<PAGE>
Registration Nos. 2-98326
811-4323
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
---- ---
Post-Effective Amendment No. 28 x
---- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29 x
---- ---
(Check appropriate box or boxes)
NEW ENGLAND FUNDS TRUST I
-------------------------
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
-------------------------------------------------
(Address of Principal Executive Offices)
(617) 578-1388
--------------
(Registrant's Telephone Number, including Area Code)
Robert P. Connolly, Esq. Copy to: Edward A. Benjamin, Esq.
New England Funds, L.P. Ropes & Gray
399 Boylston Street One International Place
Boston, Massachusetts 02116 Boston, Massachusetts 02110-26624
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
on (date) pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on (date) pursuant to paragraph (a)(1) of Rule 485
-----
X 75 days after filing pursuant to paragraph (a)(2) of Rule 485
-----
on (date) pursuant to paragraph (a)(2) of Rule 485.
-----
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
Registration Nos. 2-98326
811-4323
Registrant has registered an indefinite number of securities under the
Securities Act of 1933 in accordance with Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant filed on February 27, 1995, the
Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1994.
-2-
<PAGE>
NEW ENGLAND FUNDS TRUST I
(Prospectus and Statement of Additional Information)
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No. of
Form N-1A Caption in Prospectus
--------- ---------------------
1 ........................ Cover Page
2 ........................ Schedule of Fees
3 ........................ None
4 ........................ Cover page; Additional Facts about the
Fund; Investment Strategy; Subadvisers'
Investment Styles; Investment Risks
5 ........................ Investment Strategy; Subadvisers'
Investment Styles; Fund Management; Back
cover page
6 ........................ Cover page; Additional Facts about the
Fund; Buying Fund Shares; Owning Fund
Shares; Income Tax Considerations
7 ........................ Cover page; Schedule of Fees; Buying Fund
Shares; How Fund Share Price is
Determined; The Fund's Expenses; Back
cover page
8 ........................ Selling Fund Shares; Exchanging Among New
England Funds; Additional Facts About the
Fund
9 ........................ None
<PAGE>
Item No. of Caption in Statement
Form N-1A of Additional Information
--------- -------------------------
10 ........................ Cover page
11 ........................ Table of Contents
12 ........................ Description of the Trust and Ownership
of Shares
13 ........................ Miscellaneous Investment Practices;
Investment Restrictions
14 ........................ Management of the Trust
15 ........................ Management of the Trust
16 ........................ Fund Charges and Expenses; Management of
the Trust
17 ........................ Portfolio Transactions and Brokerage;
Fund Charges and Expenses
18 ........................ Description of the Trust and Ownership
of Shares
19 ........................ How to Buy Shares; Net Asset Value and
Public Offering Price; Reduced Sales
Charges; Shareholder Services;
Redemptions
20 ........................ Income Dividends, Capital Gain
Distributions and Tax Status
21 ........................ Advisory and Subadvisory Agreements;
Distribution Agreement and Rule 12b-1
Plans
22 ........................ Performance Information (in Prospectus);
Standard Performance Measures
23 ........................ None
-2-
<PAGE>
LOGO
New England Star Worldwide Fund
Prospectus and Application
December 27, 1995
New England Star Worldwide Fund (the "Fund") is a newly organized, multi-
manager, diversified mutual fund that will allocate its investment capital on a
substantially equal basis among multiple segments of the Fund advised by
investment management organizations that employ different investment styles and
strategies. The Fund is a series of New England Funds Trust I (the "Trust"), a
registered open-end management investment 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 without
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
determined 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 (a "CDSC"),
however, is imposed 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."
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
December 27, 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 1-800-225-5478. 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 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 REPRESENTA TION 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>
TABLE OF CONTENTS
Page
----
FUND EXPENSES Sales charges, yearly operating
Schedule of Fees expenses.
INVESTMENT STRATEGY
How the Fund Pursues Its Investment Objective
SUBADVISERS' INVESTMENT STYLES
INVESTMENT RISKS It is important to understand the risks
inherent in the Fund before you invest
PERFORMANCE INFORMATION
Subadvisers' Past Performance
FUND MANAGEMENT
BUYING FUND SHARES Everything you need to know to open
Minimum Investment and add to a New England Fund account
6 Ways to Buy Fund Shares
Sales Charges
Reduced Sales Charges (Class A only)
OWNING FUND SHARES New England Funds offers three
Exchanging Among New England Funds convenient ways to exchange fund shares
Fund Dividend Payments
SELLING FUND SHARES An opportunity to reinvest your
redemption proceeds with 120 days for
no sales charge
4 Ways to Sell Fund Shares How to withdraw money or close your
. Through your investment dealer account
. By telephone
. By mail
. By Systematic Withdrawal Plan
Repurchase Option (Class A Shares Only)
FUND DETAILS Additional information you may find
How Fund Share Price Is Determined important
Income Tax Considerations
The Fund's Expenses
Performance Criteria
Additional Facts About the Fund
GLOSSARY OF TERMS
<PAGE>
FUND EXPENSES
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
investment 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
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
portion of certain purchases of Class A shares greater than $1,000,000
redeemed within approximately 1 year after purchase. See "Buying Fund
Shares - Sales Charges."
Annual operating expenses - paid directly by the Fund, and indirectly by its
shareholders (as a percentage of average net assets) (TO BE UPDATED)
<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**................................. 0.90% 0.90% 0.90%
Total Expenses................................... 2.20% 2.95% 2.95%
</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 annualized percentages based on estimated expenses for
the Fund's first 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.
1
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------------- -------
(1) (2)
<S> <C> <C> <C> <C>
1 Year...................................... $ $ $ $
3 Years..................................... $ $ $ $
</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.
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.
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."
2
<PAGE>
INVESTMENT STRATEGY
How the Fund Pursues Its Investment Objective
The Fund seeks long term growth of capital by investing primarily in equity
securities both within the United States and around the world. The Fund is a
global fund, which means it will seek to invest in equity securities traded on
foreign stock markets as well as the stock markets of the United States.
Foreign markets represent two-thirds of the value of all stocks traded in the
world, and offer many opportunities for investment in addition to those found in
the United States. Foreign markets may be located in large, developed countries
such as Great Britain or in smaller, developing markets like Singapore. The
Fund may also invest in other securities, as described below. Under normal
market conditions, however, at least 65% of each segment of the Fund's
portfolio, and at least 65% of the Fund's total 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. Under normal market
conditions, the Fund will invest in securities of issuers in at least three
different countries, one of which will be the United States. As a temporary,
defensive measure, however, the Fund may invest without limit in securities of
U.S. issuers, including corporate and government debt obligations, or in cash or
cash equivalents. The Fund may purchase securities of non-U.S. issuers either
directly or in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs) or Global Depository Receipts (GDRs). For more
information about investments in foreign securities, see the next section,
"Investment Risks - Foreign Securities."
Capital invested in the Fund will be allocated among five different segments of
the portfolio, managed by four different subadvisers. Each subadviser will
manage its segment or segments of the Fund's assets in accordance with that
subadviser's own investment style and strategy. The subadvisers' styles and
strategies are outlined below. See also "Subadvisers' Investment Styles" and
"Fund Management."
Harris Associates L.P. ("Harris Associates") manages two segments of the Fund's
portfolio, a U.S. segment and an international segment. Harris Associates'
investment philosophy is predicated on the belief that over time market price
and value converge and that investment in securities priced significantly below
long-term value presents the best opportunity to achieve the Fund's objective.
The U.S. segment invests primarily in equity securities of U.S. issuers, whereas
the international segment may invest primarily in both mature and emerging
markets outside the U.S. The segments of the Fund managed by Harris Associates
invest primarily in common stocks and securities convertible into common stock,
but may also invest in other securities that are suited to the Fund's investment
objective, including preferred stocks and debt securities.
Montgomery Asset Management, L.P. ("Montgomery") ordinarily will invest at least
65% of its segment of the Fund's portfolio in equity securities in emerging
market countries. Montgomery selects investments for its segment based on a
combination of quantitative screening techniques and fundamental analysis.
Founders Asset Management, Inc.'s ("Founders") segment of the portfolio may
invest in both small and established growth companies, in both emerging and
established markets throughout the world. 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.
Janus Capital Corporation ("Janus Capital") pursues the Fund's investment
objective by investing its segment of the portfolio in U.S. and foreign
(including emerging) markets, using a "bottom up" approach. Janus Capital
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
3
<PAGE>
agreements when its portfolio manager perceives an opportunity for capital
growth from such securities or to receive a return on idle cash.
Under unusual market conditions as determined by any of the four subadvisers,
all or any portion of the segment(s) 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, certificates of deposit, commercial paper and other
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 fully collateralized repurchase agreements.
SUBADVISERS' INVESTMENT STYLES
The Manager believes that a multi-adviser approach to global equity investing --
one that combines the varied styles and geographic focuses of a number of
subadvisers in selecting securities for the Fund's portfolio -- offers a
different investment opportunity than global 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 Manager believes that assigning portfolio management
responsibility for the five segments of the Fund's portfolio 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(s) of the Fund's portfolio for which that subadviser
is responsible.
Harris Associates L.P.
Harris Associates manages two of the five segments of the Fund's portfolio, a
U.S. segment and an international segment. Harris Associates' chief
consideration in security selection is the size of the discount of market price
relative to the economic value of the security as determined by Harris
Associates. Harris Associates' investment philosophy is predicated on the
belief that over time market price and value converge and that investment in
securities priced significantly below long-term value presents the best
opportunity to achieve the Fund's objective.
U.S. Segment. In managing its U.S. segment of the Fund's portfolio, Harris
Associates uses several qualitative and quantitative methods in analyzing
economic value, but considers the primary determinant of value to be the
enterprise's long-run ability to generate cash for its owners. Once Harris
Associates has determined that a security is undervalued, Harris Associates will
consider it for purchase by this segment of the Fund. In making investment
decisions, a key additional factor is the quality of management and, for equity
securities, particular emphasis is placed on significant management stock
ownership. Harris Associates believes that the risks of equity investing are
often reduced if management's interests are strongly aligned with the interests
of its stockholders. At least 65% of the value of this segment of the portfolio
will, under normal market conditions, be invested in equity securities of U.S.
issuers. The segment may invest the balance of its assets in equity or fixed
income securities, including those of non-U.S. issuers.
International Segment. In managing its international segment of the Fund's
portfolio, Harris Associates uses several qualitative and quantitative methods
in analyzing economic value, but considers the primary determinant of value to
be the enterprise's long-run ability to generate cash for its owners. Once
Harris Associates has determined that a security is undervalued, Harris
Associates will consider it for purchase by this segment of the Fund, taking
into account the quality of management, the firm's market position within its
industry and its degree of pricing power. Harris Associates also considers the
relative political and economic stability of the company's
4
<PAGE>
home country in evaluating the potential rewards and risks of an investment
opportunity. This segment of the Fund may invest in securities traded in mature
markets (for example, Japan, Canada and the United Kingdom), in less developed
markets (Mexico and Thailand, for example), and in selected emerging markets
(Peru and India, for example). There are no limits on the Fund's geographic
asset distribution, but, to provide adequate diversification, Harris Associates
ordinarily invests this segment of the Fund in the securities markets of at
least five countries outside the United States, as well as in U.S. markets.
Some foreign governments have been engaged in programs of selling part or all of
their stakes in government owned or controlled enterprises ("privatizations").
Harris Associates believes that privatizations may offer opportunities for
significant capital appreciation, and intends to invest its global segment of
the Fund in privatizations in appropriate circumstances.
Montgomery Asset Management, L.P.
Montgomery will invest at least 65% of the assets of its segment in equity
securities of companies in countries having emerging markets, defined as having
an economy and market that are or would be considered by the World Bank or the
United Nations to be emerging or developing.
This segment currently limits its investments to the following emerging market
countries: Latin America (Argentina, Brazil, Chile, Colombia, Costa Rica,
Jamaica, Mexico, Peru, Trinidad and Tobago, Uruguay, Venezuela); Asia (China,
India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka,
Taiwan, Thailand, Vietnam); Southern and Eastern Europe (Czech Republic, Greece,
Hungary, Poland, Portugal, Turkey); Mid-East (Israel, Jordan); and Africa
(Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, South Africa, Tunisia,
Zimbabwe). In the future, this segment may invest in other emerging market
countries. Under normal conditions, this segment maintains investments in at
least six emerging market countries and invests no more than 35% of its total
assets in any one emerging market country. Montgomery considers a company to be
an emerging market company if its securities are principally traded in the
capital market of an emerging market country; it derives at least 50% of its
total revenue from either goods produced or services rendered in emerging market
countries or from sales made in such emerging market countries, regardless of
where the securities of such companies are principally traded; or it is
organized under the laws of, and with a principal office in, an emerging market
country.
Montgomery uses a proprietary, quantitative asset allocation model created by
Montgomery to manage its segment of the Fund. This model employs mean-variance
optimization, a process used in developed markets based on modern portfolio
theory and statistics. Mean-variance optimization helps determine the percent
of assets to invest in each country to maximize expected returns for a given
risk level. Montgomery's aims are to invest in those countries that are
expected to have the highest risk/reward trade-off when incorporated into the
context of Montgomery's segment as a whole and to construct a portfolio of
emerging market investments approximating the risk level of an internationally
diversified portfolio of securities in developed markets. This "top-down"
country selection is combined with "bottom-up" fundamental industry analysis and
stock selection based on original research and publicly available information
and company visits.
Founders Asset Management, Inc.
Founders is a "growth-style" manager of equity portfolios and gives priority to
the selection of individual securities that have the potential to provide
superior results over time, despite short-term volatility. Under normal
circumstances, Founders' approach to investment management gives greater
emphasis to the fundamental financial, marketing and operating strengths of the
companies whose securities it buys, and is less concerned with the short-term
impact of changes in macroeconomic and market conditions. Founders focuses on
purchasing the stocks of companies with strong management and market positions
whose earnings prospects are significantly above the average for their market
sectors.
Founders' segment of the Fund normally will invest at least 65% of its assets in
securities of growth companies in a variety of markets throughout the world.
Founders will emphasize common stocks of both small and established growth
companies that generally have proven performance records and strong market
positions. This segment of the Fund's portfolio will usually consist of
investments in companies in various countries. and under normal
5
<PAGE>
market conditions it will invest in at least three countries. Founders will not
invest more than 25% of the assets of its segment of the Fund in the securities
of any one foreign country.
Janus Capital Corporation
Janus Capital manages its segment of the portfolio to seek long-term capital
growth primarily from investing in common stocks of foreign and domestic
companies, of any size. This segment of the Fund normally invests in issuers
from at least five different countries, including the United States, but may at
times invest in fewer than five countries or even a single country. Janus
invests primarily in common stocks to the extent it believes that the relevant
market environment favors profitable investing in those securities. Janus takes
a "bottom up" approach to building its segment of the Fund's portfolio. In
other words, Janus seeks to identify individual companies with earning growth
potential that may not be recognized by the market at large. Although themes
may emerge, securities are selected without regard to any defined industry
sector or other similarly defined selection procedure. The portfolio manager
seeks companies with earnings growth potential on a worldwide basis, regardless
of country of organization or place of principal business activity. Foreign
securities are selected on a stock-by-stock basis without regard to any defined
allocation among countries or geographic regions. However, certain factors,
such as expected levels of inflation, government policies influencing business
conditions, the outlook for currency relationships, and prospects for economic
growth among countries, regions or geographic areas, may warrant greater
consideration in selecting foreign stocks.
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
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. 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 interest, like the value of all fixed-income securities,
generally fluctuates inversely 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 organizations such as Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("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.
. Foreign Securities
6
<PAGE>
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 governmental 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.
. 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.
. 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.
7
<PAGE>
. 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 capital gains. Portfolio turnover considerations will not
limit any subadviser's investment discretion in managing the Fund's assets.
. Small Companies
The Fund may, in the discretion of its subadvisers, 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 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 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 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. Securities of below investment grade are
commonly known as "junk bonds." For more information, see the Statement's
"Appendix A - Description of Bond Ratings."
. Options and Futures
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 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.
8
<PAGE>
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 Fund may seek to increase its current return by entering into futures
contracts on securities, financial indices and foreign currencies and
options on such contracts, and may invest in options on securities,
financial indices and foreign currencies, as well as forward contacts. See
Part II of the Statement for more information.
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.
. Swaps
The Fund may enter into interest rate, currency and index swaps. The Fund
will enter into these transactions primarily to seek to preserve a return
or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration managament technique
or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to
pay or receive interest (for example, an exchange of floating rate payments
for fixed rate payments with respect to a notional amount of principal). A
currency swap is an agreement to exchange cash flows on a notional amount
based on changes in the relative values of the specified currencies. The
Fund will maintain cash and appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
Because swap agreements are not exchange-traded, but are private contracts
into which the Fund and a swap counterparty enter as principals, the Fund
may experience a loss or delay in recovering assets if the counterparty
were to default on its obligations.
. Hedging Transactions
The Fund may, at the discretion of its subadvisers, 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 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 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 and "Strips"
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 resalable, which may
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. The Fund may also purchase commercial paper issued under
Section 4(2) of the Securities Act of 1933. Rule 144A securities and
Section 4(2) commercial paper are treated as illiquid, unless a subadviser
has determined, under guidelines established by Trust's trustees, that the
particular issue of Rule 144A securities or commercial paper 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.
9
<PAGE>
The Fund may purchase securities 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. 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 may borrow money and bond portfolio securities and other assets,
as described under "Investment Restrictions" and "Miscellaneous Investment
Practices" in the Statement.
. Special Considerations Regarding the Multi-Adviser Approach
New England Funds Management, L.P. (the "Manager" or "NEFM") oversees the
portfolio management services provided to the Fund by each of the four
subadvisers. The Manager 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(s) of the portfolio independently
from the other subadvisers (and Harris Associates will manage its two
segments independently of each other), 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 the subadviser of another segment deems it
appropriate to dispose of the security from that other segment. 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, one segment may be larger or smaller at
various times than other segments. 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 five segments of the portfolio.
The Manager may, at its discretion, terminate its agreement with a
segment's subadviser. In such case, the Manager will either enter into an
agreement with another subadviser to manage the segment or will allocate
the segment's assets equally among the other segments of the Fund.
PERFORMANCE INFORMATION
Subadvisers' Past Performance
Investment Advisers' Performance Data
The graphs below are based on performance data provided by each subadviser
relating to all of the accounts (the "Accounts") managed by that subadviser that
have investment objectives substantially similar to the Fund and are managed by
that subadviser using investment styles and strategies substantially similar to
those to be employed by that subadviser in managing its segment(s) of the Fund's
portfolio. The following information does not represent the Fund's performance.
The Fund is newly organized and has no performance record of its own. The
following information should not be considered a prediction of the future
performance of the Fund. The Fund's performance may be higher or lower than that
shown below.
10
<PAGE>
Subadvisers' Performance
The following graphs show the total returns for the year-to-date and the one,
three, and four year periods ended September 30, 1995 of the Accounts managed by
each subadviser. (In cases where a subadviser has not been managing the
Accounts for the full period, the information is presented for the period
beginning with the first full calendar quarter that the subadviser has been
managing the Accounts.) The graphs also show the combined total returns of the
Accounts for the year-to-date and the one and three year periods ended
September 30, 1995, during which all four subadvisers were managing the
Accounts. The performance shown below is adjusted to give effect to the higher
of the level of the actual expenses of the Accounts during the periods shown, or
the annualized expenses projected for the Fund's Class A shares during its
initial fiscal period. The following information has not been adjusted to
reflect deduction of the sales charge payable on the Fund's Class A shares, nor
does it give effect to the higher expense levels of the Fund's Class B and Class
C shares or any contingent deferred sales charges. Performance would be lower
if it were adjusted for these charges and expenses.
During the periods that Janus Capital, Montgomery and Harris Associates were
managing their Accounts, there were no changes in the portfolio management
personnel for the Accounts. The Founders Accounts were managed by a team that
included Bjorn K. Borgen as lead portfolio manager through _____________, 1995.
Michael W. Gerding joined the team managing the Founders Accounts in ________
and, in ____________, assumed lead portfolio management responsibility for those
Accounts.
[A bar graph appears here, illustrating the year-to-date total returns for
December 31, 1994 to September 30, 1995 for the Lipper Global Index, the
subadvisers' combined performance and for the Accounts of Founders, Janus,
Montgomery, Oakmark and Oakmark International. The data points from the graph
are as follows:
Lipper Global Index 13.31%
Combined Advisor Performance 12.86%
Founders 19.47%
Janus 15.75%
Montgomery -5.07%
Oakmark 24.92%
Oakmark International 10.09%]
[A bar graph appears here, illustrating the one year average annual return for
September 30, 1994 to September 30, 1995 for the Lipper Global Index, the
subadvisers' combined performance and for the Accounts of Founders, Janus,
Montgomery, Oakmark and Oakmark International Accounts. The data points from
the chart are as follows:
Lipper Global Index 8.42%
Combined Advisor Performance 7.10%
Founders 14.71%
Janus 14.85%
11
<PAGE>
Montgomery -14.82%
Oakmark 22.20%
Oakmark International 0.91%]
[A bar graph appears here, illustrating the three year average annual return for
September 30, 1992 to September 30, 1995 for the Lipper Global Index, the
subadvisers' combined performance and for the Accounts of Founders, Janus,
Montgomery, Oakmark and Oakmark International Accounts. The data points from
the chart are as follows:
Lipper Global Index 14.42%
Combined Advisor Performance 18.38%
Founders 17.01%
Janus 19.03%
Montgomery 14.88%
Oakmark 24.15%
Oakmark International 15.06%]
[A bar graph appears here, illustrating the four year average annual return for
September 30, 1991 to September 30, 1995 for the Lipper Global Index and for the
Accounts of Founders, Janus and Oakmark. The data points from the chart are as
follows:
Lipper Global Index 11.34%
Founders 13.89%
Janus 15.89%
Oakmark 30.52%]
12
<PAGE>
FUND MANAGEMENT
New England Funds Management, L.P., 399 Boylston Street, Boston, Massachusetts
02116, serves as the Fund's manager. The Manager 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 Manager 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, but it is believed to be appropriate for the
services received by the Fund and to be comparable to fees paid by other mutual
funds investing in a manner similar to the Fund. This difference in the fee
rate is partially due to the multi-adviser format. The Manager pays each of
Harris Associates, Founders and Janus Capital an advisory fee at the annual rate
of 0.65% of the first $50 million of the average daily net assets of each
segment of the Fund that the subadviser manages, 0.60% of the next $50 million
of such assets and 0.55% of such assets in excess of $100 million. The Manager
pays Montgomery an advisory fee at the annual rate of 0.90% of the first $25
million of the average daily net assets of the segment of the Fund that
Montgomery manages, 0.70% of the next $25 million of such assets and 0.55% of
such assets in excess of $50 million. Montgomery has agreed to waive 0.15% of
its fee through June 30, 1996.
The Distributor in its discretion may pay an incentive bonus to the subadviser
whose segment of the Fund's portfolio has the highest relative return for the
prior year versus that segment's investment peer group.
Subject to the supervision of the Manager, each subadviser manages its segment
or segments of the Fund's portfolio in accordance with the Fund's investment
objective and policies, makes investment decisions for its segment(s) of the
portfolio, places orders to purchase and sell securities for its segment(s) of
the portfolio, and employs professional advisers and securities analysts who
provide research services to its segment(s) of the portfolio. The Fund pays no
direct fees to any of the subadvisers. Below is a brief description of the
subadvisers.
Harris Associates, Two North LaSalle Street, Chicago, Illinois 60602, has
advised and managed mutual funds since 1970. Harris Associates also serves as
investment adviser to individuals, trusts, retirement plans, endowments and
foundations, and manages numerous private partnerships.
Robert J. Sanborn, C.F.A., is the portfolio manager for the U.S. segment of the
Fund managed by Harris Associates. Mr. Sanborn joined Harris Associates as a
portfolio manager and analyst in 1988. Before 1988, Mr. Sanborn held a variety
of investment positions with the State Teachers Retirement System of Ohio.
David G. Herro, C.F.A. and Michael J. Welsh are the portfolio managers for the
international segment of the Fund managed by Harris Associates. Mr. Herro
joined Harris Associates from the State of Wisconsin Investment Board, where he
managed a $700 million international equity fund from 1989 through July 1992.
Mr. Welsh joined Harris Associates as an international analyst in 1992.
Previously, he had been a senior associate, valuation services, with Coopers &
Lybrand.
Montgomery, 600 Montgomery Street, San Francisco, California 94111, was formed
in 1990 and since then has advised private accounts and mutual funds. Its
general partner is Montgomery Asset Management, Inc. and its sole limited
partner is Montgomery Securities, an investment banking firm founded in 1969.
The portfolio managers for the segment of the Fund managed by Montgomery are
Josephine S. Jimenez, CFA, Managing Director and Senior Portfolio Manager, and
Bryan L. Sudweeks, Ph.D., CFA, Managing Director and Senior Portfolio Manager.
From 1988 through 1991, Ms. Jimenez worked at Emerging Markets Investors
Corporation/Emerging Markets Management in Washington, D.C. as senior analyst
and portfolio manager. Before joining Montgomery in 1991, Dr. Sudweeks was a
senior analyst and portfolio manager at Emerging Markets Investors
Corporation/Emerging Markets Management in Washington, D.C. Previously, he was
a Professor of International Finance and Investments at George Washington
University and served as Adjunct Professor of International Investments from
1988 until May 1991.
13
<PAGE>
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, portfolio
traders and research analysts. Team members share responsibility for providing
ideas, information, knowledge and expertise in the management of Founders'
segment of the Fund. Each team member has one or more areas of expertise that
is applied to the management of Founders' segment of the Fund. Daily decisions
on portfolio selection rest with the lead portfolio manager, who, through
participation in the committee process, utilizes the input and advice of the
management team in making purchase and sale determinations. Michael W. Gerding
is lead portfolio manager for the segment of the Fund 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 1970 and also advises individual, corporate,
charitable and retirement accounts. Helen Young Hayes has day-to-day management
responsibility for those assets of the Fund allocated to Janus Capital, where
she serves as a portfolio manager and a Vice President. Kansas City Southern
Industries, Inc. ("KCSI"), a publicly traded holding company, owns approximately
83% of Janus Capital. Thomas H. Bailey, President and Chairman of the Board of
Janus Capital, owns approximately 12% of Janus Capital's voting stock and, by
agreement with KCSI, selects a majority of Janus Capital's board of
directors.
The general partners of the Manager, Harris Associates and the Distributor are
special purpose corporations. These corporations are indirect wholly-owned
subsidiaries of New England Investment Companies, L.P. ("NEIC"), whose sole
general partner, New England Investment Companies, Inc., is a wholly-owned
subsidiary of New England Mutual Life Insurance Company ("The New England").
[Add disclosure about New England/Metropolitan Life merger]
In placing portfolio transactions for the Fund, each subadviser seeks the best
execution. Subject 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
NEIC or the Manager or any subadviser.
The Trust's Board of Trustees supervises the affairs of the Trust as conducted
by NEFM and the subadvisers.
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 recent 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
minimum for each subsequent investment. There are special initial investment
minimums for the following plans:
14
<PAGE>
. $25 (for initial and subsequent investments) for payroll deduction
investment programs for 401(k), SARSEP, 403(b) retirement plans and certain
other retirement 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
following 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. Proceeds 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 additional 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
7:00 p.m. (Eastern time) to obtain an account number and wire transfer
instructions.
For subsequent investments, direct your bank to transfer funds to State
Street Bank and Trust Company, ABA #011000028, DDA #99011538, Credit New
England Star Worldwide 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
authorize 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
automatic 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.
15
<PAGE>
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
Clearing 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.
To purchase through ACH, call us at 1-800-225-5478 between 8 a.m. and 7
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 redemptions 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 "Owning Fund Shares - Exchanging Among New
England Funds" for complete details.
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 orders
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 request
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 depending
on the size of your purchase. They are also subject to a 0.25% annual service
fee. The current sales charges are:
<TABLE>
<CAPTION>
Sales Charges as a % of Dealer's Concession
----------------------- as a % of
Value of Total Investment Public Offering Price Amount Invested Offering 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%
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C>
$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.
------------------------------------------------------------------
To make investing even easier, you can also order personalized
investment slips by calling 1-800-225-5478.
------------------------------------------------------------------
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
redemption, 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
Exempt 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 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.
Accordingly, 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
redemption of such shares. The CDSC equals the following percentages of the
dollar 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%
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
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
requested, 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
advances 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
distribution fee; and do not convert into another class.
Class Y Shares
The Fund may also offer a fourth class of shares which is not currently
available for purchase. See "Additional Facts About the Fund" below.
------------------------------------------------------------------
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. Consult your financial representative
for help in deciding which class is appropriate for you.
------------------------------------------------------------------
Deciding Which Class to Purchase
The decision as to whether Class A, Class B or Class C shares are more
appropriate for an investor depends on the amount and intended length of the
investment. 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
reasons, 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
relevant 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
investment dealer for advice applicable to your particular circumstances.
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)
distributions from an IRA due to death, disability or a tax-free return of an
excess 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
18
<PAGE>
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 disability. 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 received
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 series
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
governmental 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 series 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
incentives 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 connection
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 compensation 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
business 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. The participation of representatives 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.
. 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
the Fund at a reduced 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
investments by any state, county or city or any instrumentality,
department, authority or agency thereof that has determined that the Fund
is a
19
<PAGE>
legally permissible 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 $25,000 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 (affiliated 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 (affiliated 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 client 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.
. Purchases of Class A shares of the Fund may be made with no sales charge or
CDSC through an investment adviser, broker or financial planner that
charges for its services. Purchases of Class A shares of the Fund may be
made with no sales charge or CDSC by a participating investment adviser,
broker or financial planner, provided such purchases are placed through an
omnibus account with the Fund.
. There is no sales charge, CDSC or initial investment minimum related to
investments 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 persons 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
described above reflects the absence or reduction of sales expenses associated
with such sales.
OWNING FUND SHARES
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
acquired through exchanges from any of the series of the Trusts) for the Class A
shares of any other series of the Trusts (except New England Growth Fund, which
is subject to special eligibility restrictions) without paying a sales charge.
Class A shares of 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
20
<PAGE>
exchange. If you exchange your Class A shares of 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.
------------------------------------------------------------------
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 available
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 program, but there may be a sales charge as
described on this page.
------------------------------------------------------------------
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, which does
not offer Class B shares). 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
series 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 7 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
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 personal identification prior to acting upon your
telephone instructions, will provide you with written confirmations of such
transactions 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
distributes annually all net realized long-term capital gains (after applying
any available capital loss carryovers). The trustees of the Trust may adopt a
different schedule as long
21
<PAGE>
as payments are made at least annually. If you intend 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
reinvesting 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
writing 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 appropriate 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.
------------------------------------------------------------------
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 redemption 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 7 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 proceeds.
22
<PAGE>
Your bank must be a member of the Federal Reserve System or have a
correspondent 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 arrive 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 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, 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 special 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 signature guaranteed by an eligible guarantor institution in
accordance with procedures 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
benefit plans and IRAs. Contact the Distributor or your investment dealer
for details.
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
recommends 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 basis, 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 Distributor or your investment dealer. Since withdrawal
payments may have tax consequences, you should consult your tax adviser
before establishing such a plan.
23
<PAGE>
General. Redemption requests will be effected at the net asset value next
determined after your redemption request is received in proper form by State
Street Bank or your investment dealer (except that orders received by your
investment dealer before the close of regular trading on the Exchange and
transmitted to the Distributor by 5:00 p.m. Eastern time on the same day will
receive 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 person
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 request
before a redemption request can be honored. See the instructions for redemption
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 holidays,
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 investors.
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 redemption
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.
24
<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
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 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 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 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 the Fund's Class A shares is
determined 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
calculations 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
received, 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
investment 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. (Eastern
time) to receive that day's public offering price.
- --------------------------------------------------------------------------------
CALCULATING THE PRICE OF SHARES
Total Market Value of
- ---------------------
Portfolio Securities + Other Assets - Any 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.
- --------------------------------------------------------------------------------
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 distributions 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 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.
25
<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 taxpayer
identification number, if the Fund is notified that you have under reported
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
distributions on your federal income tax return. You should consult your tax
adviser 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 Fund may be liable to foreign governments for taxes relating primarily to
investment income or capital gains on foreign securities in the Fund's
portfolio. The Fund may in some circumstances be eligible to, and in its
discretion may, make an election under the Internal Revenue Code which would
allow Fund shareholders who are U.S. citizens or U.S. corporations to claim a
foreign tax credit or deduction (but not both) on their U.S. income tax return.
If the Fund makes the election, the amount of each shareholder's distribution
reported on the information returns filed by the Fund with the Internal Revenue
Service must be increased by the amount of the shareholder's portion of the
Fund's foreign tax paid.
The Fund may limit its investments in certain "passive foreign investment
companies" in order to avoid certain taxes that arise as a result of such
investments.
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 and about consequences of their investment under foreign laws.
- --------------------------------------------------------------------------------
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
determine your gain or loss for tax purposes.
- --------------------------------------------------------------------------------
The Fund's Expenses
In addition to the management fee paid to the Adviser, the Fund pays all
expenses 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 transfer 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 shareholders' and trustees' meetings and preparing, printing and
mailing prospectuses 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 affiliates, 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 "Additional Facts about the Fund," below.) Under a Service
Plan in the case of Class A shares, and Service and Distribution 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 personal 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
26
<PAGE>
investors and/or the maintenance of shareholder accounts. To the extent that
the Distributor's reimbursable expenses 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 expenses.
The Fund's Class B and Class C shares also pay the Distributor a monthly
distribution 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
entire 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
compensation for its services as distributor of the Class B and Class C shares.
Performance Criteria
The Fund may include total return information for each class of shares in
advertisements 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
presented, or without deduction of a sales charge. If a sales charge is not
deducted 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.
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 is a newly organized series of the
Trust.
. When you invest in the Fund, you acquire freely transferable shares of
beneficial 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.
. If they become available, Class Y shares of the Fund will be eligible for
purchase by endowments and foundations. The minimum initial investment is
$1 million for these entities and the minimum 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
27
<PAGE>
$10 million. Plan sponsors' investment assets in multiple Retirement Plans
can be aggregated for purposes of meeting this minimum. Class Y shares will
also be eligible for purchase 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 Separate Accounts. Investments in Class Y shares will
also be able to be made by certain individual retirement accounts if the
amounts invested represent rollover distributions from investments by any
of the foregoing Retirement Plans of amounts invested in Class Y shares.
. If Class Y shares become available, they will be identical to Class A,
Class B and Class C shares, except that Class Y shares will have no sales
charge or CDSC, will bear no Rule 12b-1 fees and will have separate voting
rights in certain circumstances. Class Y will bear its own transfer agency
and prospectus printing costs and will 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
subcontracted certain of its obligations as such to State Street Bank, 225
Franklin 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 for all
accounts, except for those indicated below and for Individual Retirement
Accounts, which have a $25 minimum), the Fund may close your account and
send the proceeds to you. Shareholders who are affected 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 Keogh, pension and profit sharing
plans, automatic investment 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.
28
<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 usually
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 managed
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 England
Funds.
Open end management investment company - A mutual fund that allows investors to
redeem fund shares directly from the fund company on any business day.
Public offering price - The price of one share of a mutual fund, including 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
representative.
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 developed
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
29
<PAGE>
NEW ENGLAND FUNDS
NEW ENGLAND STAR WORLDWIDE FUND
STATEMENT OF ADDITIONAL INFORMATION
December 27, 1995
This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
prospectus of New England Star Worldwide Fund (the "Fund"). This Statement is
not a prospectus and is only authorized for distribution when accompanied or
preceded by the prospectus of the Fund dated December 27, 1995 for Class A, B, C
or Y shares (the "prospectus"). The Statement should be read together with the
prospectus. Investors may obtain a free copy of the prospectus from New England
Funds, L.P., Prospectus Fulfillment Desk, 399 Boylston Street, Boston, MA 02116.
This Statement contains information about the Class A, B, C and Y shares of
the Fund. The Fund is a series of New England Funds Trust I (the "Trust"), a
registered investment company that offers a total of eleven series.
T a b l e o f C o n t e n t s
Page
Part I
Investment Restrictions
Fund Charges and Expenses
Part II
Miscellaneous Investment Practices
Management of the Trust
Portfolio Transactions and Brokerage
Description of the Trust and Ownership of Shares
How to Buy Shares
Net Asset Value and Public Offering Price
Reduced Sales Charges
Shareholder Services
Redemptions
Standard Performance Measures
Income Dividends, Capital Gain Distributions and Tax Status
Appendix A - Description of Bond Ratings
Appendix B - Publications That May Contain Fund Information
Appendix C - Advertising and Promotional Literature
-i-
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following is a description of restrictions on the investments to be
made by the Fund, some of which restrictions (those restrictions marked with an
asterisk) may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. The percentages set forth below and
the percentage limitations set forth in the prospectus will apply at the time of
the purchase of a security and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result of a purchase
of such security.
The Fund may not:
(1) Purchase any security (other than U.S. Government securities) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries);
(3) Purchase securities on margin (but it may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of securities),
or make short sales except where, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and
the Fund will not deposit or pledge more than 10% of its total assets
(taken at current value) as collateral for such sales. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government Securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or acquire more than 10% of the outstanding voting securities of an
issuer;
*(5) Borrow money in excess of 25% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 15% of its total assets (taken at cost). (For the purpose
of this restriction, reverse repos, collateral arrangements with respect to
options, futures contracts and options on futures contracts, forward
contracts and swaps and with respect to initial and variation margin are
not deemed to be a pledge of assets);
(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
-ii-
<PAGE>
(8) Purchase or retain securities of any issuer if officers and trustees of
the Trust or of the investment adviser of the Fund who individually own
more than 1/2 of 1% of the shares or securities of that issuer, together
own more than 5%;
*(9) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(10) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options. (This restriction
does not prevent the Fund from purchasing securities, swaps and forward
contracts of companies investing in the foregoing);
*(11) Act as underwriter, except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws;
(12) Make investments for the purpose of exercising control or management;
(13) Participate on a joint or joint and several basis in any trading account
in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with Harris Associates L.P. or accounts under its
management to reduce brokerage commissions, to average prices among them
or to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction.);
(14) Write, purchase or sell options or warrants, except that the Fund may (a)
acquire warrants or rights to subscribe to securities of companies issuing
such warrants or rights, or of parents or subsidiaries of such companies,
(b) write, purchase and sell put and call options on securities or
securities indexes and (c) enter into currency forward contracts;
(15) Purchase any illiquid security if, as a result, more than 15% of its total
assets (taken at current value) would be invested in such securities;
(16) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions. Under the Investment Company Act of 1940 (the "1940 Act"),
the Fund may not (a) invest more than 10% of its total assets (taken at
current value) in such securities, (b) own securities of any one
investment company having a value in excess of 5% of the total assets of
the Fund (taken at current value), or (c) own more than 3% of the
outstanding voting stock of any one investment company; or
*(17) Issue senior securities. For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts; and the issuance of shares of beneficial interest permitted
from time to time by the provisions
-iii-
<PAGE>
of the Trust's Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom.
The staff of the Securities and Exchange Commission (the "SEC") is
currently of the view that repurchase agreements maturing in more than seven
days are subject to restriction (15) above.
- --------------------------------------------------------------------------------
FUND CHARGES AND EXPENSES
- --------------------------------------------------------------------------------
Investment Advisory and Administrative Services Fees
Pursuant to an Advisory Agreement dated December 27, 1995 New England Funds
Management, L.P. ("NEFM") has agreed, subject to the supervision of the board of
trustees of the Trust, to manage the investment and reinvestment of the assets
of the Fund and to provide a range of administrative services to the Fund. For
the services described in the Advisory Agreement, the Fund pays NEFM a fee at
the annual rate of 1.05% of the Fund's average daily net assets.
The Advisory Agreement provides that NEFM may delegate its responsibilities
thereunder to other parties. As explained in the prospectus, the Fund's
portfolio is divided into five segments. NEFM has delegated responsibility for
the investment and reinvestment of the assets of each segment of the portfolio
to four different investment advisers (the "subadvisers"). The subadvisers are
Harris Associates L.P. ("Harris"), which manages two of the five segments, and
Founders Asset Management Inc. ("Founders"), Janus Capital Corporation ("Janus
Capital") and Montgomery Asset Management, L.P. ("Montgomery"), each of which
manage one of the five segments. NEFM pays each subadviser a fee for managing
its segment or segments of the portfolio, at the annual rate of 0.65% of the
average daily net assets of each such segment up to $50 million, 0.60% of the
next $50 million of such assets and 0.55% of such assets in excess of $100
million; except that Montgomery's fee is at the annual rate of 0.90% of the
average daily net assets of its segment of the portfolio up to $25 million,
0.70% of the next $25 million of such assets and 0.55% of such assets in excess
of $50 million. Montgomery has agreed to waive 0.15% of its fee through June
30, 1996.
For more information about the Fund's investment advisory and subadvisory
agreements, see "Management of the Trust" in Part II of this Statement.
-iv-
<PAGE>
PART II
- --------------------------------------------------------------------------------
MISCELLANEOUS INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
The following information relates to certain investment practices in which
the Fund may engage.
Loans of Portfolio Securities. The Fund may lend its portfolio securities to
- -----------------------------
broker-dealers under contracts calling for cash collateral equal to at least the
market value of the securities loaned, marked to the market on a daily basis.
(The Fund at the present time has no intention to engage in the lending of
portfolio securities.) The Fund will continue to benefit from interest or
dividends on the securities loaned and will also receive interest through
investment of the cash collateral in short-term liquid investments, which may
include shares of money market funds subject to any investment restriction
listed in Part I. No loans will be made if, as a result, the aggregate amount
of such loans outstanding at any one time would exceed 15% of the Fund's total
assets (taken at current value). Any voting rights, or rights to consent,
relating to securities loaned pass to the borrower. However, if a material
event affecting the investment occurs, such loans will be called so that the
securities may be voted by the Fund. The Fund pays various fees in connection
with such loans, including shipping fees and reasonable custodian and placement
fees approved by the board of trustees of the Trust or persons acting pursuant
to the direction of the board.
These transactions must by fully collateralized at all times, but involve
some credit risk to the Fund if the other party should default on its obligation
and the Fund is delayed in or prevented from recovering the collateral.
U.S. Government Securities. The Fund may invest in some or all of the following
- --------------------------
U.S. Government Securities:
. U.S. Treasury Bills - Direct obligations of the United States Treasury which
-------------------
are issued in maturities of one year or less. No interest is paid on Treasury
bills; instead, they are issued at a discount and repaid at full face value when
they mature. They are backed by the full faith and credit of the United States
Government.
. U.S. Treasury Notes and Bonds - Direct obligations of the United States
-----------------------------
Treasury issued in maturities that vary between one and 40 years, with interest
normally payable every six months. These obligations are backed by the full
faith and credit of the United States Government.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration. The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages. An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general
-1-
<PAGE>
obligation of the United States backed by its full faith and credit. Mortgages
included in single family or multi-family residential mortgage pools backing an
issue of Ginnie Maes have a maximum maturity of up to 30 years. Scheduled
payments of principal and interest are made to the registered holders of Ginnie
Maes (such as the Fund) each month. Unscheduled prepayments may be made by
homeowners, or as a result of a default. Prepayments are passed through to the
registered holder (such as the Fund, which reinvests any prepayments) of Ginnie
Maes along with regular monthly payments of principal and interest.
. "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a
-------------
government-sponsored corporation owned entirely by private stockholders that
purchases residential mortgages from a list of approved seller/servicers.
Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the United States Government.
. "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
--------------
corporate instrumentality of the United States Government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United States
Government.
As described in the prospectus, U.S. Government Securities do not involve
the credit risks associated with investments in other types of fixed-income
securities, although, as a result, the yields available from U.S. Government
Securities are generally lower than the yields available from corporate fixed-
income securities. Like other fixed-income securities, however, the values of
U.S. Government Securities change as interest rates fluctuate. Fluctuations in
the value of portfolio securities will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value. Since
the magnitude of these fluctuations will generally be greater at times when the
Fund's average maturity is longer, under certain market conditions the Fund may,
for temporary defensive purposes, accept lower current income from short-term
investments rather than investing in higher yielding long-term securities.
When-Issued Securities. The Fund may enter into agreements with banks or
- ----------------------
broker-dealers for the purchase or sale of securities at an agreed-upon price on
a specified future date. Such agreements might be entered into, for example,
when the Fund anticipates a decline in interest rates and is able to obtain a
more advantageous yield by committing currently to purchase securities to be
issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account cash or U.S.
Government Securities in an amount equal to or greater than, on a daily basis,
the amount of the Fund's when-issued or delayed-delivery commitments. The Fund
will make commitments to purchase on a when-issued or delayed-delivery basis
only securities meeting the Fund's investment criteria. The Fund may take
delivery of these securities or, if it is deemed advisable as a matter of
investment strategy, the Fund may sell these securities before the settlement
date. When the time comes to pay for when-issued or delayed-delivery
securities, the Fund will meet its obligations from the then available cash flow
or the sale of securities, or from the sale of the when-issued or delayed-
delivery securities themselves (which may have a value greater or less than the
Fund's payment obligation).
-2-
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements by which
- ---------------------
the Fund purchases a security and obtains a simultaneous commitment from the
seller to repurchase the security at an agreed-upon price and date. The resale
price is in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate
of indebtedness, note or bond issued by an agency, authority or instrumentality
of the United States Government, the obligation of the seller is not guaranteed
by the United States Government and there is a risk that the seller may fail to
repurchase the underlying security. In such event, the Fund would attempt to
exercise rights with respect to the underlying security, including possible
disposition in the market. However, the Fund may be subject to various delays
and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto, (b) possible reduced levels of income and lack of access to income
during this period and (c) inability to enforce rights and the expenses involved
in the attempted enforcement.
Zero Coupon Securities. Zero coupon securities are debt obligations that do not
- ----------------------
entitle the holder to any periodic payments of interest either for the entire
life of the obligation or for an initial period after the issuance of the
obligations. Such securities are issued and traded at a discount from their
face amounts. The amount of the discount varies depending on such factors as
the time remaining until maturity of the securities, prevailing interest rates,
the liquidity of the security and the perceived credit quality of the issuer.
The market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero coupon
securities having similar maturities and credit quality. In order to satisfy a
requirement for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"), the Fund must distribute
each year at least 90% of its net investment income, including the original
issue discount accrued on zero coupon securities. Because the Fund will not on
a current basis receive cash payments from the issuer of a zero coupon security
in respect of accrued original issue discount, in some years the Fund may have
to distribute cash obtained from other sources in order to satisfy the 90%
distribution requirement under the Code. Such cash might be obtained from
selling other portfolio holdings of the Fund. In some circumstances, such sales
might be necessary in order to satisfy cash distribution requirements even
though investment considerations might otherwise make it undesirable for the
Trust to sell such securities at such time.
Convertible Securities. The Fund may invest in convertible securities including
- ----------------------
corporate bonds, notes or preferred stocks of U.S. or foreign issuers that can
be converted into (that is, exchanged for) 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 proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
Options and Futures
- -------------------
Futures Contracts. A futures contract is an agreement between two parties to
buy and sell a particular commodity (e.g., an interest-bearing security) for a
specified price on a specified future date. In the case of futures on an index,
the seller and buyer agree to settle in cash, at a
-3-
<PAGE>
future date, based on the difference in value of the contract between the date
it is opened and the settlement date. The value of each contract is equal to
the value of the index from time to time multiplied by a specified dollar
amount. For example, Standard & Poor's 500 Index futures trade in contracts
equal to $500 multiplied by the Standard & Poor's 500 Index.
When a trader, such as the Fund, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker as "initial margin"
an amount of cash or short-term high-quality securities (such as U.S. Treasury
Bills or high-quality tax exempt bonds acceptable to the broker) equal to
approximately 2% to 5% of the delivery or settlement price of the contract
(depending on applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of the contract
changes, the value of futures contract positions increases or declines. At the
end of each trading day, the amount of such increase and decline is received and
paid respectively by and to the holders of these positions. The amount received
or paid is known as "variation margin." If the Fund has a long position in a
futures contract it will establish a segregated account with the Fund's
custodian containing cash or certain illiquid assets equal to the purchase price
of the contract (less any margin on deposit). For short positions in futures
contracts, the Fund will establish a segregated account with the custodian with
cash or high grade liquid debt assets that, when added to the amounts deposited
as margin, equal the market value of the instruments or currency underlying the
futures contracts.
Although futures contracts by their terms require actual delivery and
acceptance of securities (or cash in the case of index futures), in most cases
the contracts are closed out before settlement. A futures sale is closed by
purchasing a futures contract for the same aggregate amount of the specific type
of financial instrument or commodity and with the same delivery date.
Similarly, the closing out of a futures purchase is closed by the purchaser
selling an offsetting futures contract.
Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.
Options. An option on a futures contract obligates the writer, in return for
the premium received, to assume a position in a futures contract (a short
position if the option is a call and a long position if the option is a put), at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option generally will be accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the exercise price
to the market price and volatility of the underlying contract, the remaining
term of the option, supply and demand and interest rates. Options on futures
contracts traded in the United States may only be traded on a United States
board of trade licensed by the Commodity Futures Trading Commission.
An option on a security entitles the holder to receive (in the case of a
call option) or to sell (in the case of a put option) a particular security at a
specified exercise price. An "American style" option allows exercise of the
option at any time during the term of the option. A "European style" option
allows an option to be exercised only at the end of its term. Options on
securities may be traded on or off a national securities exchange.
-4-
<PAGE>
A call option on a futures contract written by the Fund is considered by
the Fund to be covered if the Fund owns the security subject to the underlying
futures contract or other securities whose values are expected to move in tandem
with the values of the securities subject to such futures contract, based on
historical price movement volatility relationships. A call option on a security
written by the Fund is considered to be covered if the Fund owns a security
deliverable under the option. A written call option is also covered if the Fund
holds a call on the same futures contract or security as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, Treasury bills or
other high grade liquid obligations in a segregated account with its custodian.
A put option on a futures contract written by the Fund, or a put option on
a security written by the Fund, is covered if the Fund maintains cash, U.S.
Treasury bills or other high-grade liquid debt obligations with a value equal to
the exercise price in a segregated account with the Fund's custodian, or else
holds a put on the same futures contract (or security, as the case may be) as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written.
If the writer of an option wishes to terminate its position, it may effect
a closing purchase transaction by buying an option identical to the option
previously written. The effect of the purchase is that the writer's position
will be canceled. Likewise, the holder of an option may liquidate its position
by selling an option identical to the option previously purchased.
Closing a written call option will permit the Fund to write another call
option on the portfolio securities used to cover the closed call option.
Closing a written put option will permit the Fund to write another put option
secured by the segregated cash, U.S. Treasury bills or other high-grade liquid
obligations used to secure the closed put option. Also, effecting a closing
transaction will permit the cash or proceeds from the concurrent sale of any
futures contract or securities subject to the option to be used for other Fund
investments. If the Fund desires to sell particular securities covering a
written call option position, it will close out its position or will designate
from its portfolio comparable securities to cover the option prior to or
concurrent with the sale of the covering securities.
The Fund will realize a profit from closing out an option if the price of
the offsetting position is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Fund will
realize a loss from closing out an option transaction if the price of the
offsetting option position is more than the premium received from writing the
option or is less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the covering securities, any loss resulting from the
closing of a written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.
Since premiums on options having an exercise price close to the value of
the underlying securities or futures contracts usually have a time value
component (i.e. a value that diminishes as the time within which the option can
be exercised grows shorter) an option writer may profit from the lapse of time
even though the value of the futures contract (or security in some cases)
underlying the option (and of the security deliverable under the futures
contract) has not changed. Consequently, profit from option writing may or may
not be offset by a decline in the value of securities covering the option. If
the profit is not entirely offset, the Fund will have a net gain from the
options transaction, and the Fund's total return will be enhanced. Likewise,
the profit or loss from writing put options may or may not be offset in
-5-
<PAGE>
whole or in part by changes in the market value of securities acquired by the
Fund when the put options are closed.
Risks. The use of futures contracts and options involves risks. One risk
arises because of the imperfect correlation between movements in the price of
futures contracts and movements in the price of the securities that are the
subject of the hedge. The Fund's hedging strategies will not be fully effective
unless the Fund can compensate for such imperfect correlation. There is no
assurance that the Fund will be able to effect such compensation.
The correlation between the price movement of the futures contract and the
hedged security may be distorted due to differences in the nature of the
markets. If the price of the futures contract moves more than the price of the
hedged security, the Fund would experience either a loss or a gain on the future
that is not completely offset by movements in the price of the hedged
securities. In an attempt to compensate for imperfect price movement
correlations, the Fund may purchase or sell futures contracts in a greater
dollar amount than the hedged securities if the price movement volatility of the
hedged securities is historically greater than the volatility of the futures
contract. Conversely, the Fund may purchase or sell fewer contracts if the
volatility of the price of hedged securities is historically less than that of
the futures contracts.
The price of index futures may not correlate perfectly with movement in the
relevant index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions, which could distort the
normal relationship between the index and futures markets. Secondly, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market, and as a result the futures market may
attract more speculators than does the securities market. In addition, trading
hours for foreign stock index futures may not correspond perfectly to hours of
trading on the foreign exchange to which a particular foreign stock index future
relates. This may result in a disparity between the price of index futures and
the value of the relevant index due to the lack of continuous arbitrage between
the index futures price and the value of the underlying index. Finally, hedging
transactions using stock indices involve the risk that movements in the price of
the index may not correlate with price movements of the particular portfolio
securities being hedged.
Price movement correlation also may be distorted by the illiquidity of the
futures and options markets and the participation of speculators in such
markets. If an insufficient number of contracts are traded, commercial users
may not deal in futures contracts or options because they do not want to assume
the risk that they may not be able to close out their positions within a
reasonable amount of time. In such instances, futures and options market prices
may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market enhances its liquidity. Nonetheless,
speculators trading spreads between futures markets may create temporary price
distortions unrelated to the market in the underlying securities.
Positions in futures contracts and options on futures contracts may be
established or closed out only on an exchange or board of trade. There is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. The liquidity of markets in
futures contracts and options on futures contracts may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges
-6-
<PAGE>
which limit the amount of fluctuation in a futures or options price during a
single trading day. Once the daily limit has been reached in a contract, no
trades may be entered into at a price beyond the limit, which may prevent the
liquidation of open futures or options positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days. If there is
not a liquid market at a particular time, it may not be possible to close a
futures or options position at such time, and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, if futures or options are used to hedge portfolio
securities, an increase in the price of the securities, if any, may partially or
completely offset losses on the futures contract.
An exchange-traded option may be closed out only on a national securities
or commodities exchange which generally provides a liquid secondary market for
an option of the same series. If a liquid secondary market for an exchange-
traded option does not exist, it might not be possible to effect a closing
transaction with respect to a particular option, with the result that the Fund
would have to exercise the option in order to realize any profit. If the Fund
is unable to effect a closing purchase transaction in a secondary market, it
will be not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
Because the specific procedures for trading foreign stock index futures on
futures exchanges are still under development, additional or different margin
requirements as well as settlement procedures may be applicable to foreign stock
index futures at the time the Fund purchases foreign stock index futures.
The successful use of transactions in futures and options depends in part
on the ability of Harris to forecast correctly the direction and extent of
interest rate movements within a given time frame. To the extent interest rates
move in a direction opposite to that anticipated, the Fund may realize a loss on
the hedging transaction that is not fully or partially offset by an increase in
the value of portfolio securities. In addition, whether or not interest rates
move during the period that the Fund holds futures or options positions, the
Fund will pay the cost of taking those positions (i.e. brokerage costs). As a
result of these factors, the Fund's total return for such period may be less
than if it had not engaged in the hedging transaction.
Options trading involves price movement correlation risks similar to those
inherent in futures trading. Additionally, price movements in options on
futures may not correlate with price movements in the futures underlying the
options. Like futures, options positions may become less liquid because of
adverse economic circumstances. The securities covering written option
positions are expected to offset adverse price movements if those options
-7-
<PAGE>
positions cannot be closed out in a timely manner, but there is no assurance
that such offset will occur. Also, an option writer may not effect a closing
purchase transaction after it has been notified of the exercise of an option.
Over-the-Counter Options. An over-the-counter option (an option not traded on a
national securities exchange) may be closed out only with the other party to the
original option transaction. While the Fund will seek to enter into over-the-
counter options only with dealers who agree to or are expected to be capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to liquidate an over-the-counter option at a favorable
price at any time prior to its expiration. Accordingly, the Fund might have to
exercise an over-the-counter option it holds in order to realize any profit
thereon and thereby would incur transactions costs on the purchase or sale of
the underlying assets. If the Fund cannot close out a covered call option
written by it, it will not be able to sell the underlying security until the
option expires or is exercised. Furthermore, over-the-counter options are not
subject to the protections afforded purchasers of listed options by the Options
Clearing Corporation or other clearing organizations.
Economic Effects and Limitations. Income earned by the Fund from its hedging
activities will be treated as capital gain and, if not offset by net recognized
capital losses incurred by the Fund, will be distributed to shareholders in
taxable distributions. Although gain from futures and options transactions may
hedge against a decline in the value of the Fund's portfolio securities, that
gain, to the extent not offset by losses, will be distributed in light of
certain tax considerations and will constitute a distribution of that portion of
the value preserved against decline.
The Fund will not "over hedge," that is, maintain open short positions in
futures or options contracts if, in the aggregate, the market value of its open
positions exceeds the current market value of its securities portfolio plus or
minus the unrealized gain or loss on such open positions, adjusted for the
historical price volatility relationship between the portfolio and futures and
options contracts. Also, subject to change without shareholder approval, the
Fund will not sell futures contracts if, as a result, the sum of the amount of
its initial margin deposits on its existing futures positions would exceed 5% of
the Fund's total assets (taken at current value).
Future Developments. The above discussion relates to the Fund's proposed use of
futures contracts, options and options on futures contracts currently available.
The relevant markets and related regulations are still in the developing stage.
In the event of future regulatory or market developments, the Fund may also use
additional types of futures contracts or options and other investment techniques
for the purposes set forth above.
Foreign Currency Hedging Transactions. To protect against a change in the
- -------------------------------------
foreign currency exchange rate between the date on which the Fund contracts to
purchase or sell a security and the settlement date for the purchase or sale, or
to "lock in" the equivalent of a dividend or interest payment in another
currency, the Fund might purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate. If conditions warrant, the Fund may also
enter into contracts with banks or broker-dealers to purchase or sell foreign
currencies at a future date ("forward contracts"). The Fund will maintain cash
or high-quality debt obligations in a segregated account with the custodian in
an amount at least equal to (i) the difference between the current value of the
Fund's liquid holdings that settle in the relevant currency and the Fund's
outstanding obligations under currency forward contracts, or (ii) the current
amount, if any, that would be required to be paid to enter into an offsetting
forward
-8-
<PAGE>
currency contract which would have the effect of closing out the original
forward contract. The Fund's use of currency hedging transactions may be limited
by tax considerations. The Fund may also purchase or sell foreign currency
futures contracts traded on futures exchanges. Foreign currency futures contract
transactions involve risks similar to those of other futures transactions. See
"Options and Futures" above.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
Trustees
- --------
Trustees of the Trust and their principal occupations during the past five years
are as follows:
GRAHAM T. ALLISON, JR. -- Trustee (55); 79 John F. Kennedy Street, Cambridge, MA
-------
02138; Douglas Dillon Professor and Director for the Center of Science and
International Affairs, John F. Kennedy School of Government; Special
Advisor to the United States Secretary of Defense; formerly, Assistant
Secretary of Defense; formerly Dean, John F. Kennedy School of Government.
KENNETH J. COWAN -- Trustee (63); One Beach Drive, S.E. #2103, St. Petersburg,
-------
Florida 33701; Retired; formerly, Senior Vice President-Finance and Chief
Financial Officer, Blue Cross of Massachusetts, Inc. and Blue Shield of
Massachusetts, Inc.; formerly Director, Neworld Bank for Savings and
Neworld Bancorp.
SANDRA O. MOOSE -- Trustee (53); 135 E. 57th Street New York, NY 10022; Senior
-------
Vice President and Director, The Boston Consulting Group, Inc. (management
consulting); Director, GTE Corporation and Rohm and Haas Company (specialty
chemicals).
HENRY L.P. SCHMELZER/*/ -- Trustee and President (52); President, Chief
---------------------
Executive Officer and Director, NEF Corporation; President and Chief
Executive Officer, New England Funds, L.P.; President and Chief Executive
Officer, NEFM; Director, Back Bay Advisors, Inc.; formerly, Director, New
England Securities Corporation ("New England Securities").
JOHN A. SHANE -- Trustee (62); 300 Unicorn Park Drive, Woburn, Massachusetts
-------
01801; President, Palmer Service Corporation (venture capital
organization); General Partner, The Palmer Organization and Palmer Partners
L.P.; Director, Arch Communications Group, Inc. (paging service); Director,
Dowden Publishing Company, Inc. (publishers of medical magazines);
Director, Eastern Bank Corporation; Director, Gensym Corporation (expert
system software); Director, Overland Data, Inc. (manufacturer of computer
tape drives); Director, Summa Four, Inc. (manufacturer of telephone
switching equipment); Director, United Asset Management Corporation
(holding company for institutional money management); formerly, Director,
Abt Associates, Inc. (consulting firm); formerly, Director, Aviv
Corporation (manufacturer of
- --------------------
/*/ Trustee deemed an "interested person" of the Trusts, as defined in the
Investment Company Act of 1940 (the "1940 Act").
-9-
<PAGE>
controllers); formerly, Director, Banyan Systems, Inc. (manufacturer of
network software); formerly, Director, Cerjac Inc. (manufacturer of
telephone testing equipment).
PETER S. VOSS* -- Chairman of the Board, Chief Executive Officer and Trustee
----------------------------------------------------------
(49); President and Chief Executive Officer, New England Investment
Companies, L.P. ("NEIC"); Director, President and Chief Executive Officer,
New England Investment Companies, Inc.; Chairman of the Board and Director,
NEF Corporation; Chairman of the Board and Director, Back Bay Advisors,
Inc.; Director, New England Mutual Life Insurance Company ("The New
England"); formerly, Executive Vice President, Bank of America; formerly,
Group Head of International Banking, Trading and Securities, Security
Pacific National Bank, and Chief Executive Officer of the Security Pacific
Investment Group.
PENDLETON P. WHITE -- Trustee (64); 6 Breckenridge Lane, Savannah, Georgia
-------
31411; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants); Trustee, The
Faulkner Corporation.
Officers
- --------
Officers of the Trust and their principal occupations during the past five
years are as follows:
J. STEVEN NEAMTZ -- Vice President; Executive Vice President, NEF Corporation;
--------------
Executive Vice President, New England Funds, L.P.
BRUCE R. SPECA -- Vice President; Executive Vice President, NEF Corporation;
--------------
Executive Vice President, New England Funds, L.P.; Executive Vice
President, NEFM.
FRANK NESVET -- Treasurer; Senior Vice President and Chief Financial Officer,
----------
NEF Corporation; Senior Vice President and Chief Financial Officer, New
England Funds, L.P.; Senior Vice President and Chief Financial Officer,
NEFM; formerly, Executive Vice President, SuperShare Services Corporation.
ROBERT P. CONNOLLY -- Secretary and Clerk; Senior Vice President and General
-------------------
Counsel, NEF Corporation; Senior Vice President and General Counsel, New
England Funds, L.P.; Senior Vice President and General Counsel, NEFM:
formerly, Managing Director and General Counsel, Kroll Associates, Inc.
(business consulting company); formerly, Managing Director and General
Counsel, Equitable Capital Management Corporation (investment management
company).
CHARLES T. WALLIS -- Senior Vice President; President, Chief Executive Officer
---------------------
and Director, Back Bay Advisors, L.P. ("Back Bay Advisors"); Director, New
England Securities; formerly, Vice President, The New England.
HAROLD B. BJORNSON -- Vice President; Vice President, Back Bay Advisors;
--------------
formerly Assistant Vice President, New England Securities.
KIMBERLY J. FORSYTH -- Vice President; Senior Vice President, Back Bay Advisors;
--------------
formerly, Senior Vice President and Director of Tax-Exempt Credit Research
Department, Legg Mason, Incorporated (investment advisory firm); formerly,
Vice
-10-
<PAGE>
President and Senior Credit Analyst, Putnam Investment Management,
Incorporated (investment management company); formerly, Director of
Municipal Research, Alex. Brown & Sons Incorporated (brokerage/advisory
firm).
CHARLES G. GLUECK -- Vice President; Senior Vice President, Back Bay Advisors;
--------------
formerly, Senior Investment Officer, The New England.
ERIC N. GUTTERSON -- Vice President; Vice President, Back Bay Advisors.
--------------
SCOTT A. MILLIMET -- Vice President; Vice President, Back Bay Advisors;
--------------
formerly, Senior Vice President and Manager of Carroll, McEntee & McGinley,
Chicago Board of Trade.
J. SCOTT NICHOLSON -- Vice President; Senior Vice President, Back Bay Advisors.
--------------
EDGAR M. REED -- Vice President; Executive Vice President and Chief Investment
--------------
Officer, Back Bay Advisors; formerly, Head of the Fixed Income Management
Group, Aetna Capital Management.
G. KENNETH HEEBNER -- Senior Vice President; Associate, Capital Growth
----------------------
Management Limited Partnership ("CGM"); formerly, Vice President and
Director, Loomis, Sayles & Company, L.P. ("Loomis Sayles").
ROBERT L. KEMP -- Senior Vice President; Associate, CGM; formerly, President and
----------------------
Director, Loomis Sayles.
ROBERT J. BLANDING -- Senior Vice President; Chief Executive Officer, Loomis
----------------------
Sayles.
MERIANNE BECK -- Vice President; Vice President, Senior Partner and Fixed-Income
---------------
Portfolio Manager, Loomis Sayles; formerly, Senior Portfolio Manager and
Investment Strategist, TSA Capital Management.
CATHERINE L. BUNTING -- Vice President; Senior Vice President, Back Bay
---------------
Advisors; formerly, trader, Harvard Management Company.
CHRISTINE A. CREELMAN -- Vice President; Vice President, Back Bay Advisors.
---------------
DAVID M. DAVIS -- Vice President; Vice President and Senior Partner, Loomis
---------------
Sayles.
CHARLES J. FINLAYSON -- Vice President; Vice President, Director, General
---------------
Counsel, Secretary and Clerk, Loomis Sayles.
DANIEL FUSS -- Vice President; Managing Partner, Executive Vice President and
--------------
Director, Loomis Sayles.
RICHARD W. HURCKES -- Vice President; Vice President, Loomis Sayles.
---------------
CAROL C. McMURTRIE -- Vice President; Director, Managing Partner and Vice
---------------
President, Loomis Sayles; formerly, Vice President, Addison Capital
Management.
TRICIA H. MILLS -- Vice President; Vice President, Loomis Sayles.
---------------
-11-
<PAGE>
SCOTT S. PAPE -- Vice President; Vice President, Loomis Sayles; formerly, Equity
---------------
Portfolio Manager, Illinois State Board of Investment.
JEFFREY C. PETHERICK -- Vice President; Vice President, Loomis Sayles; formerly,
--------------
Analyst, Masco Corporation.
DOUGLAS D. RAMOS -- Vice President; Vice President and Senior Partner, Loomis
---------------
Sayles.
Previous positions during the past five years with The New England, Back
Bay Advisors, Loomis Sayles or New England Funds, L.P. are omitted, if not
materially different. Each of the Trust's trustees is also a director or trustee
of certain other investment companies for which New England Funds, L.P. acts as
principal underwriter and Back Bay Advisors acts as investment adviser.
Except as indicated above, the address of each trustee and officer of the
Trust affiliated with New England Funds, L.P. or Back Bay Advisors is 399
Boylston Street, Boston, Massachusetts. The address of each officer associated
with Loomis Sayles is One Financial Place, Boston, Massachusetts, except for Mr.
Blanding, Mr. Davis and Ms. Beck, whose address is 155 Lake Avenue, Suite 1030,
Pasadena, California; Messrs. Hurckes and Pape, whose address is Three First
National Plaza, Chicago, Illinois; and Mr. Petherick, whose address is 1533
North Woodward Street, #300, Detroit, Michigan. The address of each officer
associated with Harris is Two North LaSalle Street, Chicago, Illinois 60602.
The address of each officer associated with Founders is 2930 East Third Avenue,
Denver, Colorado 80206. The address of each officer associated with Janus
Capital is 100 Fillmore Street, Suite 300, Denver, Colorado 80206. The address
of each officer associated with Montgomery is 600 Montgomery Street, San
Francisco, California 94111.
Trustees Fees
- -------------
The Trust pays no compensation to its officers or to its trustees who are
interested persons thereof.
Each trustee who is not an interested person of the Trust receives, in the
aggregate for serving on the boards of the Trust and [12] other mutual fund
portfolios, a retainer fee at the annual rate of $40,000 and meeting attendance
fees of $2,500 for each meeting of the boards he or she attends and $1,500 for
each meeting he or she attends of a committee of the board of which he or she
was a member. Each committee chairman receives an additional retainer fee at
the annual rate of $2,500. These fees are allocated among the Fund and the [12]
other mutual fund portfolios based on a formula that takes into account, among
other factors, the net assets of each fund.
During the fiscal year ended December 31, 1995 the persons who were then
trustees of the Trust received the amounts set forth in the following table for
serving as a trustee of the Trust and for also serving on the governing boards
of [28] other mutual fund portfolios (the "Other Funds").
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation from the Trust and the Other
the Trust in 1995 Funds in 1995
Name of Trustee ---- ----
---------------
<S> <C> <C>
Kenneth J. Cowan $ $
Joseph M. Hinchey
Richard S. Humphrey, Jr.
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C> <C>
Robert B. Kittredge (a)
Laurens MacLure (a)
Sandra O. Moose
James H. Scott
John A. Shane
Joseph F. Turley
Pendleton P. White
</TABLE>
(a) Also includes compensation paid by the 5 CGM Funds, a group of mutual funds
for which Capital Growth Management Limited Partnership, the investment adviser
of the Trust 's New England Growth Fund, serves as investment adviser.
The Trust provides no pension or retirement benefits to trustees, but has
adopted a deferred payment arrangement under which each trustee may elect not to
receive fees from the Trust on a current basis but to receive in a subsequent
period an amount equal to the value that such fees would have if they had been
invested in each of the funds in the Trust on the normal payment date for such
fees. As a result of this method of calculating the deferred payments, the
Fund, upon making the deferred payments, will be in the same financial position
as if the fees had been paid on the normal payment dates.
As of December 27, 1995, the officers and trustees of the Trust as a group
owned less than 1% of the outstanding shares of the Trust.
Advisory and Subadvisory Agreements
- -----------------------------------
The Fund's advisory agreement provides that NEFM will furnish or pay the
expenses of the Fund for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain administrative services.
The Fund pays all expenses not borne by its adviser or subadvisers
including, but not limited to, the charges and expenses of the Fund's custodian
and transfer agent, independent auditors and legal counsel, 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 the federal or state securities laws, all expenses of
shareholders' and trustees' meetings and of preparing, printing and mailing
reports to shareholders and the compensation of trustees who are not directors,
officers or employees of the Fund's adviser, subadviser or their affiliates,
other than affiliated registered investment companies. The Fund also pays NEFM
for certain legal and accounting services provided to the Fund by NEFM.
Under the Fund's advisory agreement, if the total ordinary business expenses
of the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or Trust are qualified
for sale, NEFM shall pay such excess. At present, the most restrictive state
annual expense limitation is 2 1/2% of the average annual net assets up to
$30,000,000, 2% of the next $70,000,000 and 1 1/2% of such assets in excess of
$100,000,000. NEFM will not be required to reduce its fee or pay such expenses
to an extent or under circumstances which might result in the Fund's inability
to qualify as a regulated investment company under the Code. The term
"expenses" is defined in the advisory agreement and excludes brokerage
commissions, taxes, interest, distribution-related
-13-
<PAGE>
expenses and extraordinary expenses. This means that the distribution fees
payable to New England Funds, L.P. under the Fund's Distribution Agreement and
the Distribution Plans would be excluded from "expenses."
The advisory agreement and each sub-advisory agreement between NEFM and the
subadviser that manages a segment or segments of the Fund's portfolio provides
that it will continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at least annually
(i) by the board of trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund and (ii) by vote of a majority of the
trustees who are not "interested persons" of the Trust, as that term is defined
in the 1940 Act, cast in person at a meeting called for the purpose of voting on
such approval. Any amendment to the advisory agreement or the subadvisory
agreement must be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the trustees of the Trust
who are not such interested persons, cast in person at a meeting called for the
purpose of voting on such approval. Each agreement may be terminated without
penalty by vote of the Trust's board of trustees or by vote of a majority of the
outstanding voting securities of the Fund, upon 60 days' written notice, or by
NEFM upon 90 days' written notice, and each terminates automatically in the
event of its assignment. The subadvisory agreement also may be terminated by
the subadviser upon 90 days' notice and is automatically terminated upon
termination of the advisory agreement. In addition, the advisory agreement will
automatically terminate if the Trust or the Fund shall at any time be required
by the Distributor to eliminate all reference to the words "New England" or the
letters "TNE" in the name of the Trust or the Fund, unless the continuance of
the agreement after such change of name is approved by a majority of the
outstanding voting securities of the Fund and by a majority of the Trustees who
are not interested persons of the Trust or NEFM.
The advisory agreement and each sub-advisory agreement each provide that the
adviser and subadviser shall not be subject to any liability in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
NEFM, organized in 1995, is an independently operated subsidiary of NEIC,
and serves as the investment adviser to New England Growth Opportunities Fund,
New England Strategic Income Fund [,Growth Fund of Israel] and New England
Equity Income Fund, as well as the Fund [update if restructuring before 1/1/96].
Harris was organized in 1995 to succeed to the business of a predecessor
limited partnership also named Harris Associates L.P., which together with its
predecessor had advised and managed mutual funds since 1970. Harris is a
wholly-owned subsidiary of NEIC, having been acquired by NEIC in 1995. Harris
also serves as investment adviser to individuals, trusts, retirement plans,
endowments and foundations, and manages numerous private partnerships.
Janus Capital serves as investment adviser to the Janus mutual funds and for
individual, charitable, corporate and retirement accounts. Kansas City Southern
Industries, Inc., a publicly-traded company, owns 83% of Janus Capital. Thomas
H. Bailey, chairman and president of Janus Capital, owns approximately 12%.
Certain officers and employees of Harris who are also officers of the Trust
have responsibility for portfolio management of other advisory accounts and
clients (including
-14-
<PAGE>
other registered investment companies and accounts of affiliates of Harris) that
may invest in securities in which the Fund may invest. Where Harris determines
that an investment purchase or sale opportunity is appropriate and desirable for
more than one advisory account, purchase and sale orders may be executed
separately or may be combined and, to the extent practicable, allocated by
Harris to the participating accounts. Where advisory accounts have competing
interests in a limited investment opportunity, Harris will allocate an
investment purchase opportunity based on the relative time the competing
accounts have had funds available for investment, and the relative amounts of
available funds, and will allocate an investment sale opportunity based on
relative cash requirements and the time the competing accounts have had
investments available for sale. It is Harris's policy to allocate, to the
extent practicable, investment opportunities to each client over a period of
time on a fair and equitable basis relative to its other clients.
In addition to advising a segment of the Fund's portfolio, Montgomery serves
as investment adviser to other mutual funds, pension and profit-sharing plans,
and other institutional and private investors. At times, Montgomery may effect
purchases and sales of the same investment securities for the Fund, and for one
or more other investment accounts. In such cases, it will be the practice of
Montgomery to allocate the purchase and sale transactions among the Fund and the
accounts in such manner as it deems equitable. In making such allocation, the
main factors to be considered are the respective investment objectives of the
Fund and the accounts, the relative size of portfolio holdings of the same or
comparable securities, the current availability of cash for investment by the
Fund and each account, the size of investment commitments generally held by the
Fund and each account, and the opinions of the persons at Montgomery responsible
for selecting investments for the Fund and the accounts. It is the opinion of
the trustees that the desirability of retaining Montgomery as an investment
adviser to the Fund outweighs the disadvantages, if any, which might result from
these procedures.
The segment of the Fund advised by Founders and one or more of the other
mutual funds or clients to which Founders serves as investment adviser may own
the same securities from time to time. If purchases or sales of securities for
the segment of the Fund advised by Founders and other funds or clients advised
by Founders arise for consideration at or about the same time, transactions in
such securities will be made, insofar as feasible, for the Fund and other
clients in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client during the same period may increase the demand
for securities being purchased or the supply of securities being sold, there may
be an adverse effect on the price and amount of the security being purchased or
sold for the Fund. However, the ability of the Fund to participate in volume
transactions may possibly produce better executions for the Fund in some cases.
It is the opinion of the trustees that the desirability of retaining Founders as
an adviser to the Fund outweighs the disadvantages, if any, which might result
from these procedures.
Janus Capital performs investment advisory services for other mutual funds,
individual, charitable, corporate and retirement accounts (the "private
accounts"), as well as for a segment of the portfolio of the Fund. Although the
overall investment objective of the Fund may differ from the objectives of the
private accounts and other funds served by Janus Capital, there may be
securities that are suitable for the portfolio of the Fund as well as for one or
more of the other funds or the private accounts. Therefore, purchases and sales
of the same investment securities may be recommended for the Fund and for one or
more of the other funds or private accounts. To the extent that the Fund and
one or more of the other funds or private accounts seek to acquire or sell the
same security at the same time, either the
-15-
<PAGE>
price obtained by the Fund or the amount of securities that may be purchased or
sold by the Fund at one time may be adversely affected. In such cases, the
purchase and sale transactions are allocated among the Fund, the other funds and
the private accounts in a manner believed by the management of Janus Capital to
be equitable to each. It is the opinion of the trustees that the desirability
of retaining Janus Capital as an adviser to the Fund outweighs the
disadvantages, if any, which might result from these procedures.
It is believed that the ability of the Fund to participate in larger volume
transactions in this manner will in some cases produce better executions for the
Fund. However, in some cases, this procedure could have a detrimental effect on
the price and amount of a security available to the Fund or the price at which a
security may be sold. The trustees are of the view that the benefits of
retaining Harris as investment manager outweigh the disadvantages, if any, that
might result from participating in such transactions.
Distribution Agreement and Rule 12b-1 Plans. Under an agreement with the
-------------------------------------------
Fund (the "Distribution Agreement"), New England Funds, L.P. serves as the
general distributor of each class of shares of the Fund. Under this agreement,
New England Funds, L.P. is not obligated to sell a specific number of shares.
New England Funds, L.P. bears the cost of making information about the Fund
available through advertising and other means and the cost of printing and
mailing prospectuses to persons other than shareholders. The Fund pays the cost
of registering and qualifying its shares under state and federal securities laws
and the distribution of prospectuses to existing shareholders.
New England Funds, L.P. is compensated under the Distribution Agreement
through receipt of the sales charges on Class A shares described below under
"Net Asset Value and Public Offering Price" and is paid by the Fund the service
and distribution fees described in the prospectus.
As described in the prospectuses, the Fund has adopted Rule 12b-1 plans (the
"Plans") for its Class A, Class B and Class C shares which, among other things,
permit it to pay the Fund's distributor (currently New England Funds, L.P.)
monthly fees out of its net assets. Pursuant to Rule 12b-1 under the 1940 Act,
each Plan was approved by the shareholders of the Fund, and (together with the
Distribution Agreement) by the board of trustees, including a majority of the
trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plan or the Distribution Agreement (the "Independent Trustees").
Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the Fund. Each Plan may be amended by vote of the
trustees, including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. Any change in any Plan that would materially
increase the fees payable thereunder by the relevant class of shares of the Fund
requires approval of the holders of such shares. The Trust's trustees review
quarterly written reports of such costs and the purposes for which such costs
have been incurred. For so long as a Plan is in effect, selection and
nomination of those trustees who are not interested persons of the Trust shall
be committed to the discretion of such disinterested persons.
The Distributor has entered into selling agreements with investment dealers,
including New England Securities, an affiliate of the Distributor, for the sale
of the Fund's shares. New England Securities is registered as a broker-dealer
under the Securities Exchange Act of
-16-
<PAGE>
1934. 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.
[If they become available, Class Y shares of the Fund may be offered by
registered representatives of New England Securities who are also employees of
New England Investment Associates, Inc. ("NEIA"), an indirect, wholly-owned
subsidiary of NEIC. NEIA may receive compensation from NEFM with respect to
sales of Class Y shares.]
The Distribution Agreement may be terminated at any time on 60 days' written
notice without payment of any penalty by New England Funds, L.P. or by vote of a
majority of the outstanding voting securities of the Fund or by vote of a
majority of the Independent Trustees.
The Distribution Agreement and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Independent Trustees and (ii) by
the vote of a majority of the entire board of trustees cast in person at a
meeting called for that purpose or by a vote of a majority of the outstanding
securities of Fund (or the relevant class, in the case of the Plans).
With the exception of New England Funds, L.P., New England Securities and
their direct and indirect corporate parents (NEIC and The New England), no
interested person of the Trust nor any trustee of the Trust had any direct or
indirect financial interest in the operation of the Plans or any related
agreement.
Benefits to the Fund and its shareholders resulting from the Plans are
believed to include (1) enhanced shareholder service, (2) asset retention, (3)
enhanced bargaining position with third party service providers and economies of
scale arising from having higher asset levels and (4) portfolio management
opportunities arising from having an enhanced positive cash flow.
New England Funds, L.P. controls the words "New England" in the name of the
Trust and the Fund and if it should cease to be the distributor, the Trust or
the Fund may be required to change their names and delete these words or
letters. New England Funds, L.P. also acts as general distributor for New
England Cash Management Trust, New England Tax Exempt Money Market Trust, New
England Funds Trust II, New England Funds Trust III and the other series of the
Trust besides the Fund.
During the years ended December 31, 1992 and 1993, New England Funds, L.P.
received commissions on the sale of the Class A shares of the Trust aggregating
$19,853,746 and $12,478,105 and respectively, of which $1,985,975 and $1,428,524
was retained by New England Funds, L.P. During the year ended December 31,
1994, New England Funds, L.P. received commissions on the sale of shares of the
Trust aggregating $9,569,312, of which $8,290,120 was allowed to other
securities dealers and the balanced retained by New England Funds, L.P. See
"Other Arrangements" for information about amounts received by New England
Funds, L.P. from the Trust's investment advisers or the Funds directly for
providing certain administrative services relating to the Trust.
Custodial Arrangements. State Street Bank and Trust Company ("State Street
----------------------
Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
the Fund and, in such capacity, is the registered owner of securities in book-
entry form belonging to the Fund. Upon instruction, State Street Bank receives
and delivers cash and securities of the Fund in connection with
-17-
<PAGE>
Fund transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Trust and calculates the total net asset value,
total net income and net asset value per share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Price
-----------------------
Waterhouse L.L.P., 160 Federal Street, Boston, MA 02109. The independent
accountants of the Trust conduct an annual audit of that Trust's financial
statements, assist in the preparation of federal and state income tax returns
and consult with the Trust as to matters of accounting and federal and state
income taxation.
Other Arrangements
- ------------------
Pursuant to a contract between the Fund and New England Funds, L.P., New
England Funds, L.P. acts as shareholder servicing and transfer agent for the
Fund and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Fund's shares. The Fund
pays per account fees to New England Funds, L.P. for these services in the
amount of $17.25. New England Funds, L.P. has subcontracted with State Street
Bank for it to provide, through its subsidiary Boston Financial Data Services,
Inc. ("BFDS") transaction processing, mail and other services. For these
services, New England Funds, L.P. pays BFDS a per account fee of $6.80.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Segments of the Fund advised by Harris. In placing orders for the
--------------------------------------
purchase and sale of portfolio securities for the Fund, Harris always seeks the
best price and execution. Some of the Fund's portfolio transactions are placed
with brokers and dealers who provide Harris with supplementary investment and
statistical information or furnish market quotations to the Fund or other
investment companies advised by Harris. The business would not be so placed if
the Fund would not thereby obtain the best price and execution. Although it is
not possible to assign an exact dollar value to these services, they may, to the
extent used, tend to reduce the expenses of Harris. The services may also be
used by Harris in connection with their other advisory accounts and in some
cases may not be used with respect to the Fund.
In placing orders for the purchase and sale of equity securities, Harris
selects only brokers which it believes are financially responsible, will provide
efficient and effective services in executing, clearing and settling an order
and will charge commission rates that, when combined with the quality of the
foregoing services, will produce best price and execution for the transaction.
This does not necessarily mean that the lowest available brokerage commission
will be paid. However, the commissions are believed to be competitive with
generally prevailing rates. Harris will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. Harris is the
-18-
<PAGE>
principal source of information and advice to the Fund, and is responsible for
making and initiating the execution of the investment decisions by the Fund.
However, the Board of Trustees of the Trust recognizes that it is important for
Harris, in performing its responsibilities to the Fund, to continue to receive
and evaluate the broad spectrum of economic and financial information that many
securities brokers have customarily furnished in connection with brokerage
transactions, and that in compensating brokers for their services, it is in the
interest of the Fund to take into account the value of the information received
for use in advising the Fund. Consequently, the commission paid to brokers
providing research services may be greater than the amount of commission another
broker would charge for the same transaction. The extent, if any, to which the
obtaining of such information may reduce the expenses of Harris in providing
management services to the Fund is not determinable. In addition, it is
understood by the Board of Trustees of the Trust that other clients of Harris
might also benefit from the information obtained for the Fund, in the same
manner that the Fund might also benefit from information obtained by the Harris
in performing services to others.
Segments of the Fund advised by Montgomery and Founders. In placing orders
--------------------------------------------------------
for the purchase and sale of portfolio securities for the Fund, Montgomery and
Founders always seek the best price and execution. Some of the Fund's portfolio
transactions are placed with brokers and dealers who provide Montgomery and
Founders with supplementary investment and statistical information or furnish
market quotations to the Fund, the other Funds or other investment companies
advised by Montgomery and Founders. The business would not be so placed if the
Fund would not thereby obtain the best price and execution. Although it is not
possible to assign an exact dollar value to these services, they may, to the
extent used, tend to reduce the expenses of Montgomery and Founders. The
services may also be used by Montgomery and Founders in connection with their
other advisory accounts and in some cases may not be used with respect to the
Fund.
In placing orders for the purchase and sale of equity securities, each
subadviser selects only brokers which it believes are financially responsible,
will provide efficient and effective services in executing, clearing and
settling an order and will charge commission rates that, when combined with the
quality of the foregoing services, will produce best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be
competitive with generally prevailing rates. Each subadviser will use its best
efforts to obtain information as to the general level of commission rates being
charged by the brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors affecting
liquidity and execution of the order, as well as the amount of the capital
commitment by the broker in connection with the order, are taken into account.
The Fund will not pay a broker a commission at a higher rate than otherwise
available for the same transaction in recognition of the value of research
services provided by the broker or in recognition of the value of any other
services provided by the broker which do not contribute to the best price and
execution of the transaction.
Segment of the Fund advised by Janus Capital. Decisions as to the
---------------------------------------------
assignment of portfolio business for the segment of the Fund's portfolio advised
by Janus Capital and negotiation of its commission rates are made by Janus
Capital, whose policy is to obtain the "best execution" (prompt and reliable
execution at the most favorable securities price) of all portfolio transactions.
In placing portfolio transactions for its segment of the Fund's portfolio, Janus
Capital may agree to pay brokerage commissions for effecting a securities
-19-
<PAGE>
transaction, in an amount higher than another broker or dealer would have
charged for effecting that transaction as authorized, under certain
circumstances, by the Securities Exchange Act of 1934.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the securities being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; and research products or services provided. In recognition of
the value of the foregoing factors, Janus Capital may place portfolio
transactions with a broker or dealer with whom it has negotiated a commission
that is in excess of the commission another broker or dealer would have charged
for effecting that transaction if Janus Capital determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research provided by such broker or dealer viewed in terms of
either that particular transaction or of the overall responsibilities of Janus
Capital. Research may include furnishing advice, either directly or through
publications or writing, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, trading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research analysts,
corporate management personnel, industry experts, economists and government
officials; comparative performance evaluation and technical measurement services
and quotation services, and products and other services (such as third party
publications, reports and analyses, and computer and electronic access,
equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist Janus Capital in carrying out its responsibilities. Research received
from brokers or dealers is supplemental to Janus Capital's own research efforts.
Janus Capital may use research products and services in servicing other
accounts in addition to the Fund. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may also consider sales of shares of mutual funds advised by
Janus Capital by a broker-dealer or the recommendation of a broker-dealer to its
customers that they purchase shares of such funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Fund. In placing
portfolio business with such broker-dealers, Janus Capital will seek the best
execution of each transaction.
General
- -------
-20-
<PAGE>
Portfolio turnover is not a limiting factor with respect to investment
decisions. The Fund anticipates that its portfolio turnover rate will vary
significantly from time to time depending on the volatility of economic and
market conditions.
Subject to procedures adopted by the Board of Trustees of the Trust, the
Fund's brokerage transactions may be executed by brokers that are affiliated
with the Distributor, NEFM or the subadvisers. Any such transactions will
comply with Rule 17e-1 under the Investment Company Act of 1940.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Fund as a principal in the purchase and sale of securities.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principals for their own accounts, affiliated persons of
the Trust, such as New England Securities, may not serve as the Fund's dealer in
connection with such transactions.
It is expected that the portfolio transactions in fixed-income securities
will generally be with issuers or dealers on a net basis without a stated
commission. Securities firms may receive brokerage commissions on transactions
involving options, futures and options on futures and the purchase and sale of
underlying securities upon exercise of options. The brokerage commissions
associated with buying and selling options may be proportionately higher than
those associated with general securities transactions.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
- --------------------------------------------------------------------------------
New England Funds Trust I is organized as a Massachusetts business Trust
under the laws of Massachusetts by an Agreement and Declaration of Trust (a
"Declaration of Trust") dated June 7, 1985 and is a "series" company as
described in Rule 18f-1 under the 1940 Act. The Fund is a newly organized series
of the Trust. The Trust has eleven separate portfolios (the "Funds"). The
other series of the Trust are New England Growth Fund, which has one class of
shares, New England Tax Exempt Income Fund, which has two classes of shares, New
England Capital Growth Fund, New England Strategic Income Fund and New England
Government Securities Fund, each of which has three classes of shares, and New
England Balanced Fund, New England Value Fund, New England International Equity
Fund, New England Star Advisers Fund and New England Bond Income Fund, each of
which has four classes of shares. The initial portfolio of the Trust (the Fund
now called New England Government Securities Fund) commenced operations on
September 16, 1985. New England International Equity Fund commenced operations
on May 22, 1992. New England Capital Growth Fund was organized in 1992 and
commenced operations on August 3, 1992. New England Star Advisers Fund was
organized in 1994 and commenced operations on July 7, 1994. New England
Strategic Income Fund was organized in 1995 and commenced operations on May 1,
1995. The remaining funds in the Trust are successors to the following
corporations which commenced operations in the years indicated:
<TABLE>
<CAPTION>
Corporation Date of Commencement
----------- --------------------
<S> <C>
NEL Growth Fund, Inc. 1968
NEL Retirement Equity Fund, Inc.* 1969
NEL Equity Fund, Inc.** 1968
NEL Income Fund, Inc. 1973
</TABLE>
-21-
<PAGE>
<TABLE>
<S> <C>
NEL Tax Exempt Bond Fund, Inc. 1976
</TABLE>
*Predecessor of New England Value Fund
**Predecessor of New England Balanced Fund
The Declaration of Trust of the Trust currently permits the Trust's trustees
to issue an unlimited number of full and fractional shares of each series. The
Fund is represented by a series of shares of the Trust. The Declaration of
Trust further permits the Trust's trustees to divide the shares of each series
into any number of separate classes, each having such rights and preferences
relative to other classes of the same series as the trustees may determine. The
shares of Fund do not have any preemptive rights. Upon termination of the Fund,
whether pursuant to liquidation of the Trust or otherwise, shareholders of each
class of the Fund are entitled to share pro rata in the net assets attributable
to that class of shares of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The shares of the Fund are divided into four classes, Class A, Class B,
Class C and Class Y. The Fund offers Class A, Class B, Class C and Class Y
shares. The Class Y shares are available for purchase only by certain eligible
institutional investors and have higher minimum purchase requirements than
Classes A, B and C. All expenses of the Fund are borne by its Class A, Class B,
Class C and Class Y shares on a pro rata basis, except for the administrative
services fee (which may be charged at a separate rate to each class), 12b-1 fees
(which are borne only by Classes A, B and C) and the following expenses that are
separately allocated to each class: transfer agency fees and expenses of
printing and mailing prospectuses to shareholders.
The assets received by each class of the Fund for the issue or sale of its
shares and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to, and constitute the underlying
assets of, that class. The underlying assets of each class of the Fund are
segregated and are charged with the expenses with respect to that class and with
a share of the general expenses of the Trust. Any general expenses of the Trust
that are not readily identifiable as belonging to a particular class of a fund
in the Trust are allocated by or under the direction of the trustees in such
manner as the trustees determine to be fair and equitable. While the expenses
of the Trust are allocated to the separate books of account of each fund in the
Trust, certain expenses may be legally chargeable against the assets of all
classes of the funds in the Trust.
The Declaration of Trust also permits Trust's trustees, without shareholder
approval, to subdivide any series or class of shares or fund into various sub-
series or sub-classes with such dividend preferences and other rights as the
trustees may designate. While the trustees have no current intention to
exercise this power, it is intended to allow them to provide for an equitable
allocation of the impact of any future regulatory requirements which might
affect various classes of shareholders differently. The trustees may also,
without shareholder approval, establish one or more additional series or classes
or merge two or more existing series or classes.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or any fund of the Trust, however, may be terminated at any time by
vote of at least two-thirds of the outstanding shares of each fund affected.
Similarly, any class within a fund may be terminated by vote of at least two-
thirds of the outstanding shares of such class. While the Declaration of Trust
further provides that the board of trustees may also terminate the Trust
-22-
<PAGE>
upon written notice to its shareholders, the 1940 Act requires that the Trust
receive the authorization of a majority of its outstanding shares in order to
change the nature of its business so as to cease to be an investment company.
Voting Rights
- -------------
As summarized in the prospectus, shareholders are entitled to one vote for
each full share held (with fractional votes for each fractional share held) and
may vote (to the extent provided therein) in the election of trustees and the
termination of the Trust and on other matters submitted to the vote of
shareholders.
The Declaration of Trust provides that on any matter submitted to a vote of
all shareholders of the Trust, all Trust shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular
series or class would be adversely affected by the vote, in which case a
separate vote of that series or class shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it is clear
that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the SEC, shareholders of all series and classes vote together, irrespective
of series or class, on the election of trustees and the selection of the Trust's
independent accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain changes in
investment policies of that series or the approval of the investment advisory
and subadvisory agreements relating to that series, and shareholders of each
class within a series vote separately as to the Rule 12b-1 plan (if any)
relating to that class.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value of at
least $25,000 or at least 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Trust has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Shareholder voting rights are not cumulative.
-23-
<PAGE>
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust except (i) to change
the Trust's or a fund's name or to cure technical problems in the Declaration of
Trust, (ii) to establish and designate new series or classes of Trust shares and
(iii) to establish, designate or modify new and existing series or classes of
Trust shares or other provisions relating to Trust shares in response to
applicable laws or regulations.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
trustees. The Declaration of Trust provides for indemnification out of the
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund by reason of owning shares of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself would be unable to
meet its obligations.
The Declaration of Trust further provides that the board of trustees will
not be liable for errors of judgment or mistakes of fact or law. However,
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The By-Laws of the Trust provide for
indemnification by the Trust of trustees and officers of the Trust, except with
respect to any matter as to which any such person did not act in good faith in
the reasonable belief that his or her action was in or not opposed to the best
interests of the Trust. Such persons may not be indemnified against any
liability to the Trust or the Trust's shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Fund are summarized in the
prospectus. Banks may charge a fee for transmitting funds by wire. With respect
to shares purchased by federal funds, shareholders should bear in mind that wire
transfers may take two or more hours to complete.
For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange on a day
when the Exchange is open; otherwise the settlement date is the following
business day. For telephone orders, the settlement date is the fifth business
day after the order is made.
Shares may also be purchased either in writing, by phone or, in the case of
Class A, B and C shares, by electronic funds transfer using Automaed Clearing
House ("ACH"), or by exchange as described in the prospectus through firms that
are members of the National Association of Securities Dealers, Inc. and that
have selling agreements with the Distributor.
-24-
<PAGE>
The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of the Fund's Class A, B or C shares. Payment must
be received by the Distributor within five business days following the
transaction date or the order will be subject to cancellation. Telephone orders
must be placed through the Distributor or your investment dealer.
- --------------------------------------------------------------------------------
NET ASSET VALUE AND PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
The method for determining the public offering price and net asset value per
share is summarized in the prospectus.
The total net asset value of each class of shares of the Fund (the excess of
the assets of the Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the New York Stock Exchange
is open for trading. The weekdays that the New York Stock Exchange is expected
to be closed are New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Securities
listed on a national securities exchange or on the NASDAQ national market system
are valued at their last sale price, or, if there is no reported sale during the
day, the last reported bid price estimated by a broker. Unlisted securities
traded in the over-the-counter market are valued at the last reported bid price
in the over-the-counter market or on the basis of yield equivalents as obtained
from one or more dealers that make a market in the securities. U.S. Government
Securities are traded in the over-the-counter market. Options, interest rate
futures and options thereon that are traded on exchanges are valued at their
last sale price as of the close of such exchanges. Securities for which current
market quotations are not readily available and all other assets are taken at
fair value as determined in good faith by the board of trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the board.
Generally, trading in Foreign Government Securities and other fixed-income
securities, as well as trading in equity securities in markets outside the
United States, is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
determining the net asset value of the Fund's shares are computed as of 3:00
p.m. Eastern time, in the case of U.S. and Canadian Government Securities, and
5:00 p.m. London time, in the case of Foreign Government Securities and equity
securities of non-U.S. issuers which are not traded on a U.S. national exchange,
except that, in unusual instances in which London trading in certain Foreign
Government Securities continues past 5:00 p.m. London time, the values of such
Foreign Government Securities will be computed as of the close of the New York
Stock Exchange that day (or such earlier time as significant trading activity in
such Foreign Government Securities ceases for the day). The value of equity
securities of non-U.S. issuers not traded on a U.S. exchange will be valued at
their last sale price, if any, on the exchange on which they principally trade.
Occasionally, events affecting the value of fixed-income securities and of
equity securities of non-U.S. issuers not traded on a U.S. exchange may occur
between the completion of substantial trading of such securities for the day and
the close of the New York Stock Exchange, which events will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of the Fund's securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
in accordance with procedures approved by the trustees.
-25-
<PAGE>
The per share net asset value of a class of the Fund's shares is computed by
dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share of the
Fund is the net asset value per share next determined after a properly completed
purchase order is accepted by New England Funds, L.P. or State Street Bank, plus
a sales charge as set forth in the Fund's prospectus. The public offering price
of a Class B, C or Y share of the Fund is the next determined net asset value.
- --------------------------------------------------------------------------------
REDUCED SALES CHARGES
Class A Shares Only
- --------------------------------------------------------------------------------
Special purchase plans are enumerated in the text of the prospectus.
Cumulative Purchase Discount. A Fund shareholder making an additional
----------------------------
purchase of Class A shares may be entitled to a discount on the sales charge
payable on that purchase. This discount will be available if the shareholder's
"total investment" in the Fund reaches the breakpoint for a reduced sales charge
in the table under "Buying Fund Shares - Sales Charges" in the prospectus. The
total investment is determined by adding the amount of the additional purchase,
including sales charge, to the current public offering price of all series and
classes of shares of New England Funds Trust II and the Trust (the "Trusts")
held by the shareholder in one or more accounts. If the total investment
exceeds the breakpoint, the lower sales charge applies to the entire additional
investment even though some portion of that additional investment is below the
breakpoint to which a reduced sales charge applies. For example, if a
shareholder who already owns shares of one or more funds in the Trusts with a
value at the current public offering price of $30,000 makes an additional
purchase of $20,000 of Class A shares of the Fund, the reduced sales charge of
4.5% of the public offering price will apply to the entire amount of the
additional investment.
Letter of Intent. A Letter of Intent (a "Letter"), which can be effected at
----------------
any time, is a privilege available to investors which reduces the sales charge
on investments in Class A shares. Ordinarily, reduced sales charges are
available for single purchases of Class A shares only when they reach certain
breakpoints (e.g., $50,000, $100,000, etc.). By signing a Letter, a shareholder
indicates an intention to invest enough money in Class A shares within 13 months
to reach a breakpoint. If the shareholder's intended aggregate purchases of all
series and classes of the Trusts over a defined 13-month period will be large
enough to qualify for a reduced sales charge, the shareholder may invest the
smaller individual amounts at the public offering price calculated using the
sales load applicable to the 13-month aggregate investment.
A Letter is a non-binding commitment, the amount of which may be increased,
decreased or canceled at any time. The effective date of a Letter is the date
it is received in good order at New England Funds, L.P., or, if communicated by
a telephone exchange or order, at the date of telephoning provided a signed
Letter, in good order, reaches New England Funds, L.P. within five business
days.
-26-
<PAGE>
A reduced sales charge is available for aggregate purchases of all series
and classes of shares of the Trusts pursuant to a written Letter effected within
90 days after any purchase. In the event the account was established prior to 90
days before the Letter effective date, the account will be credited with Rights
of Accumulation ("ROA") towards the breakpoint level that will be reached upon
the completion of the 13 months' purchases. The ROA credit is the value of all
shares held as of the effective date of the Letter based on the "public offering
price computed on such date."
The cumulative purchase discount, described above, permits the aggregate
value at the current public offering price of Class A shares of any accounts
with the Trusts held by a shareholder to be added to the dollar amount of the
intended investment under a Letter, provided the shareholder lists them on the
account application.
State Street Bank will hold in escrow shares with a value at the current
public offering price of 5% of the aggregate amount of the intended investment.
The amount in escrow will be released when the Letter is completed. If the
shareholder does not purchase shares in the amount indicated in the Letter, the
shareholder agrees to remit to State Street Bank the difference between the
sales charge actually paid and that which would have been paid had the Letter
not been in effect, and authorizes State Street Bank to redeem escrowed shares
in the amount necessary to make up the difference in sales charges. Reinvested
dividends and distributions are not included in determining whether the Letter
has been completed.
Combining Purchases. Purchases of all series and classes of the Trusts by
-------------------
or for an investor, the investor's spouse, parents, children, siblings,
grandparents or grandchildren and any other account of the investor, including
sole proprietorships, in either Trust may be treated as purchases by a single
individual for purposes of determining the availability of a reduced sales
charge. Purchases for a single trust estate or a single fiduciary account may
also be treated as purchases by a single individual for this purpose, as may
purchases on behalf of a participant in a tax-qualified retirement plan and
other employee benefit plans, provided that the investor is the sole participant
in the plan.
Combining with Other Series and Classes of the Trusts. A shareholder's
-----------------------------------------------------
total investment for purposes of the cumulative purchase discount and purchases
under a Letter of Intent includes the value at the current public offering price
of any shares of series and classes of the Trusts that the shareholder owns
(which includes shares of New England Cash Management Trust and New England Tax
Exempt Money Market Trust [the "Money Market Funds"] if such shares were
purchased by exchanging shares of either of the Trusts). Shares owned by
persons described in the preceding paragraph may also be included.
Unit Holders of Unit Investment Trusts. Unit investment trust distributions
--------------------------------------
may be invested in Class A shares of the Fund at a reduced sales charge of 1.50%
of the public offering price (or 1.52% of the net amount invested); for large
purchases on which a sales charge of less than 1.50% would ordinarily apply,
such lower charge also applies to investments of unit investment trust
distributions.
Clients of Advisers or Subadvisers (Affiliated with NEIC). No sales charge
---------------------------------------------------------
or contingent deferred sales charge applies to investments of $100,000 or more
in Class A shares of the Fund by (1) clients of an adviser or subadviser
(affiliated with NEIC) to the Trusts; any director, officer or partner of a
client of an adviser or subadviser (affiliated with NEIC) to the Trusts; and the
spouse, parents, children, siblings, grandparents or grandchildren of the
foregoing; (2) any individual who is a participant in a Keogh or IRA
-27-
<PAGE>
Plan under a prototype of an adviser or subadviser (affiliated with NEIC) to 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 client of an adviser or subadviser
(affiliated with NEIC) to the Trusts. Any investor eligible for this
arrangement should so indicate in writing at the time of the purchase.
Offering to Employees of The New England and Associated Entities. There is
----------------------------------------------------------------
no sales charge, CDSC or initial investment minimum related to investments in
Class A shares of the Fund by any of the Trusts' investment advisers or
subadvisers (affiliated with NEIC), New England Funds, L.P. or any other company
affiliated with The New England; current and former directors and trustees of
the Trusts; 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 New England Funds, L.P.; the spouse, parents, children,
siblings, grandparents or grandchildren of the persons listed above and any
trust, pension, profit sharing or other benefit plans for any of the foregoing
persons and any separate account of The New England or any other company
affiliated with The New England.
Eligible Governmental Authorities. There is no sales charge or contingent
---------------------------------
deferred sales charge related to investments in Class A shares of the Fund by
any state, county or city or any instrumentality, department, authority or
agency thereof that has determined that the Fund is a legally permissible
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.
Investment Advisory Accounts. Purchases of Class A shares of the Fund may
----------------------------
be made with no sales charge or CDSC through an investment adviser, broker or
financial planner that charges for its services. Purchases of Class A shares of
the Fund may be made with no sales charge or CDSC by a participating investment
adviser, broker or financial planner, provided such purchases are placed through
an omnibus account with the Fund. There is no sales charge or contingent
deferred sales charge related to investments in Class A shares of the Fund by
any advisory accounts through investment advisers registered under the
Investment Advisers Act of 1940 and affiliated with broker-dealers.
Shareholders of Reich and Tang Government Securities Trust. Shareholders of
-----------------------------------------------------------
Reich and Tang Government Securities Trust may exchange their shares of that
fund for Class A shares of the Fund at net asset value and without imposition of
a sales charge.
The reduction or elimination of the sales charge in connection with sales
described above reflects the absence or reduction of sales expenses associated
with such sales.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
- -------------
A shareholder's investment is automatically credited to an open account
maintained for the shareholder by State Street Bank. Following each transaction
in the account, a shareholder will receive a confirmation statement disclosing
the current balance of shares owned and the details of recent transactions in
the account. After the close of each calendar
-28-
<PAGE>
year, State Street Bank will send each shareholder a statement providing federal
tax information on dividends and distributions paid to the shareholder during
the year. This statement should be retained as a permanent record. New England
Funds, L.P. may charge a fee for providing duplicate information.
The open account system provides for full and fractional shares expressed
to three decimal places and, by making the issuance and delivery of stock
certificates unnecessary, eliminates problems of handling and safekeeping, and
the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are paid by the Fund and
no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Automatic Investment Plans (Class A, B and C Shares)
- ----------------------------------------------------
Subject to the Fund's investor eligibility requirements, investors may
automatically invest in additional shares of the Fund on a monthly basis by
authorizing New England Funds, L.P. to draw checks on an investor's bank
account. The checks are drawn under the Investment Builder Program, a program
designed to facilitate such periodic payments, and are forwarded to New England
Funds, L.P. for investment in the Fund. A plan may be opened with an initial
investment of $50 or more and thereafter regular monthly checks of $50 or more
will be drawn on the investor's account. The reduced minimum initial investment
pursuant to an automatic investment plan is referred to in the prospectus. An
Investment Builder application must be completed to open an automatic investment
plan. An application may be found in the prospectus or may be obtained by
calling New England Funds, L.P. at (800) 225-5478 or your investment dealer.
This program is voluntary and may be terminated by New England Funds, L.P.
upon notice to existing plan participants.
The Investment Builder Program plan may be discontinued at any time by the
investor by written notice to New England Funds, L.P., which must be received at
least five business days prior to any payment date. The plan may be
discontinued by State Street Bank at any time without prior notice if any check
is not paid upon presentation; or by written notice to you at least thirty days
prior to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.
Retirement Plans Offering Tax Benefits (Class A, B and C Shares)
- ----------------------------------------------------------------
The federal tax laws provide for a variety of retirement plans offering tax
benefits. These plans may be funded with shares of the Fund or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.
The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the prospectus. For these plans,
initial and subsequent investments in the Fund must be at least $25 for each
participant in a plan, and income dividends and capital
-29-
<PAGE>
gain distributions must be reinvested (unless the investor is over age 59 1/2 or
disabled). Plan documents and further information can be obtained from New
England Funds, L.P.
An investor should consult a competent tax or other adviser as to the
suitability of the Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects.
Certain retirement plans may also be eligible to purchase Class Y shares.
See the prospectus.
Systematic Withdrawal Plans (Class A, B and C Shares)
- -----------------------------------------------------
An investor owning Fund shares having a value of $5,000 or more at the
current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may
be paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or New England Funds, L.P.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.
In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. No CDSC applies to a redemption pursuant to the Plan.
All shares under the Plan must be held in an open (uncertificated) account.
Income dividends and capital gain distributions will be reinvested (without a
sales charge in the case of Class A shares) at net asset value determined on the
record date.
Since withdrawal payments represent proceeds from the liquidation of shares,
withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, the
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Fund and New England Funds, L.P. make no recommendations or representations in
this regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a plan.
It may be disadvantageous for a shareholder to purchase on a regular basis
additional Fund shares with a sales charge while redeeming shares under a
Systematic Withdrawal Plan. Accordingly, the Fund and New England Funds, L.P. do
not recommend additional investments in Class A shares by a shareholder who has
a withdrawal plan in effect and who would be subject to a sales load on such
additional investments.
-30-
<PAGE>
Because of statutory restrictions this plan is not available to pension or
profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
trustee.
Exchange Privilege
- ------------------
A shareholder may exchange the shares of any fund in the Trusts (in the case
of Class A shares of New England Adjustable Rate U.S. Government Fund, New
England Intermediate Term Tax Free Fund of California and New England
Intermediate Term Tax Free Fund of New York, only if such shares have been held
for at least six months) for shares of the same class of any other fund of the
Trusts (subject to the investor eligibility requirements of the fund into which
the exchange is being made) on the basis of relative net asset values at the
time of the exchange without any sales charge. If you own Class A or Class C
shares, you may also elect to exchange your shares of the Fund for Class A
shares of the Money Market Funds. On all exchanges of Class A shares subject to
a CDSC, the exchange stops the aging period relating to the CDSC. The aging
resumes only when an exchange is made back into shares of one of the Trusts. If
you own Class Y shares of the Fund, you may exchange those shares for Class Y
shares of other funds in the Trusts or for the Class A shares of the Money
Market Funds. These options are summarized in the prospectus. An exchange may
be effected, provided that neither the registered name nor address of the
accounts are different and provided that a certificate representing the shares
being exchanged has not been issued to the shareholder, by (1) a telephone
request to New England Funds, L.P. at (800) 223-7124 or (2) a written exchange
request to New England Funds, P.O. Box 8551, Boston, MA 02266-8551. You must
acknowledge receipt of a current prospectus for a Fund before an exchange for
that Fund can be effected.
The investment objectives of the other funds (besides the Fund) in the Trusts
and the Money Market Funds are as follows:
Stock Funds:
New England Growth Fund seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
New England Capital Growth Fund seeks long-term growth of capital.
New England Value Fund seeks a reasonable long-term investment return from a
combination of market appreciation and dividend income from equity securities.
New England Balanced Fund seeks a reasonable long-term investment return
from a combination of long-tern capital appreciation and moderate current
income.
New England Growth Opportunities Fund seeks opportunities for long-term
growth of capital and income.
New England International Equity Fund seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.
New England Star Advisers Fund seeks long-term growth of capital.
-31-
<PAGE>
Growth Fund of Israel seeks long-term growth of capital.
Bond Funds:
New England Government Securities Fund seeks a high level of current income
consistent with safety of principal by investing in U.S. Government securities
and engaging in transactions involving related options, futures and options on
futures.
New England Limited Term U.S. Government Fund seeks a high current return
consistent with preservation of capital.
New England Adjustable Rate U.S. Government Fund seeks a high level of
current income consistent with low volatility of principal.
New England Strategic Income Fund seeks high current income with a secondary
objective of capital growth.
New England Bond Income Fund seeks a high level of current income consistent
with what the Fund considers reasonable risk. The Bond Income Fund invests
primarily in corporate and U.S. Government bonds.
New England High Income Fund seeks high current income plus the opportunity
for capital appreciation to produce a high total return.
New England Tax Exempt Income Fund seeks as high a level of current income
exempt from federal income taxes as is consistent with reasonable risk and
protection of shareholder's' capital. The Tax Exempt Income Fund invests
primarily in debt securities, the interest of which is, in the opinion of the
debt issuer's counsel, exempt from federal income tax ("tax exempt bonds"), and
may engage in transactions in financial futures contracts and options on
futures.
New England Massachusetts Tax Free Income Fund seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as Back Bay Advisors, the Fund's investment adviser, believes is
consistent with preservation of capital.
New England Intermediate Term Tax Free Fund of California seeks as high a
level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.
New England Intermediate Term Tax Free Fund of New York seeks as high a
level of current income exempt from federal income tax and its state personal
income tax and New York City personal income tax as is consistent with
preservation of capital.
Money Market Funds:
NEW ENGLAND CASH MANAGEMENT TRUST -
Money Market Series -- maximum current income consistent with
-------------------
preservation of capital and liquidity.
-32-
<PAGE>
U.S. Government Series -- highest current income consistent with
----------------------
preservation of capital and liquidity.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- current income exempt from federal
income taxes consistent with preservation of capital and liquidity.
As of December 27, 1995, the net assets of the funds in the Trusts and the
Money Market Funds totaled over [$____] billion.
An exchange constitutes a sale of shares for federal income tax purposes in
which the investor may realize a long- or short-term capital gain or loss.
Automatic Exchange Plan (Class A, B and C Shares)
- -------------------------------------------------
As described in the prospectus following the caption "Owning Fund Shares", a
shareholder may establish an Automatic Exchange Plan under which shares of the
Fund are automatically exchanged each month for shares of the same class of one
or more of the other funds in the Trusts. Registration on all accounts must be
identical. The exchanges are made on the 15th of each month or the first
business day thereafter if the 15th is not a business day until the account is
exhausted or until New England Funds, L.P. is notified in writing to terminate
the plan. Exchanges may be made in amounts of $500 or over ($1000 for spousal
IRAs). The Service Options Form is available from New England Funds, L.P. or
your financial representative to establish an Automatic Exchange Plan.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of shares of a Fund are summarized in the
prospectus. As described in the prospectus, a contingent deferred sales charge
("CDSC") may be imposed on certain purchases of Class A shares. For purposes of
the CDSC, an exchange of shares from the Fund to another series of the Trusts is
not considered a redemption or a purchase. For federal tax purposes, however,
such an exchange is considered a sale and a purchase and, therefore, would be
considered a taxable event on which you may recognize a gain or loss. In
determining whether a contingent deferred sales charge is applicable to a
redemption of Class A shares, the calculation will be determined in the manner
that results in the lowest rate being charged. Therefore, it will be assumed
that the redemption is first of any Class C shares in the shareholder's Fund
account, second of shares held for over one year and third of shares issued in
connection with dividend reinvestment. The charge will not be applied to dollar
amounts representing an increase in the net asset value of shares since the time
of purchase or reinvested distributions associated with such shares. Unless you
request otherwise at the time of redemption, the CDSC is deducted from the
redemption, not the amount remaining in the account.
Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution", as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, a signature guarantee will not be required if the proceeds
of the redemption do not exceed $100,000 and the proceeds check is made payable
to the registered owner(s) and mailed to the record address.
-33-
<PAGE>
If you select the telephone redemption service in the manner described in
the next paragraph, shares of the Fund may be redeemed by calling toll free
(800) 225-5478. A wire fee, currently $5.00, will be deducted from the
proceeds. Telephone redemption requests must be received by the close of
regular trading on the New York Stock Exchange. Requests made after that time
or on a day when the New York Stock Exchange is not open for business cannot be
accepted and a new request on a later day will be necessary. The proceeds of a
telephone withdrawal will normally be sent on the first business day following
receipt of a proper redemption request.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, available from your investment dealer. When selecting
the service, a shareholder must designate a bank account to which the redemption
proceeds should be sent. Any change in the bank account so designated may be
made by furnishing to your investment dealer a completed Service Options Form
with a signature guarantee. Whenever the Service Options Form is used, the
shareholder's signature must be guaranteed as described above. Telephone
redemptions may only be made if the designated bank is a member of the Federal
Reserve System or has a correspondent bank that is a member of the System. If
the account is with a savings bank, it must have only one correspondent bank
that is a member of the System.
The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Fund reserves the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that the check
has cleared).
The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trust's
board of trustees determines it to be advisable and in the interest of the
remaining shareholders of the Fund. If portfolio securities are distributed in
lieu of cash, the shareholder will normally incur brokerage commissions upon
subsequent disposition of any such securities. However, the Fund has elected to
be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period. The Fund does not currently intend to
impose any redemption charge (other than the CDSC imposed by the Distributor),
although it reserves the right to charge a fee not exceeding 1% of the
redemption price. A redemption constitutes a sale of shares for federal income
tax purposes on which the investor may realize a long- or short-term capital
gain or loss. See also "Income Dividends, Capital Gain Distributions and Tax
Status," below.
Reinstatement Privilege (Class A shares only)
- ---------------------------------------------
The prospectus describes redeeming shareholders' reinstatement privileges
for Class A shares. Written notice and the investment check from persons
wishing to exercise this reinstatement privilege must be received by your
investment dealer within 120 days after the date of the redemption. The
reinstatement or exchange will be made at net asset value next determined after
receipt of the notice and the investment check and will be limited to the
-34-
<PAGE>
amount of the redemption proceeds or to the nearest full share if fractional
shares are not purchased.
Even though an account is reinstated, the redemption will constitute a sale
for federal income tax purposes. Investors who reinstate their accounts by
purchasing shares of the Fund should consult with their tax advisers with
respect to the effect of the "wash sale" rule if a loss is realized at the time
of the redemption.
- --------------------------------------------------------------------------------
STANDARD PERFORMANCE MEASURES
- --------------------------------------------------------------------------------
Calculation of Total Return. Total return is a measure of the change in
---------------------------
value of an investment in the Fund over the period covered, which assumes that
any dividends or capital gains distributions are automatically reinvested in
shares of the same class of the Fund rather than paid to the investor in cash.
The formula for total return used by the Fund is prescribed by the Securities
and Exchange Commission and includes three steps: (1) adding to the total number
of shares of the particular class that would be purchased by a hypothetical
$1,000 investment in the Fund (with or without giving effect to the deduction of
sales charge or CDSC, if applicable) all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by multiplying the
total of shares owned at the end of the period by the net asset value per share
of the relevant class on the last trading day of the period; (3) dividing this
account value for the hypothetical investor by the amount of the initial
investment, and annualizing the result for periods of less than one year. Total
return may be stated with or without giving effect to any expense limitations in
effect for the Fund.
Performance Comparisons
- -----------------------
Total Return. Total returns will generally be higher for Class A shares
------------
than for Class B and C shares of the Fund, because of the higher levels of
expenses borne by the Class B and C shares. Because of its lower operating
expenses, Class Y shares of the Fund can be expected to achieve a higher total
return than the Fund's Class A, B and C shares. The Fund may from time to time
include total return in advertisements or in information furnished to present or
prospective shareholders. The Funds may from time to time include in
advertisements its total return and the ranking of those performance figures
relative to such figures for groups of mutual funds categorized by Lipper
Analytical Services as having similar investment objectives.
Total return may also be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S. Bureau of Labor Statistics' Consumer Price
Index.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is a
market value-weighted and unmanaged index showing the changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500 is
composed almost entirely of common stocks of companies listed on the New York
Stock Exchange, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
-35-
<PAGE>
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange.
The Salomon Brothers World Government Bond Index includes a broad range of
institutionally-traded fixed-rate government securities issued by the national
governments of the nine countries whose securities are most actively traded.
The index generally excludes floating- or variable-rate bonds, securities aimed
principally at non-institutional investors (such as U.S. Savings Bonds) and
private-placement type securities.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rated
agency.
The Dow Jones Industrial Average is a market value-weighted and unmanaged
index of 30 large industrial stocks traded on the New York Stock Exchange.
The Merrill Lynch High Yield Index includes over 750 issues and represents
public debt greater than $10 million (original issuance rated BBB/BB and below),
and the First Boston High Yield Index includes over 350 issues and represents
all public debt greater than $100 million (original issuance and rated BBB/BB
and below).
The Salomon Brothers Broad Investment Grade Bond Index is a price composite
of a broad range of institutionally based U.S. Government mortgage-backed and
corporate debt securities of investment outstanding of at least $1 million and
with a remaining period to maturity of at least one year.
The Consumer Price Index, published by the U.S. Bureau of Labor Statistics,
is a statistical measure of changes, over time, in the prices of goods and
services in major expenditure groups.
Lipper Analytical Services, Inc. is an independent service that monitors the
performance of over 1,300 mutual funds, and calculates total return for the
funds grouped by investment objective.
The Morgan Stanley Capital International Europe, Australia and Far East
(Gross Domestic Product) Index (the "EAFE Index") is a market-value weighted and
unmanaged index of common stocks traded outside the U.S. The stocks in the
index are selected with reference to national and industry representation and
weighted in the EAFE Index according to their relative market value (market
price per share times the number of shares outstanding).
The Morgan Stanley Capital International Europe, Australia and Far East
Index (the "EAFE [GDP] Index") is a market-value weighted and unmanaged index of
common stocks
-36-
<PAGE>
traded outside the U.S. The stocks in the index are selected with reference to
national and industry representation and weighted in the EAFE (GDP) Index
according to their relative market values. The relative market value of each
country is further weighted with reference to the country's relative gross
domestic product.
The Fund may compare its performance to the Salomon-Russell Broad Market
Index Global X-US and to universes of similarly managed investment pools
compiled by Frank Russell Company and Intersec Research Corporation.
Articles and releases, developed by the Fund and other parties, about the
Fund regarding performance, rankings, statistics and analyses of the Fund's and
the fund group's asset levels and sales volumes, numbers of shareholders by fund
or in the aggregate for New England Funds, statistics and analyses of industry
sales volumes and asset levels, and other characteristics may appear in
advertising, promotional literature, publications and on various computer
networks, including, but not limited to, those publications and computer
networks listed in Appendix B to this Statement. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of such articles may
be used in the Funds' advertising and promotional literature. Such advertising
and promotional material may refer to NEIC, its structure, goals and objectives
and the advisory subsidiaries of NEIC, including their portfolio management
responsibilities, portfolio managers and their categories and background; their
tenure, styles and strategies and their shared commitment to fundamental
investment principles and may identify specific clients, as well as discuss the
types of institutional investors who have selected the advisers to manage their
investment portfolios and the reasons for that selection. The references may
discuss the independent, entrepreneurial nature of each advisory organization
and allude to or include excerpts from articles appearing in the media regarding
NEIC, its advisory subsidiaries and their personnel. For additional information
about the Fund's advertising and promotional literature, see Appendix C.
The Fund may enter into arrangements with banks exempted from registration
under the Securities Exchange Act of 1934. Advertising and sales literature
developed to publicize such arrangements will explain the relationship of the
bank to New England Funds and New England Funds, L.P. as well as the services
provided by the bank relative to the Fund. The material may identify the bank
by name and discuss the history of the bank including, but not limited to, the
type of bank, its asset size, the nature of its business and services and its
status and standing in the industry.
The Fund may use the accumulation charts below in their advertisements to
demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.
Investments At 8% Rate of Return
<TABLE>
<CAPTION>
5 yrs. 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$ 50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148
</TABLE>
-37-
<PAGE>
Investments At 10% Rate of Return
<TABLE>
<CAPTION>
5 yrs. 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$ 50 3,904 10,328 20,896 38,285 66,895 113,966
75 5,856 15,491 31,344 57,427 100,342 170,949
100 7,808 20,655 41,792 76,570 133,789 227,933
150 11,712 30,983 62,689 114,855 200,684 341,899
200 15,616 41,310 83,585 153,139 267,578 455,865
500 39,041 103,276 208,962 382,848 668,945 1,139,663
</TABLE>
The Fund's advertising and sales literature may refer to historical,
current and prospective economic trends and may include historical and current
performance and total returns of investment alternatives to the New England
Funds. Articles, releases, advertising and literature may discuss the range of
services offered by the Trusts and New England Funds, L.P., as distributor and
transfer agent of the Trusts, with respect to investing in shares of the Trusts
and customer service. Such materials may discuss the multiple classes of shares
available through the Trusts and their features and benefits, including the
details of the pricing structure.
Advertising and sales literature may also refer to the beta
coefficient of the New England Funds. A beta coefficient is a measure of
systematic or undiversifiable risk of a stock. A beta coefficient of more than
1 means that the company's stock has shown more volatility than the market index
(e.g. the S&P 500) to which it is being related. If the beta is less than 1, it
is less volatile than the market average to which it is being compared. If it
equals 1, its risk is the same as the market index. High variability in stock
price may indicate greater business risk, instability in operations and low
quality of earnings. The beta coefficients of the New England Funds may be
compared to the beta coefficients of other funds.
In addition, sales literature may be published concerning topics of
general investor interest for the benefit of registered representatives and the
Fund's prospective shareholders. These materials may include, but are not
limited to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in the Fund's prospectus, it is the policy of the Fund to
pay its shareholders, as dividends, substantially all net investment income and
to distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.
Income dividends and capital gain distributions are payable in full
and fractional shares of the relevant class of the Fund based upon the net asset
value determined as of the close of the New York Stock Exchange on the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gain distributions, or both, in cash.
The election may be made at any time by submitting a written request directly to
New England Funds. In order for a change to be in effect for any dividend
-38-
<PAGE>
or distribution, it must be received by New England Funds on or before the
record date for such dividend or distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
The Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Code. In order to qualify, the Fund must,
among other things (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from sale of
securities or foreign currencies, or other income (including but not limited to
gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute at least 90% of its
dividend, interest and certain other taxable income each year; and (iv) at the
end of each fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other regulated investment
companies, other securities of issuers which represent, with respect to each
issuer, no more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and with no more than 25% of its
assets invested in the securities (other than those of the U.S. government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades and businesses. To the extent it qualifies for treatment as a
regulated investment company, the Fund will not be subject to federal income tax
on income paid to its shareholders in the form of dividends or capital gains
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. The Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by the Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
Shareholders of the Fund will be subject to federal income taxes on
distributions made by the Fund whether received in cash or additional shares of
the Fund. Distributions by the Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Distributions of
long-term capital gains, if any, will be taxable to shareholders as long-term
capital gains, without regard to how long a shareholder has held shares of the
Fund. A loss on the sale of shares held for 12 months or less will be treated
as a long-term capital loss to the extent of any long-term capital gain dividend
paid to the shareholder with respect to such shares.
Dividends and distributions on Fund shares received shortly after
their purchase, although in effect a return of capital, are subject to federal
income taxes.
The Fund may be eligible to make and, if eligible, may make an
election under Section 853 of the Code so that its shareholders will be able to
claim a credit or deduction on their income tax returns for, and will be
required to treat as part of the amounts distributed to
-39-
<PAGE>
them, their pro rata portion of qualified taxes paid by the Fund to Israel and
other foreign countries. The ability of shareholders of the Fund to claim a
foreign tax credit is subject to certain limitations imposed by Section 904 of
the Code, which in general limit the amount of foreign tax that may be used to
reduce a shareholder's U.S. tax liability to that amount of U.S. tax which would
be imposed on the amount and type of income in respect of which the foreign tax
was paid. A shareholder who for U.S. income tax purposes claims a foreign tax
credit in respect of Fund distributions may not claim a deduction for foreign
taxes paid by the Fund, regardless of whether the shareholder itemizes
deductions. Also, under Section 63 of the Code, no deduction in respect of
income taxes paid by the Fund to foreign countries may be claimed by
shareholders who do not itemize deductions on their federal income tax returns.
The Fund will notify shareholders each year of the amount for dividends and
distributions and the shareholder's pro rata share of qualified taxes paid by
the Fund to foreign countries.
The Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.
The Fund may limit its investments in certain "passive foreign
investment companies" in order to avoid certain taxes that arise as a result of
such investments.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
If shares have been held for more than one year, gain or loss realized will be
long-term capital gain or loss, provided the shareholder holds the shares as a
capital asset. However, if a shareholder sells Fund shares at a loss within six
months after purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain distributions received
by the shareholder. Furthermore, no loss will be allowed on the sale of Fund
shares to the extent the shareholder acquired other shares of the Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax
law. Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
-40-
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S CORPORATION
- -----------------------------
AAA
This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC, C
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CI
The rating CI is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-); The ratings from "AA' to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
-41-
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large, or by an exceptionally stable,
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, if
fact, have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default
of there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
-42-
<PAGE>
C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is not longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, and B1.
-43-
<PAGE>
APPENDIX B
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
-44-
<PAGE>
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
-45-
<PAGE>
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
-46-
<PAGE>
WEEI
WHDH
Worcester Telegram
Worth Magazine
WRKO
-47-
<PAGE>
APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in New England Funds' advertising and
promotional literature to New England Investment Companies ("NEIC") and its
affiliates that perform advisory functions for New England Funds including, but
not limited to: Back Bay Advisors, L.P., Harris Associates L.P., Loomis, Sayles
and Company, L.P., Westpeak Investment Advisors, L.P., Capital Growth Management
Limited Partnership and Draycott Partners, Ltd.
References may be included in New England Funds' advertising and
promotional literature to NEIC affiliates that do not perform advisory or
subadvisory functions for the Funds including, but not limited to, New England
Investment Associates, L.P., Copley Real Estate Advisors, L.P., Marlborough
Capital Advisors, L.P., Reich & Tang Capital Management and Reich and Tang
Mutual Funds Group.
References to subadvisers unaffiliated with NEIC that perform
subadvisory functions on behalf of New England Funds may be contained in New
England Funds' advertising and promotional literature including, but not limited
to, Montgomery Asset Management, L.P., Berger Associates, Inc., Janus Capital
Corporation and Founders Asset Management, Inc.
New England Funds' advertising and promotional material will include,
but is not limited to, discussions of the following information about the above
entities:
Specific and general investment emphasis, specialties, competencies,
operations and functions
Specific and general investment philosophies, strategies, processes
and techniques
Specific and general sources of information, economic models,
forecasts and data services utilized, consulted or considered in the course of
providing advisory or other services
The corporate histories, founding dates and names of founders of the
entities
Awards, honors and recognition given to the firms
The names of those with ownership interest and the percentage of
ownership
Current capitalization, levels of profitability and other financial
information
Identification of portfolio managers, researchers, economists,
principals and other staff members and employees
The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and duties
performed, industry experience, educational background and degrees, awards and
honors
Specific identification of, and general reference to, current
individual, corporate and institutional clients, including pension and profit
sharing plans
Current and historical statistics about:
-48-
<PAGE>
- total dollar amount of assets managed
- New England Funds' assets managed in total and by Fund
- the growth of assets
- asset types managed
- numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
- the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or the subadviser
Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than New England Funds, and those
families of funds, other than New England Funds, including but not limited
to, New England Star Advisers Fund (the "Star Advisers Fund") portfolio
manager Rodney L. Linafelter of Berger Associates, Inc. and Berger Funds, who
also serves as portfolio manager of the Berger 100 Fund; Star Advisors Fund
portfolio manager Warren B. Lammert and Fund portfolio manager Helen Young
Hayes of Janus Capital Corporation and Janus Funds, who also serve as
portfolio managers of the Janus Mercury Fund and the Janus Worldwide Fund,
respectively; Fund portfolio managers Josephine S. Jimenez and Bryan L.
Sudweeks of Montgomery Asset Management, L.P., who also serve as portfolio
managers of Montgomery Emerging Markets Fund; Star Advisers Fund portfolio
manager Edward F. Keely and Fund portfolio manager Michael W. Gerding of
Founders Asset Management, Inc. and Founders Funds, who also serve as
portfolio managers of Founders Growth Fund and Founders Worldwide Growth
Fund, respectively; and Star Advisers Fund portfolio manager Jeffrey C.
Petherick of Loomis, Sayles & Company, L.P. and Loomis Sayles Funds, who also
serves as portfolio manager of the Loomis Sayles Small Cap Fund. Specific and
general references may be made to the Loomis Sayles Funds, the Loomis Sayles
Bond Fund and Daniel Fuss, who serves as portfolio manager of New England
Strategic Income Fund and the Loomis Sayles Bond Fund; and Fund portfolio
managers Robert J. Sanborn and David G. Herro of Harris Associates L.P. and
Oakmark Funds, who also serve as portfolio managers of Oakmark Fund and
Oakmark International Fund, respectively. Any such references will indicate
that New England Funds and the other funds of the managers differ as to
performance, objectives, investment restrictions and limitations, portfolio
composition, asset size and other characteristics, including fees and
expenses. References may also be made to industry rankings and
ratings of the Fund and other funds managed by the Fund's subadvisers,
including but not limited to those provided by Morningstar, Lipper
Analytical Services, Forbes and Worth.
In addition, communications and materials developed by New England Funds
will make reference to the following information about NEIC and its affiliates:
NEIC is the [seventh] largest publicly traded manager in the U.S. listed on
the New York Stock Exchange. NEIC maintains over [$60] billion in assets under
management. Clients serviced by NEIC and its affiliates, besides New England
Funds, are wealthy individuals, major corporations and large institutions.
Back Bay Advisors, L.P. employs a conservative style of management
emphasizing short and intermediate term securities to reduce volatility, adds
value through careful
-49-
<PAGE>
continuous credit analysis and has expertise in government, corporate and tax-
free municipal bonds and equity securities. Among its clients are Boston City
Retirement System, Public Service Electric and Gas of New Jersey, Petrolite
Corp. and General Mills.
Draycott Partners, Ltd. specializes in international stocks and tracks key
world markets and economic trends from offices in London and Boston. Its
investment approach is based on concentration on "blue chip" companies in
stable, growing economies and is guided by independent, non-consensus thinking.
It monitors country weightings with strict attention to risk control to promote
long-term returns.
Capital Growth Management, L.P. seeks to deliver exceptional growth for its
clients through the selection of stocks with the potential to outperform the
market and grow at a faster rate than the U.S. economy. Among its approaches
are pursuit of growth 50% above the Standard & Poor's Index of 500 Common
Stocks, prompt responses to changes in the market or economy and aggressive,
highly concentrated portfolios.
Loomis, Sayles & Company, L.P. is one of the oldest and largest investment
firms in the U.S. and has provided investment counseling to individuals and
institutions since 1926. Characteristic of Loomis Sayles is that it has one of
the largest staffs of research analysts in the industry, practices strict buy
and sell disciplines and focuses on sound value in stock and bond selection.
Among its clients are large corporations such as Chrysler, Mobil Oil and Revlon.
Westpeak Investment Advisors, L.P. ("Westpeak") employs proprietary
research and a disciplined stock selection process that seeks rigorously to
control unnecessary risk. Its investment process is designed to evaluate when
value and growth styles - two primary approaches to stock investing - hold
potential for reward. Over seventy fundamental attributes are continuously
analyzed by Westpeak's experienced analysts and sophisticated computer systems.
The results are assessed against Wall Street's consensus thinking, in pursuit of
returns in excess of appropriate benchmarks. The value/growth strategy is a
unique blend of investment styles, seeking opportunities for increased return
with reduced risk. Among the keys to Westpeak's investment process are
continuous review of timely, accurate data on over 3600 companies, analysis of
dozens of factors for excess return potential and identification of overvalued
and undervalued stocks.
Harris Associates, L.P. is a Chicago-based investment management company
with more than $6.5 billion in assets under management, comprised of the $3.2
billion Oakmark Fund Group and $3.3 billion in institutional assets.
Harris Associates, L.P.'s investment philosophy is predicated on the belief
that over time market price and value converge and that investment in securities
priced significantly below long-term value presents the best opportunity to
achieve long-term growth of capital.
On June 30, 1995, NEIC purchased the assets of Graystone Partners, L.P.
("Graystone"), a Chicago-based consulting firm focusing exclusively on working
with the wealthiest families in the country. Founded in 1993, Graystone
specializes in assisting high net worth families in developing asset allocation
strategies, identifying appropriate portfolio managers and the monitoring of
investment performance.
-50-
<PAGE>
References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:
Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers of plans, funding vehicles,
participants, sponsors and other demographic data relating to plans,
participants and sponsors, third party and other administrators, benefits
consultants and firms including, but not limited to, DC Xchange, William
Mercer and other organizations involved in 401(k) and retirement programs with
whom New England Funds may or may not have a relationship.
Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the New England Funds as a
401(k) or retirement plan funding vehicle produced by, including, but not
limited to, Access Research, Dalbar, Investment Company Institute and other
industry authorities, research organizations and publications.
Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including but not
limited to, statistics, detailed explanations or broad summaries of:
-past, present and prospective tax regulation, IRS requirements and rules,
including, but not limited to reporting standards, minimum distribution
notices, Form 5500, Form 1099R and other relevant forms and documents,
Department of Labor rules and standards and other regulation. This includes
past, current and future initiatives, interpretive releases and positions of
regulatory authorities about the past, current or future eligibility,
availability, operations, administration, structure, features, provisions or
benefits of 401(k) and retirement plans
-information about the history, status and future trends of Social Security
and similar government benefit programs including, but not limited to,
eligibility and participation, availability, operations and administration,
structure and design, features, provisions, benefits and costs
-current and prospective ERISA regulation and requirements.
Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including explanations,
statistics and other data, about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-51-
<PAGE>
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited to,
videos, slides, presentation materials, brochures, an investment calculator,
payroll stuffers, quarterly publications, releases and information on a
periodic basis and the availability of wholesalers and other personnel.
Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and, in particular, New England Funds and
investing in its 401(k) and retirement plans, including but not limited to:
-the significant economies of scale experienced by mutual fund companies in
the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including but not limited to, trustee
services and tax reporting
-the services of DST and BFDS, including but not limited to, mutual fund
processing support, participant 800 numbers and participant 401(k) statements
-the services of Trust Consultants Inc. (TCI), including but not limited to,
sales support, plan record keeping, document service support, plan sponsor
support, compliance testing and Form 5500 preparation.
Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment and
on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual fund
diversification and professional management.
-52-
<PAGE>
Registration Nos. 2-98326
811-4323
NEW ENGLAND FUNDS TRUST I
-------------------------
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(b) Exhibits:
1.
(a) Amended and Restated Declaration of Trust is
incorporated herein by reference to Post-Effective
Amendment No. 13 to this Registration Statement, filed
on April 1, 1992.
(b) Amendments No. 3 and 4 to Amended and Restated
Declaration of Trust are incorporated herein by
reference to Post-Effective Amendment No. 20 to this
Registration Statement, filed on December 22, 1993.
(c) Amendment No. 5 to Amended and Restated Declaration of
Trust is incorporated herein by reference to Post-
Effective Amendment No. 22 to this Registration
Statement, filed on April 18, 1994.
(d) Amendment No. 6 to Amended and Restated Declaration of
Trust is incorporated herein by reference to Post-
Effective Amendment No. 24 to this Registration
Statement, filed June 20, 1994.
(e) Form of Amendment No. 7 to Amended and Restated
Declaration of Trust is incorporated herein by
reference to Exhibit 1(e) to Post-Effective Amendment
No. 25 to this Registration Statement, filed on
February 15, 1995.
2.
(a) Bylaws of the Registrant are incorporated herein by
reference to this Registration Statement, filed on June
11, 1985.
(b) Amendment to Bylaws of the Registrant is incorporated
herein by reference to Exhibit 2(b) to Post-Effective
Amendment No. 25 to this Registration Statement, filed
on February 15, 1995.
3. None.
<PAGE>
Registration Nos. 2-98326
811-4323
4. Form of share certificate for series of New England Funds
Trust I is incorporated by reference to Post-Effective
Amendment No. 23 to this Registration Statement, filed on
April 21, 1994.
5.
(a) The following are incorporated herein by reference to
Post-Effective Amendment No. 3 to this Registration
Statement, filed on November 7, 1986: (i) Form of
Advisory Agreement between the Registrant, on behalf of
its New England Value Fund, and Loomis Sayles &
Company, L.P. ("Loomis Sayles"); (ii) Form of Advisory
Agreement between the Registrant, on behalf of its New
England Balanced Fund (formerly New England Equity
Income Fund), and Loomis Sayles; (iii) Form of Advisory
Agreement between the Registrant, on behalf of its New
England Bond Income Fund, and Back Bay Advisors, L.P.
("Back Bay Advisors"); (iv) Form of Advisory Agreement
between the Registrant, on behalf of its New England
Government Securities Fund, and Back Bay Advisors; (v)
Form of Advisory Agreement between the Registrant, on
behalf of its New England Tax Exempt Income Fund, and
Back Bay Advisors.
(b) Advisory Agreement among the Registrant, on behalf of
its New England International Equity Fund, Draycott
Partners, Ltd. and Back Bay Advisors is incorporated
herein by reference to Post-Effective Amendment No. 12
to this Registration Statement, filed on January 10,
1992.
(c) Form of Advisory Agreement between the Registrant, on
behalf of its New England Growth Fund, and Capital
Growth Management Limited Partnership ("CGM") is
incorporated herein by reference to Post-Effective
Amendment No. 20 to this Registration Statement, filed
on December 22, 1993.
(d) Form of Advisory Agreement between the Registrant, on
behalf of its New England Star Advisers Fund, and New
England Investment Companies, L.P. ("NEIC") is
incorporated herein by reference to Post-Effective
Amendment No. 24 to this Registration Statement, filed
on June 20, 1994.
(e) Form of Sub-Advisory Agreement for New England Star
Advisers Fund between NEIC and Loomis Sayles is
-2-
<PAGE>
Registration Nos. 2-98326
811-4323
incorporated herein by reference to Post-Effective
Amendment No. 24 to this Registration Statement, filed
on June 20, 1994.
(f) Form of Sub-Advisory Agreement for New England Star
Advisers Fund between NEIC and Berger Associates, Inc.
is incorporated herein by reference to Exhibit 5 to
Post-Effective Amendment No. 25 to this Registration
Statement, filed on February 15, 1995.
(g) Form of Sub-Advisory Agreement for New England Star
Advisers Fund between NEIC and Founders Asset
Management, Inc. is incorporated herein by reference to
Post-Effective Amendment No. 24 to this Registration
Statement, filed on June 20, 1994.
(h) Form of Sub-Advisory Agreement for New England Star
Advisers Fund between NEIC and Janus Capital
Corporation is incorporated herein by reference to
Post-Effective Amendment No. 24 to this Registration
Statement, filed on June 20, 1994.
(i) Form of Advisory Agreement between the Registrant, on
behalf of its New England Strategic Income Fund, and
New England Funds Management, L.P. ("NEFM") is
incorporated herein by reference to Exhibit 5 to Post-
Effective Amendment No. 25 to this Registration
Statement, filed on February 15, 1995.
(j) Form of Sub-Advisory Agreement for New England
Strategic Income Fund between NEFM and Loomis Sayles is
incorporated herein by reference to Exhibit 5 to Post-
Effective Amendment No. 25 to this Registration
Statement, filed on February 15, 1995.
(k) Form of Advisory Agreement between the Registrant, on
behalf of its New England Star Worldwide Fund, and NEFM
is filed herewith.
(l) Form of Sub-Advisory Agreement for New England Star
Worldwide Fund between NEFM and Harris Associates L.P.
is filed herewith.
-3-
<PAGE>
Registration Nos. 2-98326
811-4323
(m) Form of Sub-Advisory Agreement for New England Star
Worldwide Fund between NEFM and Montgomery Asset
Management, L.P. is filed herewith.
(n) Form of Sub-Advisory Agreement for New England Star
Worldwide Fund between NEFM and Founders Asset
Management, Inc. is filed herewith.
(o) Form of Sub-Advisory Agreement for New England Star
Worldwide Fund between NEFM and Janus Capital
Corporation is filed herewith.
6.
(a) Form of Distribution Agreement between the Registrant,
on behalf of each of its series, except New England
International Equity Fund, New England Capital Growth
Fund, New England Star Advisers Fund and New England
Star Worldwide Fund, and New England Funds, L.P. is
incorporated by reference to Post-Effective Amendment
No. 11 to this Registration Statement, filed on May 1,
1991.
(b) Distribution Agreement between the Registrant, on
behalf of its New England International Equity Fund,
and New England Funds, L.P. is incorporated herein by
reference to Post-Effective Amendment No. 12 to this
Registration Statement, filed on January 10, 1992.
(c) Form of Distribution Agreement between the Registrant,
on behalf of its New England Capital Growth Fund, and
New England Funds, L.P. is incorporated herein by
reference to Post-Effective Amendment No. 14 to this
Registration Statement, filed on May 5, 1992.
(d) Form of Distribution Agreement between the Registrant,
on behalf of its New England Star Advisers Fund, and
New England Funds, L.P. is incorporated herein by
reference to Post-Effective Amendment No. 24 to this
Registration Statement, filed on June 20, 1994.
(e) Form of Distribution Agreement between the Registrant,
on behalf of its New England Strategic Income Fund, and
New England Funds, L.P. is incorporated herein by
reference to
-4-
<PAGE>
Registration Nos. 2-98326
811-4323
Exhibit 6(e) to Post-Effective Amendment No. 25 to this
Registration Statement, filed on February 15, 1995.
(f) Form of Distribution Agreement between the Registrant,
on behalf of its New England Star Worldwide Fund, and
New England Funds, L.P. is filed herewith.
7. None.
8.
(a) Form of Custodian Contract dated April 13, 1988 between
the Registrant, on behalf of its New England Global
Government Fund, and State Street Bank and Trust
Company ("State Street"), including form of
subcustodian agreement, is incorporated herein by
reference to Post-Effective Amendment No. 8 to this
Registration Statement, filed on April 13, 1988.
(b) Amendment No. 1 to Custodian Contract dated April 12,
1988 between the Registrant and State Street Bank and
Trust Company is incorporated herein by reference to
Post-Effective Amendment No. 12 to this Registration
Statement, filed on January 10, 1992.
(c) Form of Letter Agreement between the Registrant and
State Street relating to the applicability of the
Custodian Contract to New England International Equity
Fund is incorporated herein by reference to Post-
Effective Amendment No. 13 to this Registration
Statement, filed on April 1, 1992.
(d) Form of Letter Agreement between the Registrant and
State Street relating to the applicability of the
Custodian Contract to New England Capital Growth Fund
is incorporated herein by reference to Post-Effective
Amendment No. 14 to this Registration Statement, filed
on May 15, 1992.
(e) Form of Letter Agreement between the Registrant and
State Street relating to the applicability of the
Custodian Contract to New England Star Advisers Fund is
incorporated herein by reference to Post-Effective
Amendment No. 24 to this Registration Statement, filed
on June 20, 1994.
-5-
<PAGE>
Registration Nos. 2-98326
811-4323
(f) Form of Letter Agreement between the Registrant and
State Street relating to the applicability of the
Custodian Contract to New England Strategic Income Fund
is incorporated herein by reference to Exhibit 8(f) to
Post-Effective Amendment No. 25 to this Registration
Statement filed on February 15, 1995.
(g) Form of Letter Agreement between the Registrant and
State Street relating to the applicability of the
Custodian Contract to New England Star Worldwide Fund
is filed herewith.
9.
(a) Transfer Agency Agreement between the Registrant and
State Street is incorporated herein by reference to
Post-Effective Amendment No. 3 to this Registration
Statement, filed on November 7, 1986.
(b) Form of Service Agreement between New England
Securities Corporation and Back Bay Advisors is
incorporated herein by reference to Post-Effective
Amendment No. 3 to this Registration Statement, filed
on November 7, 1986.
(c) Form of Service Agreement between New England
Securities Corporation and Loomis Sayles is
incorporated herein by reference to Post-Effective
Amendment No. 3 to this Registration Statement, filed
on November 7, 1986.
(d) Form of Service Agreement between New England
Securities Corporation and CGM is incorporated herein
by reference to Post-Effective Amendment No. 10 to this
Registration Statement, filed on May 1, 1990.
(e) Form of Administrative Agreement between New England
Securities Corporation and the Registrant is
incorporated herein by reference to Post-Effective
Amendment No. 3 to this Registration Statement, filed
on November 7, 1986.
(f) Form of Administrative Services Agreement between the
Registrant, on behalf of its New England International
Equity Fund, and New England Funds, L.P. is
incorporated herein by reference to Exhibit 9 to Post-
Effective Amendment No. 25 to this Registration
Statement, filed on February 15, 1995.
-6-
<PAGE>
Registration Nos. 2-98326
811-4323
(g) Organizational Expense Reimbursement Agreement between
the Registrant and New England Mutual Life Insurance
Company is incorporated herein by reference to Pre-
Effective Amendment No. 1 to this Registration
Statement, filed on September 11, 1985.
(h) Organizational Expense Reimbursement Agreement between
the Registrant, on behalf of its New England
International Equity Fund and New England Funds, L.P.
is incorporated herein by reference to Post-Effective
Amendment No. 13 to this Registration Statement, filed
on April 1, 1992.
(i) Organizational Expense Reimbursement Agreement between
the Registrant, on behalf of its New England Capital
Growth Fund, is incorporated herein by reference to
Post-Effective Amendment No. 16 to this Registration
Statement, filed on August 19, 1992.
(j) Transfer Agency Agreement between the Registrant and
New England Funds, L.P. (formerly TNE Investment
Services Corporation) is incorporated herein by
reference to Exhibit 9 to Post-Effective Amendment No.
25 to this Registration Statement, filed on February
15, 1995.
10.
(a) Opinion and consent of counsel relating to the
Registrant's New England Growth Fund, New England
Equity Income Fund, New England Value Fund, New England
Bond Income Fund and New England Tax Exempt Income Fund
is incorporated herein by reference to Post-Effective
Amendment No. 3 to this Registration Statement, filed
on November 7, 1986.
(b) Opinion and consent of counsel relating to New England
Government Securities Fund is incorporated herein by
reference to Exhibit No. 10 to Pre-Effective Amendment
No. 1 to this Registration Statement, filed on
September 11, 1985.
(c) Opinion and consent of counsel relating to the
Registrant's New England International Equity Fund is
incorporated herein by reference to Post-Effective
Amendment No. 17 to this Registration Statement, filed
on October 20, 1992.
-7-
<PAGE>
Registration Nos. 2-98326
811-4323
(d) Opinion and consent of counsel relating to the
Registrant's issuance of multiple classes of shares is
incorporated herein by reference to Post-Effective
Amendment No. 20 to this Registration Statement, filed
on December 22, 1993.
(e) Opinion and consent of counsel relating to the
Registrant's New England Capital Growth Fund is
incorporated herein by reference to Post-Effective
Amendment No. 24 to this Registration Statement, filed
on June 20, 1994.
(f) Opinion and consent of counsel relating to the
Registrant's New England Star Advisers Fund is
incorporated herein by reference to Post-Effective
Amendment No. 24 to this Registration Statement, filed
on June 20, 1994.
(g) Opinion and consent of counsel relating to the
Registrant's New England Strategic Income Fund is filed
herewith.
(h) Opinion and consent of counsel relating to the
Registrant's New England Star Worldwide Fund will be
filed by amendment.
11. None.
12. None.
13. Investment Letter of New England Securities Corporation is
incorporated herein by reference to Pre-Effective Amendment
No. 1 to this Registration Statement, filed on September 11,
1985.
14. The following are incorporated herein by reference to Post-
Effective Amendment No. 29 to the Registration Statement on
Form N-1A of NEL Growth Fund, Inc. (File No. 2-28971), filed
on December 22, 1983: (i) NEL Equity Services Corporation
Tax Sheltered Mutual Fund Plan; (ii) HR-10 New England Life
Defined Contribution Prototype Retirement Plan for the Self-
Employed; and (iii) NEL Funds Prototype Individual
Retirement Account Plan.
15.
(a) Rule 12b-1 Plans relating to the Class A shares of New
England Balanced Fund, New England Growth Fund, New
England Value Fund, New England International Equity
Fund, New England Capital Growth Fund, New England Bond
-8-
<PAGE>
Registration Nos. 2-98326
811-4323
Income Fund, New England Tax Exempt Income Fund and New
England Government Securities Fund are incorporated
herein by reference to Post-Effective Amendment No. 19
to this Registration Statement, filed on June 25, 1993.
(b) Rule 12b-1 Plans relating to the Class B shares of New
England Balanced Fund, New England Value Fund, New
England International Equity Fund, New England Capital
Growth Fund, New England Bond Income Fund and New
England Government Securities Fund are incorporated
herein by reference to Post-Effective Amendment No. 20
to this Registration Statement, filed on December 22,
1993.
(c) Form of Rule 12b-1 Plan relating to the Class A shares
of New England Star Advisers Fund is incorporated
herein by reference to Post-Effective Amendment No. 24
to this Registration Statement, filed on June 20, 1994.
(d) Form of Rule 12b-1 Plan relating to the Class B shares
of New England Star Advisers Fund is incorporated
herein by reference to Post-Effective Amendment No. 24
to this Registration Statement, filed on June 20, 1994.
(e) Form of Rule 12b-1 Plan relating to the Class C shares
of New England Star Advisers Fund is incorporated
herein by reference to Post-Effective Amendment No. 24
to the Registration Statement on Form N-1A (File No. 2-
98326) filed on June 20, 1994.
(f) Rule 12b-1 Plans relating to the Class C shares of New
England International Equity Fund, New England Value
Fund, New England Balanced Fund, New England Capital
Growth Fund and New England Bond Income Fund are
incorporated herein by reference to Post-Effective
Amendment No. 25 to this Registration Statement, filed
on February 15, 1995.
(g) Form of Rule 12b-1 Plan relating to the Class A shares
of New England Strategic Income Fund is incorporated
herein by reference to Exhibit 15 to Post-Effective
Amendment No. 25 to this Registration Statement, filed
on February 15, 1995.
-9-
<PAGE>
Registration Nos. 2-98326
811-4323
(h) Form of Rule 12b-1 Plan relating to the Class B shares
of New England Strategic Income Fund is incorporated
herein by reference to Exhibit 15 to Post-Effective
Amendment No. 25 to this Registration Statement, filed
on February 15, 1995.
(i) Form of Rule 12b-1 Plan relating to the Class C shares
of New England Strategic Income Fund is incorporated
herein by reference to Exhibit 15 to Post-Effective
Amendment No. 25 to this Registration Statement, filed
on February 15, 1995.
(j) Forms of Rule 12b-1 Plans relating to the Class A,
Class B and Class C shares of New England Star
Worldwide Fund are filed herewith.
16. Schedule for computation of performance quotations is
incorporated herein by reference to Post-Effective Amendment
No. 9 to this Registration Statement, filed on May 1, 1989.
17. Not applicable.
18. Plan pursuant to Rule 18f-3 under the Investment Company Act
of 1940 is incorporated herein by reference to Exhibit 18 to
Post-Effective Amendment No. 26 to this Registration
Statement, filed on May 1, 1995.
19. Powers of Attorney designating Edward A. Benjamin, Frank
Nesvet, Henry L.P. Schmelzer and Robert P. Connolly as
attorneys to sign for Kenneth J. Cowan, Peter S. Voss, Henry
L.P. Schmelzer, Graham T. Allison Jr., James H. Scott,
Pendleton P. White, John A. Shane and Sandra O. Moose are
incorporated herein by reference to Post-Effective Amendment
No. 27 to this Registration Statement, filed on October 12,
1995.
Item 25. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
-10-
<PAGE>
Registration Nos. 2-98326
811-4323
The following table sets forth the number of record holders of each class
of securities of the Trust as of September 30, 1995:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B Class C Class Y
------- ------- -------- -------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest 82,079 0 0 0
New England Growth Fund
No Par Value
Shares of Beneficial Interest 15,140 3,363 89 2
New England Value Fund
No Par Value
Shares of Beneficial Interest 13,892 4,488 69 6
New England Balanced Fund
No Par Value
Shares of Beneficial Interest 12,346 2,121 50 6
New England Bond Income Fund
No Par Value
Shares of Beneficial Interest 10,075 379 0 2
New England Government Securities
Fund
No Par Value
Shares of Beneficial Interest 5,998 500 0 0
New England Tax Exempt Income
Fund
No Par Value
Shares of Beneficial Interest 17,193 19,150 2,533 5
New England Star Advisers Fund
No Par Value
Shares of Beneficial Interest 13,865 7,580 114 11
New England International Equity
Fund
No Par Value
</TABLE>
-11-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C> <C> <C>
Shares of Beneficial Interest 11,644 3,633 33 0
New England Capital Growth Fund
No Par Value
Shares of Beneficial Interest 1,375 1,537 499 0
New England Strategic Income Fund
No Par Value
</TABLE>
Item 27. Indemnification
---------------
(a) Incorporated herein by reference to Pre-Effective Amendment No. 1
to this Registration Statement, filed on September 11, 1985.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Draycott Partners, Ltd. ("Draycott"), the adviser of New England
International Equity Fund, provides investment advice to three
separate accounts of New England Mutual Life Insurance Company
("The New England"), the indirect parent corporation of Draycott.
The three separate accounts are the International Equity Separate
Account, the European Equity Separate Account and the Pacific Rim
Equity Separate Account. Interests in such separate accounts are
offered to U.S. tax-qualified pension and profit-sharing plans by
means of group annuity contracts issued by NEMLICO. Draycott's
directors and officers have been engaged during the past two
years in the following other businesses, vocations or employments
of a substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
Draycott Affiliations Connection
-------- ------------ ----------
<S> <C> <C>
Nicholas D.P. Carn, CIGNA International Managing Director,
Director, Chief Executive Investment Advisors, International Equities
Officer, President, Chief Ltd.* Group
Investment Officer and 16 Finsbury Circus
Principal London EC2Y 1HE
Sherry A. Umberfield, New England Investment Executive Vice President
Director Companies, L.P.
501 Boylston Street
Boston, MA 02117
</TABLE>
-12-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
New England Investment Director
Associates, Inc.
399 Boylston Street
Boston, MA 02116
NEF Corporation Director
399 Boylston Street
Boston, MA 02116
New England Investment Executive Vice President
Companies, Inc.
399 Boylston Street
Boston, MA 02116
Robert G. Barrett, Cassa Di Risparmio Assistant General
Chief Financial Officer, Delle Provincie Manager
Treasurer, Vice Lombarde (Cariplo)*
President, Principal, 6 Lombard Street
Compliance Officer and London EC3V 9AA
Assistant Secretary
Timothy S. Griffen, CIGNA International Vice President
Senior Portfolio Manager Investment Advisors,
and Principal Ltd.*
Tokyo, Japan
Edward N. Wadsworth, New England Investment Executive Vice
General Counsel, Clerk and Companies, L.P. President, Clerk,
Secretary 501 Boylston Street Secretary and General
Boston, MA 02117 Counsel
Marlborough Capital Assistant Clerk
Advisors, Inc.
399 Boylston Street
Boston, MA 02116
New England Investment Secretary
Associates, Inc.
399 Boylston Street
Boston, MA 02116
</TABLE>
-13-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Westpeak Investment Clerk, Secretary and
Advisors, L.P. Chief Legal Officer
1050 Walnut Street,
Suite 300
Boulder, CO 80302
Peter Hanson, Back Bay Advisors, L.P. Secretary and Clerk
Assistant Clerk and 399 Boylston Street
Assistant Secretary Boston, MA 02116
NEIC Counsel, Senior Vice
399 Boylston Street President, Assistant
Boston, MA 02116 Clerk and Assistant
Secretary
</TABLE>
(b) Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the
adviser of the Registrants' New England Value Fund, New
England Balanced Fund and New England Capital Growth Fund
and subadviser to New England Strategic Income Fund and New
England Star Advisers Fund (Loomis Sayles' portion),
provides investment to a number of other registered
investment companies and to other organizations and
individuals.
Such adviser's directors and officers have been engaged
during the past two years in the following other businesses,
vocations or employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Loomis Sayles Other Affiliations Connection
------------- ------------------ ----------
<S> <C> <C>
Loomis Sayles, Inc. None None
General Partner
Robert J. Blanding, None None
President and Chief Executive
Officer
Daniel J. Fuss, None None
Executive Vice President and
Managing Partner
</TABLE>
-14-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Jeffrey L. Meade, None None
Executive Vice President and
Chief Operating Officer
Charles J. Finlayson, None None
Vice President, General Counsel,
Secretary and Clerk
MeriAnne Beck, None None
Vice President
Mary C. Champagne, None None
Vice President
Richard W. Hurkes, None None
Vice President
Scott A. Pape, None None
Vice President
Douglas D. Ramos, None None
Vice President
Carol C. McMurtie, None None
Vice President, Director and
Managing Partner
Tricia H. Mills, None None
Vice President
Jeffery C. Petherick, None None
Vice President
</TABLE>
-15-
<PAGE>
Registration Nos. 2-98326
811-4323
(c) Capital Growth Management Limited Partnership, the adviser
of New England Growth Fund, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.
Name and Office with Name and Address of Other Nature of
CGM Affiliations Connection
--- ------------ ----------
Kenbob, Inc. None None
General Partner
(d) Back Bay Advisors, L.P. ("Back Bay Advisors"), the adviser
of the New England Bond Income Fund, New England Government
Securities Fund, New England Tax Exempt Income Fund and New
England Global Government Fund, is indirectly owned by The
New England.
Back Bay Advisors serves as investment adviser to a number
of other registered investment companies. Back Bay Advisors
serves as a sub-adviser to New England International Equity
Fund. Back Bay Advisors' directors and officers have been
engaged during the past two years in the following
businesses, vocations or employments of a substantial nature
(former affiliations are marked with an asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
Back Bay Advisors Affiliations Connection
- ----------------- ------------ ----------
<S> <C> <C>
Back Bay Advisors, Inc. None None
General Partner
Charles T. Wallis, NEF Corporation Director
President and Chief 399 Boylston Street
Executive Officer Boston, MA 02116
Back Bay Advisors, Inc. President, CEO and
399 Boylston Street Director
Boston, MA 02116
Charles G. Glueck, None None
Senior Vice President
</TABLE>
-16-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Scott A. Millimet, Chicago Board of Trade* Senior Vice
Executive Vice President 141 West Jackson Boulevard President and
Chicago, IL 60604 Manager of Carroll,
McEntee & McGinley
Edgar M. Reed, Aetna Capital Management* Head of Fixed Income
Executive Vice President 151 Farmington Avenue Management Group
and Chief Investment Hartford, CT 06156
Officer
J. Scott Nicholson, None None
Senior Vice President
Catherine Bunting, None None
Senior Vice President
Nathan R. Wentworth, None None
Vice President
Paul Zamagni, None None
Vice President and
Treasurer
Peter Palfrey, None None
Vice President
Catherine Bunting, None None
Senior Vice President
Harold B. Bjornson, None None
Vice President
Peter Hanson, Draycott Partners, Ltd. Assistant Secretary
Secretary and Clerk 8 City Road and Assistant Clerk
London, England EC2Y 1HE
NEIC Counsel and Senior
399 Boylston Street Vice President,
Boston, MA 02116 Assistant Secretary
and Assistant Clerk
</TABLE>
-17-
<PAGE>
Registration Nos. 2-98326
811-4323
(e) New England Investment Companies, L.P. ("NEIC"), is a major investment
manager that, directly or through its subsidiaries, offers a broad array of
investment management products and styles across a wide range of asset
categories to institutions (including more than 50 mutual funds) and
individuals.
Such adviser's directors and officers have been engaged during the past two
years in the following other businesses, vocations or employments of a
substantial nature (former affiliations are marked with an asterisk). In
certain cases, officers of NEIC hold the same office with NEIC's general
partner.
-18-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of Connection
NEIC Affiliations ---------------------
---- ------------
<S> <C> <C>
New England Investment None None
Companies, Inc.
General Partner
Peter S. Voss, Back Bay Advisors, Inc. Chairman of the
President and Chief 399 Boylston Street Board, Director
Executive Officer and Boston, MA 02116
President
NEF Corporation Director
399 Boylston Street
Boston, MA 02116
New England Mutual Life Director
Insurance Company
501 Boylston Street
Boston, MA 02116
New England Investment President, CEO and
Companies, Inc. Director
399 Boylston Street
Boston, MA 02116
William Berkowitz, Reich & Tang, Inc.* Executive Vice
Executive Vice President 100 Park Avenue President and
New York, NY Director
G. Neal Ryland, None None
Executive Vice President,
Treasurer and Chief
Financial Officer
Sherry A. Umberfield Draycott Associates Director
Partners, Ltd.
8 City Road
London, England EC2Y 1HE
</TABLE>
-19-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
NEF Corporation Director
399 Boylston Street
Boston, MA 02116
New England Investment Director
Associates
399 Boylston Street
Boston, MA 02116
Edward N. Wadsworth, Marlborough Capital Assistant Clerk
Executive Vice President, Advisors, Inc.
General Counsel, 399 Boylston Street
Secretary and Clerk Boston, MA 02116
New England Investment Secretary
Associates, Inc.
399 Boylston Street
Boston, MA 02116
Westpeak Investment Clerk, Secretary and
Advisors, L.P. Chief Legal Officer
1050 Walnut Street, Suite
300
Boulder, CO 80302
Draycott Partners, Ltd. General Counsel,
8 City Road Clerk and Secretary
London, England EC2Y 1HE
Beverly M. Bearden, None None
Senior Vice President
Laurence J. Dwyer, Federal Home Loan Mortgage Manager/Public
Senior Vice President Corp.* Relations
Peter D. Hanson, Back Bay Advisors, L.P. Secretary and Clerk
Senior Vice President, 399 Boylston Street
Counsel, Assistant Clerk Boston, MA 02116
and Assistant Secretary
Draycott Partners, Ltd. Assistant Secretary
8 City Road and Assistant Clerk
London, England EC2Y 1HE
</TABLE>
-20-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
William H. Morton, None None
Senior Vice President,
Controller and Assistant
Treasurer
Lorraine C. Hysler, Reich & Tang, Inc.* Secretary
Assistant Clerk and 100 Park Avenue
Assistant Secretary New York, NY
Richard De Sanctis, Reich & Tang, Inc.* Controller
Assistant Treasurer 100 Park Avenue
New York, NY
</TABLE>
f) Berger Associates, Inc. ("Berger") serves as investment adviser to
mutual funds, pension and profit sharing plans and other
institutional and private investors. Berger's' directors and
officers have been engaged during the past two years in the
following other businesses, vocations or employments of a
substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of Connection
Berger Affiliations ---------------------
- ------ ------------
<S> <C> <C>
William M. B. Berger, None None
Director
Rodney L. Linafelter, None None
Vice President and Director
William R. Keithler, INVESCO Trust Company* Senior Vice President
Vice President 7800 East Union Ave; Suite
800
Denver, CO 80237
Kevin R. Fay, None None
Vice President, Secretary
and Treasurer
Brian S. Ferrie, United Services Advisors, Compliance Officer
Compliance Officer Inc.*
7900 Callaghan Road
San Antonio, TX 78229
</TABLE>
-21-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
David J. Schultz, Smith, Brock and Gwinn* Partner
Controller 650 South Cherry Street
Denver, CO 80222
Gerard M. Lavin, DST Systems Inc. Senior Officer
President and Director 1055 Broadway, 9th Floor
Kansas City, MO 64105
Investors Fiduciary Trust President & CEO
Co.*
127 West 10th Street
Kansas City, MO 64105
Landon H. Rowland, Kansas City Southern President & CEO
Director Industries, Inc.
114 West 11th Street
Kansas City, MO 64105
</TABLE>
(g) Founders Asset Management, Inc. ("Founders"), has been an
investment adviser since 1938 and serves as an investment adviser
to mutual funds and other accounts. Founders' directors and
officers have been engaged during the past two years in the
following other businesses, vocations or employments of a
substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
Founders Affiliations Connection
- -------- ------------ ----------
<S> <C> <C>
Bjorn K. Borgen, None None
Director, Chief Executive
Officer and Secretary
David L. Ray, None None
Vice President, Assistant
Secretary and Treasurer
Michael K. Haines, None None
Senior Vice President
Michael Gerding, None None
Vice President
</TABLE>
-22-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Charles Hooper, None None
Vice President
Linda Ripley, None None
Assistant Vice President
Robert Galindo, Jr., None None
Assistant Vice President
Thomas Mauer, None None
Assistant Vice President
Gregory Contillo, None None
Vice President
James Rankin, None None
Vice President
</TABLE>
(h) Janus Capital Corporation ("Janus"), a sub-adviser to the New
England Star Adviser, serves as investment adviser to mutual funds
and individual, corporate, charitable and retirement accounts.
Janus' directors and officers have been engaged during the past
two years in the following businesses, vocations or employments of
a substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
Janus Affiliations Connection
----- ------------ ----------
<S> <C> <C>
Thomas H. Bailey, IDEX Management, Inc. Chairman and
Chairman, Director and ("IDEX") Director
President Largo, FL
James P. Craig, None
Vice President
Thomas F. Marsico, None
Vice President
James P. Goff, Vice None None
President
Warren B. Lammert, Vice None None
President
</TABLE>
-23-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Ronald V. Speaker, Vice None None
President
Helen Young Hayes, Vice None None
President
Sharon S. Pichler, Vice None None
President
Scott W. Schoelzel, Vice None None
President
David C. Tucker, Janus Service Corporation Vice President,
Vice President, Secretary ("Janus Service") General Counsel and
and General Counsel Director
Janus Distributors, Inc. Vice President,
("Janus Distributors") General Counsel and
Director
Steven R. Goodbarn, Janus Service Vice President of
Treasurer and Chief Finance, Treasurer
Financial Officer and Chief Financial
Officer
Janus Distributors Vice President of
Finance, Treasurer
and Chief Financial
Officer
IDEX Director
Michael E. Herman, Ewing Marion Kauffman Chairman of Finance
Director Foundation Committee
Michael N. Stolper, Stolper & Company, Inc. President
Director 525 B Street
San Diego, CA
Thomas A. McDonnell, DST Systems, Inc. President, Chief
Director 1004 Baltimore Avenue Executive Officer
Kansas City, MO and Director
Kansas City Southern Executive Vice
Industries, Inc. President and
114 W. 11th Street Director
Kansas City, MO
</TABLE>
-24-
<PAGE>
Registration Nos. 2-98326
811-4323
(i) New England Funds Management, L.P. ("NEFM") is a wholly-owned
subsidiary of NEIC. NEFM was organized in 1995, and has not
previously served as investment adviser to a mutual fund.
NEFM's directors and officers have been engaged during the past
two years in the following businesses, vocations or employments of
a substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
NEFM Affiliations Connection
- ---- ------------ ----------
<S> <C> <C>
NEF Corporation None None
General Partner
Henry L.P. Schmelzer, New England Funds, L.P. President and CEO
President and Chief Executive 399 Boylston Street
Officer Boston, MA 02116
NEF Corporation President, CEO and
399 Boylston Street Director
Boston, MA 02116
Back Bay Advisors, Inc. Director
399 Boylston Street
Boston, MA 02116
New England Securities Director
Corporation*
399 Boylston Street
Boston, MA 02116
Frank Nesvet, New England Funds, L.P. Senior Vice
Senior Vice President, Chief 399 Boylston Street President and CFO
Financial Officer and Boston, MA 02116
Treasurer
NEF Corporation Senior Vice
399 Boylston Street President, CFO and
Boston, MA 02116 Treasurer
Sheila M. Barry, NEF Corporation Secretary
Secretary 399 Boylston Street
Boston, MA 02116
</TABLE>
-25-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
New England Funds, L.P. Vice President,
399 Boylston Street Senior Counsel and
Boston, MA 02116 Secretary
</TABLE>
(j) Montgomery Asset Management, L.P. ("Montgomery") is a subadviser
to New England Star Worldwide Fund. Montgomery's directors and
officers have been engaged during the past two years in the
following businesses, vocations or employments of a substantial
nature (former affiliations are marked with an asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Other Nature of
NEFM Affiliations Connection
- ---- ------------ ----------
<S> <C> <C>
Montgomery Asset None None
Management, Inc.
R. Stephen Doyle, Montgomery Asset Management, Chairman and
Chairman, Managing Inc. Director
Director of Mutual Funds 600 Montgomery Street
and Executive Vice San Francisco, CA 94111
President
Montgomery Securities Managing Director
600 Montgomery Street
San Francisco, CA 94111
Mark B. Geist, President Montgomery Asset Management, Director and
Inc. President
600 Montgomery Street
San Francisco, CA 94111
John T. Story, Managing Alliance Capital Management* Managing Director
Director of Mutual Funds and Senior Vice
and Executive Vice President
President
Mary Jane Fross, Manager None None
of Mutual Fund
Administration and Finance
Josephine Jimenez, None None
Managing Director and
Portfolio Manager
Bryan L. Sudweeks, None None
Managing Director and
Portfolio Manager
</TABLE>
-26-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Stuart O. Roberts, None None
Managing Director and
Portfolio Manager None
John H. Brown, Managing Merus Capital Management* Portfolio Manager
Director and Senior 475 Sansome Street and Analyst
Portfolio Manger San Francisco, CA 94111
William C. Stevens, None None
Managing Director and
Portfolio Manager
Roger Honour, Managing Twentieth Century Investors* Vice President
Director and Senior and Portfolio
Portfolio Manager Manager
Oscar Castro, Managing G.T. Capital Management, Inc.* Vice President
Director and Portfolio 50 California Street and Portfolio
Manager San Francisco, CA 94111 Manager
John Boich, Managing The Boston Company Vice President
Director and Portfolio Institutional Investors, Inc.* and Portfolio
Manager One Boston Place Manager
Boston, MA 02108
Rhoda Rossman, Managing Rosenberg Capital Management
Director and Portfolio
Manager
</TABLE>
Item 29. Principal Underwriter
---------------------
(a) New England Funds, L.P. also serves as principal underwriter for:
New England Tax Exempt Money Market Trust
New England Cash Management Trust
New England Funds Trust II
(b) The general partner and officers of the Registrant's principal
underwriter, New England Funds, L.P., and their addresses are as
follows:
<TABLE>
<CAPTION>
Positions and Offices
with Principal Positions and Offices
Name Underwriter with Registrant
---- ----------- ---------------
<S> <C> <C>
NEF Corporation General Partner None
</TABLE>
-27-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Henry L.P. Schmelzer President and Chief President and Trustee
Executive Officer
J. Steven Neamtz Executive Vice President Executive Vice President
Bruce R. Speca Executive Vice President Executive Vice President
Robert P. Connolly Senior Vice President, Secretary
General Counsel,
Secretary and Clerk
Frank Nesvet Senior Vice President Treasurer
and Chief Financial
Officer
Manish Agrawal Vice President None
Elizabeth Burns Vice President None
Sheila M. Barry Vice President, Senior Assistant Secretary
Counsel, Assistant
Secretary and Assistant
Clerk
James H. Davis Vice President None
Peter H. Duffy Vice President None
Martin G. Dyer Vice President None
Tracy Fagan Vice President None
William H. Finnegan Vice President None
Raymond K. Girouard Vice President Treasurer None
and Controller
Annette Golia Vice President None
Ralph M. Greggs Vice President None
Caren I. Leedom Vice President None
Marie G. McKenzie Vice President None
Bernard M. Shavelson Vice President None
Christine L. Swanson Vice President Vice President
</TABLE>
-28-
<PAGE>
Registration Nos. 2-98326
811-4323
<TABLE>
<S> <C> <C>
Kristine E. Swanson Vice President Vice President
Beatriz A. Pina Assistant Comptroller None
</TABLE>
The principal business address of all the above persons or entities is
399 Boylston Street, Boston, MA 02116.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The following companies maintain possession of the documents required by the
specified rules:
(a) Registrant
Rule 31a-1(b)(4)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)
(c) (i) For the Funds of the Trust advised by:
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
(ii) For the Fund of the Trust advised by:
Capital Growth Management Limited Partnership,
One International Place,
Boston, Massachusetts 02111
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
(iii) For Funds of the Trust advised by:
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
-29-
<PAGE>
Registration Nos. 2-98326
811-4323
Rule 31a-2(e)
(iv) For New England International Equity Fund:
Draycott Partners, Ltd.
8 City Road
London, EC2Y 1HE
England
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
(v) For New England Star Advisers Fund:
New England Investment Companies, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
Berger Associates, Inc.
210 University Blvd.; Suite 900
Denver, CO 80206
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
Janus Capital Corporation
100 Fillmore Street
East Third Ave
Denver, CO 80206
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
Founders Asset Management, Inc.
2930 East Third Ave.
Denver, CO 80206
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
(vi) For New England Strategic Income Fund
-30-
<PAGE>
Registration Nos. 2-98326
811-4323
New England Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, MA 02111
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(e)
(d) New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a - 1(d)
Rule 31a - 2(c)
Item 31. Management Services
-------------------
Not Applicable.
Item 32. Undertakings
------------
(a) The Registrant undertakes to provide any Fund's annual report to
any person who receives a Fund prospectus and who requests the
annual report.
(b) The Registrant hereby undertakes that, if requested to do so by
holders of at least 10% of the Fund's outstanding shares, it will
call a meeting of shareholders for the purpose of voting upon the
question of removal of a trustee or trustees and will assist in
communications between shareholders for such purpose as provided
in Section 16(c) of the Investment Company Act of 1940.
-31-
<PAGE>
Registration Nos. 2-98326
811-4323
NEW ENGLAND FUNDS TRUST I
-------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 28 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Boston, in the Commonwealth of Massachusetts on the 13th day of October, 1995.
NEW ENGLAND FUNDS TRUST I
By: PETER S. VOSS*
----------------------------------------
Peter S. Voss
Chief Executive Officer
*By: ROBERT P. CONNOLLY
----------------------------------------
Robert P. Connolly
Attorney-In-Fact
-32-
<PAGE>
Registration Nos. 2-98326
811-4323
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
PETER S. VOSS* Chairman of the Board; October 13, 1995
- -------------------------- Chief Financial Officer;
Peter S. Voss Principal Executive
Officer; Trustee
FRANK NESVET Chief Financial Officer October 13, 1995
- --------------------------
Frank Nesvet
GRAHAM T. ALLISON JR.* Trustee October 13, 1995
- --------------------------
Graham T. Allison Jr.
KENNETH J. COWAN* Trustee October 13, 1995
- --------------------------
Kenneth J. Cowan
SANDRA O. MOOSE* Trustee October 13, 1995
- --------------------------
Sandra O. Moose
JAMES H. SCOTT* Trustee October 13, 1995
- --------------------------
James H. Scott
HENRY L.P. SCHMELZER* Trustee and President October 13, 1995
- --------------------------
Henry L.P. Schmelzer
JOHN A. SHANE* Trustee October 13, 1995
- --------------------------
John A. Shane
PENDLETON P. WHITE* Trustee October 13, 1995
- --------------------------
Pendleton P. White
</TABLE>
*By: ROBERT P. CONNOLLY
------------------------------
Robert P. Connolly
Attorney-In-Fact
October 13, 1995
-33-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
<S> <C>
5(k) Form of Advisory Agreement between New England Funds Trust I, on
behalf of New England Star Worldwide Fund, and NEFM
5(l) Form of Sub-Advisory Agreement for New England Star Worldwide
Fund between NEFM and Harris Associates L.P.
5(m) Form of Sub-Advisory Agreement for New England Star Worldwide
Fund between NEFM and Montgomery Asset Management, L.P.
5(n) Form of Sub-Advisory Agreement for New England Star Worldwide
Fund between NEFM and Founders Asset Management, Inc.
5(o) Form of Sub-Advisory Agreement for New England Star Worldwide
Fund between NEFM and Janus Capital Corporation.
6(f) Form of Distribution Agreement between New England Funds Trust I,
on behalf of New England Star Worldwide Fund, and New England
Funds, L.P.
8(g) Form of Letter Agreement for New England Star Worldwide Fund
10(g) Opinion and Consent of Counsel relating to New England Strategic
Income Fund
15(j) Forms of Rule 12b-1 Plans - Class A, Class B and Class C shares
- New England Star Worldwide Fund
</TABLE>
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 5(K)
FORM OF ADVISORY AGREEMENT BETWEEN NEW ENGLAND FUNDS TRUST I, ON
BEHALF OF NEW ENGLAND STAR WORLDWIDE FUND, AND NEFM
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
Advisory Agreement
AGREEMENT made this 1st day of January, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Fund") with respect to its
New England Star Worldwide Fund series (the "Series"), and NEW ENGLAND FUNDS
MANAGEMENT, L.P., a Delaware limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof. The
Manager hereby accepts such employment and agrees, at its own expense, to
furnish such services (either directly or pursuant to delegation to other
parties as permitted by Sections 1(b) and (c) hereof) and to assume the
obligations herein set forth, for the compensation herein provided. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall
<PAGE>
determine, in the manner described in the prospectus of the Series from
time to time in effect, what portion of the assets belonging to the Series
shall be managed by each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by the
Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and financial
data and information and undertaking such additional investment research as
shall be necessary or advisable for the management of the investment and
reinvestment of the assets belonging to the Series in accordance with the
Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company) of
the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series' investment
policies, restrictions and guidelines, if the
-2-
<PAGE>
Manager has delegated to one or more Sub-Advisers any or all of its
responsibilities hereunder with respect to the provision of Portfolio
Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company) of
the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory aut horities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
-3-
<PAGE>
(n) the costs of services, including services of counsel, required in
connection with the preparation of the Fund's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 1.05% of the Series's average daily net
assets. Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Fund may from time to time determine and specify in writing to the Manager. The
Manager hereby acknowledges that the Fund's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the
-4-
<PAGE>
existence of any such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided in the Agreement and
Declaration of Trust of the Fund, the partnership agreement of the Manager or
specific provisions of applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Fund who are not interested persons of the
Fund or the Manager, cast in person at a meeting called for the purpose of
voting on, such approval;
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series with
said principal underwriter, this Agreement shall automatically terminate at
the time of such change unless the continuance of this Agreement after such
change shall have been specifically approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of
the trustees of the Fund who are not interested persons of the Fund or the
Manager, cast in person at a meeting called for the purpose of voting on
such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their
-5-
<PAGE>
respective meanings defined in the 1940 Act, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under the
1940 Act. References in this Agreement to any assets, property or liabilities
"belonging to" the Series shall have the meaning defined in the Fund's Agreement
and Declaration of Trust as amended from time to time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I, NEW ENGLAND
on behalf of its New England Star FUNDS MANAGEMENT, L.P.
Worldwide Fund series
By NEF Corporation, its general partner
By: ________________________________ By: ________________________________
Name: Name:
Title: Title:
NOTICE
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's New England Star Worldwide Fund series (the "Series") on
behalf of the Fund by officers of the Fund as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Series.
-6-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 5(L)
FORM OF SUB-ADVISORY AGREEMENT FOR NEW ENGLAND STAR WORLDWIDE FUND
BETWEEN NEFM AND HARRIS ASSOCIATES L.P.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
Harris Associates L.P.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 1, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Harris Associates L.P., a _____________
limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated January
1, 1996 (the "Advisory Agreement") with New England Funds Trust I (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Star Worldwide Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
---------------------
a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"), manage
the investment and reinvestment of such portion of the assets of the Series,
consisting of two separate portfolios, as the Manager may from time to time
allocate to the Sub-Adviser for management (such portfolios, the "Segments" and
each, a "Segment"). The Sub-Adviser shall manage the Segments in conformity with
(1) the investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information relating to
the Series, (2) any additional policies or guidelines established by the Manager
or by the Trust's trustees that have been furnished in writing to the Sub-
Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules
<PAGE>
and regulations thereunder. For purposes of compliance with the Policies, the
Sub-Adviser shall be entitled to treat the Segments as though the Segments
constituted the entire Series, and the Sub-Adviser shall not be responsible in
any way for the compliance of any assets of the Series, other than the Segments,
with the Policies, or for the compliance of the Series, taken as a whole, with
the Policies. Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or any
tax considerations; and the majority or the whole of each Segment may be
invested in such proportions of stocks, bonds, other securities or investment
instruments, or cash, as the Sub-Adviser shall determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-Adviser shall, upon
written instructions from the Manager, effect such portfolio transactions for
each Segment as the Manager shall determine are necessary in order for the
Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning transactions and performance of
each Segment in such form as may be mutually agreed upon, and agrees to review
each Segment and discuss the management of it. The Sub-Adviser shall permit all
books and records with respect to each Segment to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the Manager
with such other information and reports as may reasonably be requested by the
Manager from time to time, including without limitation all material requested
by or required to be delivered to the trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and a
list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
--------------------------
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets in each Segment, cash
requirements and cash available for investment in each Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if practicable, before the time the revisions or
supplements become effective. The Manager agrees to furnish the Sub-Adviser with
minutes of meetings of the trustees of the Trust
-2-
<PAGE>
applicable to the Series to the extent they may affect the duties of the Sub-
Adviser, and with copies of any financial statements or reports made by the
Series to its shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its functions under
this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy
---------
of the Series's agreement with the custodian designated to hold the assets of
the Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segments shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segments shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-
------------------
Adviser is the sole owner of the name and mark "Harris Associates L.P." and that
all use of any designation consisting in whole or part of "Harris Associates
L.P." (a "Harris Mark") under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any Harris Mark in any advertisement or sales literature or other
materials promoting the Series, except with the prior written consent of the
Sub-Adviser. Without the prior written consent of the Sub-Adviser, the Manager
shall not, and the Manager shall use its best efforts to cause the Series not
to, make representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any Harris Mark(s) as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
Neither the Sub-Adviser nor any affiliated person thereof shall be entitled to
any compensation from the Manager or the Trust with respect to service by any
-3-
<PAGE>
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
---------------------------
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segments with brokers or dealers selected by the Sub-
Adviser, which may include brokers or dealers affiliated with the Sub-Adviser,
provided such orders comply with Rule 17e-1 under the 1940 Act in all respects.
To the extent consistent with applicable law, purchase or sell orders for the
Segments may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Segments at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segments.
7. Compensation of the Sub-Adviser. As full compensation for all services
-------------------------------
rendered, facilities furnished and expenses borne by the Sub-Adviser hereunder,
the Manager shall pay the Sub-Adviser compensation at the annual rate of 0.65%
of the first $50 million of the average daily net assets (including cash or cash
equivalents) of each Segment, 0.60% of the next $50 million of such assets and
0.55% of such assets in excess of $100 million. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
---------------
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in any
way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The
-4-
<PAGE>
Manager and the Series recognize and agree that the Sub-Adviser may provide
advice to or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be identical
to advice given or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be deemed to be an independent contractor and
shall, unless otherwise provided or authorized, have no authority to act for or
represent the Series or the Manager in any way or otherwise be deemed an agent
of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segments under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other sub-adviser
to the Series, or for any loss arising out of the failure of the Series to
comply with the Policies, except for losses arising out of the Sub-Adviser's
failure to comply with the Policies with respect to the Segments. The Manager
acknowledges and agrees that the Sub-Adviser makes no representation or
warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segments or that the Series or the
Segments will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
------------------------------
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
-5-
<PAGE>
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or by the Manager on sixty days'
written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
---------
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
-------------------
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
-------
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled to
the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
-6-
<PAGE>
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS
MANAGEMENT, L.P.
By NEF Corporation, its general partner
By:_____________________________________
Name:________________________________
Title:_______________________________
HARRIS ASSOCIATES L.P.
By _______________, its general partner
By:_____________________________________
Name:________________________________
Title:_______________________________
-7-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 5(M)
FORM OF SUB-ADVISORY AGREEMENT FOR NEW ENGLAND STAR WORLDWIDE FUND
BETWEEN NEFM AND MONTGOMERY ASSET MANAGEMENT, L.P.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
Montgomery Asset Management, L.P.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 1, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Montgomery Asset Management, L.P., a
_____________ limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated January
1, 1996 (the "Advisory Agreement") with New England Funds Trust I (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Star Worldwide Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
---------------------
a. The Sub-Adviser shall, subject to the supervision of the Manager and of
any administrator appointed by the Manager (the "Administrator"), manage the
investment and reinvestment of such portion of the assets of the Series as the
Manager may from time to time allocate to the Sub-Adviser for management (such
portion, the "Segment"). The Sub-Adviser shall manage the Segment in conformity
with (1) the investment objective, policies and restrictions of the Series set
forth in the Trust's prospectus and statement of additional information relating
to the Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing to the
Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. For purposes of compliance with the
Policies,
<PAGE>
the Sub-Adviser shall be entitled to treat the Segment as though the Segment
constituted the entire Series, and the Sub-Adviser shall not be responsible in
any way for the compliance of any assets of the Series, other than the Segment,
with the Policies, or for the compliance of the Series, taken as a whole, with
the Policies. Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or any
tax considerations; and the majority or the whole of the Segment may be invested
in such proportions of stocks, bonds, other securities or investment
instruments, or cash, as the Sub-Adviser shall determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-Adviser shall, upon
written instructions from the Manager, effect such portfolio transactions for
the Segment as the Manager shall determine are necessary in order for the Series
to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning transactions and performance of
the Segment in such form as may be mutually agreed upon, and agrees to review
the Segment and discuss the management of it. The Sub-Adviser shall permit all
books and records with respect to the Segment to be inspected and audited by the
Manager and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the Manager
with such other information and reports as may reasonably be requested by the
Manager from time to time, including without limitation all material requested
by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and a
list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
--------------------------
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets in the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if practicable, before the time the revisions or
supplements become effective. The Manager agrees to furnish the Sub-Adviser with
minutes of meetings of the trustees of the Trust applicable to the Series to the
extent they may affect the duties of the Sub-Adviser, and with
-2-
<PAGE>
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
---------
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-
------------------
Adviser is the sole owner of the name and mark "Montgomery Asset Management,
L.P." and that all use of any designation consisting in whole or part of
"Montgomery Asset Management, L.P." (a "Montgomery Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf
and on behalf of the Series agrees not to use any Montgomery Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Montgomery Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
Neither the Sub-Adviser nor any affiliated person thereof shall be entitled to
any compensation from the Manager or the Trust with respect to service by any
-3-
<PAGE>
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
---------------------------
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the Sub-
Adviser, which may include brokers or dealers affiliated with the Sub-Adviser,
provided such orders comply with Rule 17e-1 under the 1940 Act in all respects.
To the extent consistent with applicable law, purchase or sell orders for the
Segment may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all services
-------------------------------
rendered, facilities furnished and expenses borne by the Sub-Adviser hereunder,
the Manager shall pay the Sub-Adviser compensation at the annual rate of 0.90%
of the first $25 million of the average daily net assets (including cash or cash
equivalents) of the Segment, 0.70% of the next $25 million of such assets and
0.55% of such assets in excess of $50 million. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services of
---------------
the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and its
affiliates are free to act as investment manager and provide other services to
various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The
-4-
<PAGE>
Manager and the Series recognize and agree that the Sub-Adviser may provide
advice to or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be identical
to advice given or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be deemed to be an independent contractor and
shall, unless otherwise provided or authorized, have no authority to act for or
represent the Series or the Manager in any way or otherwise be deemed an agent
of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other sub-adviser
to the Series, or for any loss arising out of the failure of the Series to
comply with the Policies, except for losses arising out of the Sub-Adviser's
failure to comply with the Policies with respect to the Segment. The Manager
acknowledges and agrees that the Sub-Adviser makes no representation or
warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
------------------------------
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter so
long as such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series, and (ii) by vote of a majority of the trustees
of the Trust who are not interested persons of the Trust, the Manager or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval;
-5-
<PAGE>
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of the Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or by the Manager on sixty days'
written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
---------
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
-------------------
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
-------
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled to
the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
-6-
<PAGE>
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS
MANAGEMENT, L.P.
By NEF Corporation, its general partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MONTGOMERY ASSET
MANAGEMENT, L.P.
By Montgomery Asset Management, Inc.,
its general partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-7-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 5(N)
FORM OF SUB-ADVISORY AGREEMENT FOR NEW ENGLAND STAR WORLDWIDE FUND
BETWEEN NEFM AND FOUNDERS ASSET MANAGEMENT, INC.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
Founders Asset Management, Inc.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 1, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Founders Asset Management, Inc., a
_____________ corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated January
1, 1996 (the "Advisory Agreement") with New England Funds Trust I (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Star Worldwide Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
---------------------
a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"), manage
the investment and reinvestment of such portion of the assets of the Series as
the Manager may from time to time allocate to the Sub-Adviser for management
(such portion, the "Segment"). The Sub-Adviser shall manage the Segment in
conformity with (1) the investment objective, policies and restrictions of the
Series set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been furnished
in writing to the Sub-Adviser and (3) the provisions of the Internal Revenue
Code (the "Code") applicable to "regulated investment companies" (as defined in
Section 851 of the Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including without
limitation all applicable provisions of the Investment Company Act of 1940 (the
"1940 Act") and the rules and regulations thereunder. For purposes of compliance
with the Policies,
<PAGE>
the Sub-Adviser shall be entitled to treat the Segment as though the Segment
constituted the entire Series, and the Sub-Adviser shall not be responsible in
any way for the compliance of any assets of the Series, other than the Segment,
with the Policies, or for the compliance of the Series, taken as a whole, with
the Policies. Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or any
tax considerations; and the majority or the whole of the Segment may be invested
in such proportions of stocks, bonds, other securities or investment
instruments, or cash, as the Sub-Adviser shall determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-Adviser shall, upon
written instructions from the Manager, effect such portfolio transactions for
the Segment as the Manager shall determine are necessary in order for the Series
to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning transactions and performance of
the Segment in such form as may be mutually agreed upon, and agrees to review
the Segment and discuss the management of it. The Sub-Adviser shall permit all
books and records with respect to the Segment to be inspected and audited by the
Manager and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the Manager
with such other information and reports as may reasonably be requested by the
Manager from time to time, including without limitation all material requested
by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and a
list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
--------------------------
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets in the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if practicable, before the time the revisions or
supplements become effective. The Manager agrees to furnish the Sub-Adviser with
minutes of meetings of the trustees of the Trust applicable to the Series to the
extent they may affect the duties of the Sub-Adviser, and with
-2-
<PAGE>
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
---------
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-
------------------
Adviser is the sole owner of the name and mark "Founders Asset Management, Inc."
and that all use of any designation consisting in whole or part of "Founders
Asset Management, Inc." (a "Founders Mark") under this Agreement shall inure to
the benefit of the Sub-Adviser. The Manager on its own behalf and on behalf of
the Series agrees not to use any Founders Mark in any advertisement or sales
literature or other materials promoting the Series, except with the prior
written consent of the Sub-Adviser. Without the prior written consent of the
Sub-Adviser, the Manager shall not, and the Manager shall use its best efforts
to cause the Series not to, make representations regarding the Sub-Adviser in
any disclosure document, advertisement or sales literature or other materials
relating to the Series. Upon termination of this Agreement for any reason, the
Manager shall cease, and the Manager shall use its best efforts to cause the
Series to cease, all use of any Founders Mark(s) as soon as reasonably
practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
Neither the Sub-Adviser nor any affiliated person thereof shall be entitled to
any compensation from the Manager or the Trust with respect to service by any
-3-
<PAGE>
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
---------------------------
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the Sub-
Adviser, which may include brokers or dealers affiliated with the Sub-Adviser,
provided such orders comply with Rule 17e-1 under the 1940 Act in all respects.
To the extent consistent with applicable law, purchase or sell orders for the
Segment may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
-------------------------------
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.65% of the first $50 million of the average daily net assets (including
cash or cash equivalents) of the Segment, 0.60% of the next $50 million of such
assets and 0.55% of such assets in excess of $100 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
---------------
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in any
way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The
-4-
<PAGE>
Manager and the Series recognize and agree that the Sub-Adviser may provide
advice to or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be identical
to advice given or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be deemed to be an independent contractor and
shall, unless otherwise provided or authorized, have no authority to act for or
represent the Series or the Manager in any way or otherwise be deemed an agent
of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties hereunder. The Manager shall hold harmless and
indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or demand
by any past or present shareholder of the Series that is not based upon the
obligations of the Sub-Adviser with respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other sub-adviser
to the Series, or for any loss arising out of the failure of the Series to
comply with the Policies, except for losses arising out of the Sub-Adviser's
failure to comply with the Policies with respect to the Segment. The Manager
acknowledges and agrees that the Sub-Adviser makes no representation or
warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
------------------------------
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
-5-
<PAGE>
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or by the Manager on sixty days'
written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
---------
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
-------------------
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
-------
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled to
the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
-6-
<PAGE>
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS
MANAGEMENT, L.P.
By NEF Corporation, its general partner
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
FOUNDERS ASSET
MANAGEMENT, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
-7-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 5(O)
FORM OF SUB-ADVISORY AGREEMENT FOR NEW ENGLAND STAR WORLDWIDE FUND
BETWEEN NEFM AND JANUS CAPITAL CORPORATION.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
Janus Capital Corporation
This Sub-Advisory Agreement (this "Agreement") is entered into as of
January 1, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Janus Capital Corporation, a
_____________ corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated January
1, 1996 (the "Advisory Agreement") with New England Funds Trust I (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Star Worldwide Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
---------------------
a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"), manage
the investment and reinvestment of such portion of the assets of the Series as
the Manager may from time to time allocate to the Sub-Adviser for management
(such portion, the "Segment"). The Sub-Adviser shall manage the Segment in
conformity with (1) the investment objective, policies and restrictions of the
Series set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been furnished
in writing to the Sub-Adviser and (3) the provisions of the Internal Revenue
Code (the "Code") applicable to "regulated investment companies" (as defined in
Section 851 of the Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including without
limitation all applicable provisions of the Investment Company Act of 1940 (the
"1940 Act") and the rules and regulations thereunder. For purposes of compliance
with the Policies,
<PAGE>
the Sub-Adviser shall be entitled to treat the Segment as though the Segment
constituted the entire Series, and the Sub-Adviser shall not be responsible in
any way for the compliance of any assets of the Series, other than the Segment,
with the Policies, or for the compliance of the Series, taken as a whole, with
the Policies. Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or any
tax considerations; and the majority or the whole of the Segment may be invested
in such proportions of stocks, bonds, other securities or investment
instruments, or cash, as the Sub-Adviser shall determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-Adviser shall, upon
written instructions from the Manager, effect such portfolio transactions for
the Segment as the Manager shall determine are necessary in order for the Series
to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning transactions and performance of
the Segment in such form as may be mutually agreed upon, and agrees to review
the Segment and discuss the management of it. The Sub-Adviser shall permit all
books and records with respect to the Segment to be inspected and audited by the
Manager and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the Manager
with such other information and reports as may reasonably be requested by the
Manager from time to time, including without limitation all material requested
by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and a
list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
--------------------------
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets in the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable
to the Series to the extent they may affect the duties of the Sub-Adviser, and
with
-2-
<PAGE>
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
---------
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-
------------------
Adviser is the sole owner of the name and mark "Janus Capital Corporation" and
that all use of any designation consisting in whole or part of "Janus Capital
Corporation" (a "Janus Mark") under this Agreement shall inure to the benefit of
the Sub-Adviser. The Manager on its own behalf and on behalf of the Series
agrees not to use any Janus Mark in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any Janus Mark(s) as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
Neither the Sub-Adviser nor any affiliated person thereof shall be entitled to
any compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
-3-
<PAGE>
6. Purchase and Sale of Assets. Absent instructions from the Manager to
---------------------------
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the Sub-
Adviser, which may include brokers or dealers affiliated with the Sub-Adviser,
provided such orders comply with Rule 17e-1 under the 1940 Act in all respects.
To the extent consistent with applicable law, purchase or sell orders for the
Segment may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
-------------------------------
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.65% of the first $50 million of the average daily net assets (including
cash or cash equivalents) of the Segment, 0.60% of the next $50 million of such
assets and 0.55% of such assets in excess of $100 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
---------------
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in any
way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with
-4-
<PAGE>
respect to the Series. The Sub-Adviser shall for all purposes hereof be deemed
to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Series or the Manager
in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties hereunder. The Manager shall hold harmless and
indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or demand
by any past or present shareholder of the Series that is not based upon the
obligations of the Sub-Adviser with respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other sub-adviser
to the Series, or for any loss arising out of the failure of the Series to
comply with the Policies, except for losses arising out of the Sub-Adviser's
failure to comply with the Policies with respect to the Segment. The Manager
acknowledges and agrees that the Sub-Adviser makes no representation or
warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
------------------------------
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
-5-
<PAGE>
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on sixty
days' written notice to the Manager and the Trust, or by the Manager on sixty
days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
---------
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
-------------------
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
-------
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled to
the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
-6-
<PAGE>
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS
MANAGEMENT, L.P.
By NEF Corporation, its general partner
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
JANUS CAPITAL CORPORATION
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
-7-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 6(F)
FORM OF DISTRIBUTION AGREEMENT BETWEEN NEW ENGLAND FUNDS TRUST I,
ON BEHALF OF NEW ENGLAND STAR WORLDWIDE FUND, AND NEW ENGLAND
FUNDS, L.P.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
Distribution Agreement
AGREEMENT made this 1st day of January, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust of
the Distributor being able to obtain financing with which to pay commissions on
Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
-----------
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Star Worldwide Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse at
any time or times to sell any Series shares hereunder for any reason deemed
adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
----------------
apply with respect to the sale of and payment for Series shares:
<PAGE>
(a) The Distributor shall have the right, as principal, to purchase Series
shares from the Trust at their net asset value and to sell such shares
to the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. The Distributor shall also have
the right, as principal, to sell shares to dealers against orders
therefor at the public offering price less a concession determined by
the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on the
order of, the Distributor, the Distributor shall pay or cause to be
paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
----
shares, the Trust shall cause the Series to pay to the Distributor (or its
designee or transferee) in addition to the sales charge, if any, referred
to in Section 4 below, the Class B Distribution Fee at the rate and upon
the terms and conditions set forth in the Class B Distribution and Service
Plan attached as Exhibit A hereto, and as amended from time to time, and
the Distributor shall also be entitled to receive any contingent deferred
sales charges that may be payable upon redemption or repurchase of Class B
Series shares. The Class B Distribution Fee shall be accrued daily and paid
monthly to the Distributor (or, at its direction, to its designee or
transferee) as soon as practicable after the end of the calendar month in
which it accrues, but in any event within five business days following the
last day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance with
their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional and
shall not be subject to any dispute, offset, counterclaim or defense
whatsoever (it being understood that nothing in this sentence shall be
deemed a waiver by the Trust or the Series of its right separately to
pursue any claims it may have against the Distributor and to enforce such
claims against any assets (other than its rights to be paid the Class B
Distribution Fee and to be paid contingent deferred sales charges with
respect to Class B Series shares) of the Distributor).
4. Public Offering Price. The public offering price shall be the net asset
---------------------
value of Series shares, plus any applicable sales charge, all as set forth
in the current prospectus and statement of additional information
("prospectus") of the Trust relating to the Series shares. In no event
shall the public offering price exceed 1000/942.50 of such net asset value,
and in no event shall any applicable sales charge or underwriting discount
exceed 5.75% of the public offering price. The net asset value of Series
shares shall be determined in accordance with the provisions of the
agreement and declaration of trust and by-laws of the Trust and the current
prospectus of the Trust relating to the Series shares.
-2-
<PAGE>
5. Trust Issuance of Series Shares. The delivery of Series shares shall be
-------------------------------
made promptly by a credit to a shareholder's open account for the Series or
by delivery of a share certificate. The Trust reserves the right (a) to
issue Series shares at any time directly to the shareholders of the Series
as a stock dividend or stock split, (b) to issue to such shareholders shares
of the Series, or rights to subscribe to shares of the Series, as all or
part of any dividend that may be distributed to shareholders of the Series
or as all or part of any optional or alternative dividend that may be
distributed to shareholders of the Series, and (c) to sell Series shares in
accordance with the current applicable prospectus of the Trust relating to
the Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the Trust
------------------------
in connection with the redemption or repurchase of Series shares by the
Trust to the extent and upon the terms and conditions set forth in the
current applicable prospectus of the Trust relating to the Series shares,
and the Trust agrees to reimburse the Distributor, from time to time upon
demand, for any reasonable expenses incurred in connection with such
redemptions or repurchases. The Trust will remit to the Distributor any
contingent deferred sales charges imposed on redemptions or repurchases of
Series shares (other than Class B shares) upon the terms and conditions set
forth in the then current prospectus of the Trust. The Trust will also remit
to the Distributor (or its designee or transferee), in addition to the Class
B Distribution Fee, any contingent deferred sales charges imposed on
redemptions or repurchases of Class B shares, in accordance with the
Remittance Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
---------------------------
to sell Series shares but does not agree hereby to sell any specific number
of Series shares and shall be free to act as distributor of the shares of
other investment companies. Series shares will be sold by the Distributor
only against orders therefor. The Distributor shall not purchase Series
shares from anyone except in accordance with Sections 2 and 6 and shall not
take "long" or "short" positions in Series shares contrary to the agreement
and declaration of trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair Practice of
----------
the NASD and the sale of securities laws of any jurisdiction in which it
sells, directly or indirectly, any Series shares. The Distributor agrees to
make timely filings, with the Securities and Exchange Commission in
Washington, D.C. (the "SEC"), the NASD and such other regulatory authorities
as may be required, of any sales literature relating to the Series and
intended for distribution to prospective investors. The Distributor also
agrees to furnish to the Trust sufficient copies of any agreements or plans
it intends to use in connection with any sales of Series shares in adequate
time for the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to do as
expeditiously as reasonably possible), and not to use them until so filed
and cleared.
-3-
<PAGE>
9. Registration and Qualification of Series Shares. The Trust agrees to
-----------------------------------------------
execute such papers and to do such acts and things as shall from time to
time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale under
the so-called Blue Sky Laws of any state or for maintaining the registration
of the Trust and of the Series shares under the federal Securities Act of
1933 and the federal Investment Company Act of 1940 (the "1940 Act"), to the
end that there will be available for sale from time to time such number of
Series shares as the Distributor may reasonably be expected to sell. The
Trust shall advise the Distributor promptly of (a) any action of the SEC or
any authorities of any state or territory, of which it may be advised,
affecting registration or qualification of the Trust or the Series shares,
or rights to offer Series shares for sale, and (b) the happening of any
event which makes untrue any statement or which requires the making of any
change in the Trust's registration statement or its prospectus relating to
the Series shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
----------------------------------
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
----------------------------
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
-------------------------------
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated person of the Distributor,
any organization in which the Distributor may have an interest or any
organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have
an interest in the Trust; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder except
as otherwise provided in the agreement and declaration of trust or by-
-4-
<PAGE>
laws of the Trust, in the limited partnership agreement of the Distributor
or by specific provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its parent
-------------------------------------
organizations, New England Mutual Life Insurance Company ("The New
England") and New England Investment Companies, L.P. ("NEIC"), retain
proprietary rights in the words "New England" and the letters "TNE", which
may be used by the Trust and the Series only with the consent of the
Distributor, which is authorized by The New England and NEIC to give such
consent as provided herein. The Distributor consents to the use by the
Series of the name "New England Star Worldwide Fund" or any other name
embodying the words "New England" or the letters "TNE", in such forms as
the Distributor shall in writing approve, but only on condition and so long
as (i) this Agreement shall remain in full force and (ii) the Trust shall
fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such
name shall be used by the Trust or the Series at any time or in any place
or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Distributor as agent of The
New England and NEIC to the Trust and the Series to use said words or
letters as part of a business or name is not exclusive of the right of the
Distributor itself to use, or to authorize others to use, the same; the
Trust acknowledges and agrees that as between the Distributor and the Trust
and the Series, the Distributor has the exclusive right so to use, or
authorize others to use, said words and letters, and the Trust agrees to
take such action as may reasonably be requested by the Distributor to give
full effect to the provisions of this section (including, without
limitation, consenting to such use of said words or letters). Without
limiting the generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of any
of its provisions by the Trust, the Trust will, at the request of the
Distributor made within six months after the Distributor has knowledge of
such termination or violation, use its best efforts to change the name of
the Trust and the Series so as to eliminate all reference, if any, to the
words "New England" or the letters "TNE" and will not thereafter transact
any business in a name containing the words "New England" or the letters
"TNE" in any form or combination whatsoever, or designate itself as the
same entity as or successor to any entity of such name, or otherwise use
the words "New England" or the letters "TNE" or any other reference to the
Distributor. Such covenants on the part of the Trust and the Series shall
be binding upon it, its trustees, officers, shareholders, creditors and all
other persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
------------------------------
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in effect
with respect to the shares of the Series so long as such continuation
is specifically approved at least annually (i) by the Board of
Trustees of the Trust or by the vote of a majority
-5-
<PAGE>
of the votes which may be cast by shareholders of the Series and (ii)
by a vote of a majority of the Board of Trustees of the Trust who are
not interested persons of the Distributor or the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice to
the Distributor either by vote of a majority of the Trust's Board of
Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:
(a) The "vote of a majority of the votes which may be cast by shareholders
of the Series" means (1) 67% or more of the votes of the Series
present (in person or by proxy) and entitled to vote at such meeting,
if the holders of more than 50% of the outstanding shares of the
Series entitled to vote at such meeting are present; or (2) the vote
of the holders of more than 50% of the outstanding shares of the
Series entitled to vote at such meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent of
---------
the parties, provided that such consent on the part of the Series shall be
approved (i) by the Board of Trustees of the Trust or by vote of a majority
of the votes which may be cast by shareholders of the Series and (ii) by a
vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Distributor or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
------------------------------
construed in accordance with the laws of The Commonwealth of Massachusetts.
All sales hereunder are to be made, and title to the Series shares shall
pass, in Boston, Massachusetts.
-6-
<PAGE>
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
----------------
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer its
-------------------------------------
rights to payments hereunder with respect to Class B shares (but not its
obligations hereunder) in order to raise funds to cover distribution
expenditures, and any such transfer shall be effective upon written notice
from the Distributor to the Trust. In connection with the foregoing, the
Series is authorized to pay all or a part of the Distribution Fee and/or
contingent deferred sales charges in respect of Class B shares directly to
such transferee as directed by the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan is
---------------
in effect, the Series shall not change the manner in which the Distribution
Fee is computed (except as may be required by a change in applicable law
after the date hereof) or adopt a plan of liquidation without the consent
of the Distributor (or any designee or transferee of the Distributor's
rights to receive payment hereunder in respect of Class B shares) except in
circumstances where a surviving entity or transferee of the Series' assets
adopts the Class B Distribution and Service Plan and assumes the
obligations of the Series to make payments to the Distributor (or its
transferee) hereunder in respect of Class B shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
---------------------------
that it will not pay any portion of the Class B Distribution Fee which is
calculated by reference to the "Distributor's Shares" (nor shall it pay a
Distribution Fee calculated by reference to Class B shares ("Other Class B
Shares") other than the Distributor's Shares at a rate exceeding .75% per
annum of the net assets attributable to Other Class B Shares) to any person
other than the Distributor (or its designee or transferee) without the
written consent of the Distributor. "Distributor's Shares" shall mean (i)
Class B shares of the Series that were sold by the Distributor, plus (ii)
Class B shares of the Series issued in connection with the exchange, for
Class B shares of the Series, of Class B shares of another fund in the New
England fund group that were sold by the Distributor, plus (iii) Class B
shares of the Series issued in connection with the exchange, for Class B
shares of the Series, of Class B shares of another fund in the New England
fund group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other fund
that were sold by the Distributor, plus (iv) Class B shares of the Series
issued in respect of the automatic reinvestment of dividends or capital
gain distributions in respect of Class B shares of the Series described in
clauses (i), (ii) and (iii). To the extent permitted under the 1940 Act,
the terms of this Section 21 shall survive the termination of this
Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
----------------------------------------------------
behalf of the Series, agrees that it will not reduce the Distribution Fee
in respect of Series' assets attributable to Class B shares below the
annual rate of 0.75% unless it has ceased (and not resumed)
-7-
<PAGE>
paying all "service fees" (within the meaning of Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any affiliate
of the Distributor and to any other person in circumstances where
substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the Distributor.
To the extent permitted under the 1940 Act, the terms of this Section 22
shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
Star Worldwide Fund series
By________________________________________
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By________________________________________
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Star Worldwide Fund series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
-8-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 8(G)
FORM OF LETTER AGREEMENT FOR NEW ENGLAND STAR WORLDWIDE FUND
<PAGE>
December , 1995
State Street Bank and Trust Company
1776 Heritage Drive
Fiduciary Control 42N
North Quincy, MA 02171
Re: New England Star Worldwide Fund
Gentlemen:
This is to advise you that New England Funds Trust I (the "Trust" and
formerly The New England Funds) has established a new series of shares, New
England Star Worldwide Fund. In accordance with the Additional Funds provisions
in Section 17 of the Custodian Contract dated April 12, 1988 as amended
September 12, 1991 between the Trust and State Street Bank and Trust Company and
the provisions of Section 1.01 of the Sub-Transfer and Service Agreement between
New England Funds, L.P. and State Street Bank, the Trust and New England Funds,
L.P. hereby requests that you can act as Custodian and Sub-Transfer Agent for
the new series under the terms of the respective contracts. A revised Exhibit A
to the Sub-Transfer and Service Agreement is attached to this letter.
By:_________________________
Henry L.P. Schmelzer
President
New England Funds Trust I
New England Funds, L.P.
Agreed to this day of December, 1995.
State Street Bank and Trust Company
By:______________________________
Vice President
<PAGE>
Appendix A
----------
New England Funds
. New England Growth Fund
. New England International Equity Fund
. New England Capital Growth Fund
. New England Value Fund
. New England Growth Opportunities Fund
. New England Balanced Fund
. New England Star Advisers Fund
. Growth Fund of Israel
. New England Star Worldwide Fund
. New England High Income Fund
. New England Governmental Securities Fund
. New England Bond Income Fund
. New England Limited Term U.S. Government Fund
. New England Adjustable Rate U.S. Government Fund
. New England Strategic Income Fund
. New England Tax Exempt Income Fund
. New England Massachusetts Tax Free Income Fund
. New England Intermediate Term Tax Free Fund of California
. New England Intermediate Term Tax Free Fund of New York
. New England Cash Management Trust
. Money Market Series
. U.S. Government Series
. New England Tax Exempt Money Market Trust
-2-
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 10(G)
OPINION AND CONSENT OF COUNSEL RELATING TO NEW ENGLAND STRATEGIC
INCOME FUND
<PAGE>
[LETTERHEAD OF ROPES & GRAY APPEARS HERE]
April 28, 1995
New England Funds Trust I
399 Boylston Street
Boston, Massachusetts 02116
Gentlemen:
You have informed us that you propose to register under the Securities Act
of 1933, as amended (the "Act"), and offer and sell from time to time shares of
beneficial interest, without par value, of your New England Strategic Income
Fund series ("Shares"), at not less than net asset value.
We have examined an executed copy of your Amended and Restated Agreement
and Declaration of Trust dated April 1, 1992, as amended through Amendment No.7
thereto (as so amended, the "Declaration of Trust"), and are familiar with the
action taken by your trustees to authorize the issue and sale to the public from
time to time of authorized and unissued Shares. We have further examined a copy
of your By-Laws and such other documents and records as we have deemed necessary
for the purpose of this opinion.
Based on the foregoing, we are of the opinion that:
1. The beneficial interest in your New England Strategic Income Fund
series is divided into an unlimited number of Shares.
2. The issue and sale of the authorized but unissued Shares has been duly
authorized under Massachusetts law. Upon the original issue and sale of any of
such authorized but unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than the applicable net asset
value, the Shares so issued will be validly issued, fully paid and nonassessable
by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
<PAGE>
New England funds Trust I -2- April 28,1995
in each agreement, obligation or instrument entered into or executed by the
Trust or its trustees. The Declaration of Trust provides for indemnification out
of the property of the New England Strategic Income Fund series (the "Series")
for all loss and expense of any shareholder of the Series held personally liable
solely by reason of his or her being or having been such a shareholder. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Series itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection with the
registration of an indefinite number of shares for offering and sale pursuant to
the Act. We consent to the filing of this opinion with and as part of your
Registration Statement on Form N-1A (File No. 33-98326) relating to such
offering and sale.
Very truly yours,
Ropes & Gray
<PAGE>
Registration Nos. 2-98326
811-4323
EXHIBIT 15(J)
FORMS OF RULE 12B-1 PLANS - CLASS A, CLASS B AND CLASS C SHARES - NEW
ENGLAND STAR WORLDWIDE FUND
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
Class A Service Plan
This Plan (the "Plan") constitutes the Service Plan relating to the Class A
shares of NEW ENGLAND STAR WORLDWIDE FUND (the "Series"), a series of New
England Funds Trust I, a Massachusetts business trust (the "Trust").
Section 1. The Trust, on behalf of the Series, will pay to NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership which acts as the Principal
Distributor of the Series' shares, or such other entity as shall from time to
time act as the Principal Distributor of the Series' shares (the "Distributor"),
a fee (the "Service Fee") for expenses borne by the Distributor in connection
with the provision of personal services provided to investors in Class A shares
of the Series and/or the maintenance of shareholder accounts, at an annual rate
not to exceed .25% of the Series' average daily net assets attributable to the
Class A shares. Subject to such limit and subject to the provisions of Section
7 hereof, the Service Fee shall be as approved from time to time by (a) the
Trustees of the Trust and (b) the Independent Trustees of the Trust. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. All payments under this Service Plan are
intended to qualify as "service fees" as defined in Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. (or any
successor provision) as in effect from time to time.
Section 2. The Service Fee may be paid only to reimburse the Distributor
for expenses of providing personal services to investors in Class A shares of
the Series and/or in connection with the maintenance of shareholder accounts
including, but not limited to, (i) expenses (including overhead expenses) of the
Distributor for providing personal services to investors in Class A shares of
the Series or in connection with the maintenance of shareholder accounts and
(ii) payments made by the Distributor to any securities dealer or other
organization (including, but not limited to, any affiliate of the Distributor)
with which the Distributor has entered into a written agreement for this
purpose, for providing personal services to investors in Class A shares of the
Series and/or the maintenance of shareholder accounts, which payments to any
such organization may be in amounts in excess of the cost incurred by such
organization in connection therewith.
Section 3. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class A shares of this Series, and shall in no event take effect
before January 1, 1996. This Plan shall continue in effect for a period of more
than one year after January 1, 1996 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be
<PAGE>
required by Section 12(b) of the Investment Company Act of 1940 (the "Act") or
the rules and regulations thereunder) of both (a) the Trustees of the Trust, and
(b) the Independent Trustees of the Trust, cast in person at a meeting called
for the purpose of voting on this Plan.
Section 4. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class A
shares of the Series.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class A shares of the Series, on
not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Section 1 hereof without approval by a vote of
at least a majority of the outstanding Class A shares of the Series, and all
material amendments of this Plan shall be approved in the manner provided for
continuation of this Plan in Section 3.
Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and (c) the term "majority of the outstanding Class
A shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
Class B Distribution and Service Plan
This Plan (the "Plan") dated January 1, 1996 constitutes the Distribution
and Service Plan relating to the Class B shares of NEW ENGLAND STAR WORLDWIDE
FUND (the "Series"), a series of New England Funds Trust I, a Massachusetts
business trust (the "Trust").
Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
-----------
New England Funds, L.P. ("NEF"), a Delaware limited partnership which acts as
the Principal Distributor of the Series' shares, or such other entity as shall
from time to time act as the Principal Distributor of the Series' shares (the
"Distributor"), a fee (the "Service Fee") at an annual rate not to exceed .25%
of the Series' average daily net assets attributable to the Class B shares.
Subject to such limit and subject to the provisions of Section 7 hereof, the
Service Fee shall be as approved from time to time by (a) the Trustees of the
Trust and (b) the Independent Trustees of the Trust; provided, however, that no
-------- -------
Service Fee or other fee that is a "service fee" as defined in Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(or any successor provision thereto) as in effect from time to time (the "NASD
Rule") shall be paid, with respect to Class B shares of the Series, to NEF (or
to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class B shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF), under this Plan or otherwise, if the Distribution
Fee is terminated or is reduced below the rate set forth in Section 2. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. The Distributor may pay all or any portion of
the Service Fee to securities dealers or other organizations (including, but not
limited to, any affiliate of the Distributor) as service fees pursuant to
agreements with such organizations for providing personal services to investors
in Class B shares of the Series and/or the maintenance of shareholder accounts,
and may retain all or any portion of the Service Fee as compensation for
providing personal services to investors in Class B shares of the Series and/or
the maintenance of shareholder accounts. All payments under this Section 1 are
intended to qualify as "service fees" as defined in the NASD Rule.
Section 2. Distribution Fee. In addition to the Service Fee, the Trust,
----------------
on behalf of the Series, will pay to the Distributor a fee (the "Distribution
Fee") at an annual rate of 0.75% (unless reduced as contemplated by and
permitted pursuant to the next sentence hereof) of the Series' average daily net
assets attributable to the Class B shares in consideration of the services
rendered in connection with the sale of such shares by the Distributor. The
Trust will not terminate the Distribution Fee in respect of Series assets
attributable to Class B shares, or pay such fee at an annual rate of less than
.75% of the Series' average daily net assets attributable to the Class B shares,
unless it has ceased, and not resumed, paying the Service Fee (or any other fee
that constitutes a "service fee" as defined in the NASD Rule) to NEF (or to any
affiliate of
<PAGE>
NEF, or to any other person in circumstances where substantially all of the
services and functions relating to the distribution of Class B shares of the
Series have been delegated to, or are being performed by, NEF or an affiliate of
NEF). Subject to such restriction and subject to the provisions of Section 7
hereof, the Distribution Fee shall be as approved from time to time by (a) the
Trustees of the Trust and (b) the Independent Trustees of the Trust. The
Distribution Fee shall be accrued daily and paid monthly or at such other
intervals as the Trustees shall determine.
The obligation of the Series to pay the Distribution Fee shall terminate
upon the termination of this Plan or the relevant distribution agreement between
the Distributor and the Trust relating to the Series, in accordance with the
terms hereof or thereof, but until any such termination shall not be subject to
any dispute, offset, counterclaim or defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Trust or the
Series of its right separately to pursue any claims it may have against the
Distributor and enforce such claims against any assets of the Distributor (other
than its right to be paid the Distribution Fee and to be paid contingent
deferred sales charges).
The right of NEF to receive the Distribution Fee (but not the relevant
distribution agreement or NEF's obligations thereunder) may be transferred by
NEF in order to raise funds which may be useful or necessary to perform its
duties as principal underwriter, and any such transfer shall be effective upon
written notice from NEF to the Trust. In connection with the foregoing, the
Series is authorized to pay all or part of the Distribution Fee directly to such
transferee as directed by NEF.
The Distributor may pay all or any portion of the Distribution Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as commissions, asset-based sales charges or other
compensation with respect to the sale of Class B shares of the Series, and may
retain all or any portion of the Distribution Fee as compensation for the
Distributor's services as principal underwriter of the Class B shares of the
Series. All payments under this Section 2 are intended to qualify as "asset-
based sales charges" as defined in the NASD Rule.
Section 3. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class B shares of the Series, and shall in no event take effect
before January 1, 1996 . This Plan shall continue in effect for a period of
more than one year after January 1, 1996 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 4. Any person authorized to direct the disposition of monies paid
or payable by
-2-
<PAGE>
the Trust pursuant to this Plan or any related agreement shall provide to the
Trustees of the Trust, and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class B
shares of the Series.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class B shares of the Series, on
not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Sections 1 or 2 hereof without approval by a
vote of at least a majority of the outstanding Class B shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 3.
Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and the term "majority of the outstanding Class B
shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
-3-
<PAGE>
NEW ENGLAND STAR WORLDWIDE FUND
Class C Distribution and Service Plan
This Plan (the "Plan") constitutes the Distribution and Service Plan
relating to the Class C shares of NEW ENGLAND STAR WORLDWIDE FUND (the
"Series"), a series of New England Funds Trust I, a Massachusetts business trust
(the "Trust").
Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
-----------
New England Funds, L.P., a Delaware limited partnership which acts as the
Principal Distributor of the Series' shares, or such other entity as shall from
time to time act as the Principal Distributor of the Series' shares (the
"Distributor"), a fee (the "Service Fee") at an annual rate not to exceed .25%
of the Series' average daily net assets attributable to the Class C shares.
Subject to such limit and subject to the provisions of Section 7 hereof, the
Service Fee shall be as approved from time to time by (a) the Trustees of the
Trust and (b) the Independent Trustees of the Trust. The Service Fee shall be
accrued daily and paid monthly or at such other intervals as the Trustees shall
determine. The Distributor may pay all or any portion of the Service Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as service fees pursuant to agreements with such
organizations for providing personal services to investors in Class C shares of
the Series and/or the maintenance of shareholder accounts, and may retain all or
any portion of the Service Fee as compensation for providing personal services
to investors in Class C shares of the Series and/or the maintenance of
shareholder accounts. All payments under this Section 1 are intended to qualify
as "service fees" as defined in Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (or any successor provision) as
in effect from time to time (the "NASD Rule").
Section 2. Distribution Fee. In addition to the Service Fee, the Trust
----------------
will pay to the Distributor a fee (the "Distribution Fee") at an annual rate not
to exceed .75% of the Series' average daily net assets attributable to the Class
C shares, as compensation for the Distributor's services as principal
underwriter of the Class C shares of the Series. Subject to such limit and
subject to the provisions of Section 7 hereof, the Distribution Fee shall be as
approved from time to time by (a) the Trustees of the Trust and (b) the
Independent Trustees of the Trust. The Distribution Fee shall be accrued daily
and paid monthly or at such other intervals as the Trustees shall determine.
The Distributor may pay all or any portion of the Distribution Fee to securities
dealers or other organizations (including, but not limited to, any affiliate of
the Distributor) as commissions, asset-based sales charges or other compensation
with respect to the sale of Class C shares of the Series, and may retain all or
any portion of the Distribution Fee as compensation for the Distributor's
services as principal underwriter of the Class C shares of the Series. All
payments under this Section 2 are intended to qualify as "asset-based sales
charges" as defined in the NASD Rules.
<PAGE>
Section 3. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a meeting of the
outstanding Class C shares of the Series, and shall in no event take effect
before January 1, 1996. This Plan shall continue in effect for a period of more
than one year after January 1, 1996 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 4. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class C
shares of the Series.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class C shares of the Series, on
not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Sections 1 or 2 hereof without approval by a
vote of at least a majority of the outstanding Class C shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 3.
Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and the term "majority of the outstanding Class C
shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
-2-
