemptions by such
purchasers within one year after purchase are subject to a contingent
deferred sales charge ("CDSC") of 1%.
Class B Shares
Class B shares of the Fund 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 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 CDSC is 4% on redemptions made within the first
year of investment, 3% in the second and third years, 2% in the fourth
year and 1% in the fifth year.
Class C Shares
Class C shares are offered at net asset value, without an initial sales
charge; are subject to a 0.25% annual service fee and a 0.75% annual
distribution fee; and do not convert into another class.
Class A shares of the Fund may be purchased without paying a sales
charge by exchanging (i) Class A shares of any other series of the
Trusts or (ii) Class A shares of the Money Market Funds acquired through
exchanges from any of the series of the Trusts. 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 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
exchange. If you exchange your Class A shares of the New England
Adjustable Rate U.S. Government Fund ("Adjustable Rate Fund") for shares
of the Fund, 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. In addition, shares redeemed from any Money
Market Fund that were not acquired through exchanges from any series of
the Trusts may be redeemed and the proceeds applied directly to the
purchase of Class A shares of the Fund at the applicable sales charge.
All exchanges of Class A, B and C shares must be for a minimum of $500
or the total net asset value of the shareholder's account, whichever is
less, except that, under an Automatic Exchange Privilege, the minimum is
$50.
Class B shares of the Fund may be purchased by exchanging Class B shares
of any other series of the Trusts, Class B shares of the Money Market
Funds or Class A shares of the Money Market Funds (which have not been
subject to a sales charge). Such exchanges will be made at the next
determined net asset value of the shares. The holding period for the
purposes of timing the conversion to Class A shares and determining the
CDSC will continue to run after the exchange to the Class B shares of
series of the Trusts. If the exchange is made to the Class B shares of
a Money Market Fund, then the holding period will stop and 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 Fund or 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.
Class C shares of the Fund may be purchased by exchanging Class C shares
of any other series of the Trusts which offers Class C shares or by
exchanging Class A shares of the Money Market Funds.
Shares redeemed from any Money Market Fund that were not acquired
through exchanges from any series of the Trusts may be redeemed and the
proceeds applied directly to the purchase of Class C shares of the Fund.
Class A, Class B and Class C Fund shares may be purchased by mail, by
wire transfer, by automatic investment plan, by electronic purchase
through Automated Clearing House (ACH) and by exchange as described
above. Class A, Class B and Class C shares may be redeemed by mail and
by telephone. Class A and Class C shares may also be redeemed under a
systematic withdrawal program.
The Trust generally does not hold shareholder meetings and will do so
only when required by law. Shareholders may remove the trustees of the
Trust from office by votes cast at a shareholder meeting or by written
consent.
The Distributor has entered into a selling agreement with investment
dealers, including a broker-dealer that is an affiliate of the
Distributor, for the sale of the Funds' Class Y Shares. The Distributor
may at its expense pay an amount not to exceed 0.50% of the amount
invested to dealers who have selling agreements with the Distributor.
Registered representatives of the affiliated broker-dealer are also
employees of New England Investment Associates, Inc. ("NEIA"), an
indirect, wholly owned subsidiary of NEIC. NEIA may receive
compensation with respect to certain sales of each Fund's Class Y shares
from the Fund's adviser.
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. 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.
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.
