[LOGO]
NEW ENGLAND FUNDS
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NEW ENGLAND CAPITAL GROWTH FUND
NEW ENGLAND BALANCED FUND
NEW ENGLAND GROWTH FUND
NEW ENGLAND INTERNATIONAL EQUITY FUND
NEW ENGLAND STAR ADVISERS FUND
NEW ENGLAND VALUE FUND
NEW ENGLAND GROWTH OPPORTUNITIES FUND
PROSPECTUS AND APPLICATION
FOR GENERAL INFORMATION ON THE FUNDS OR ANY OF THEIR SERVICES AND FOR ASSISTANCE
IN OPENING AN ACCOUNT, CONTACT YOUR INVESTMENT DEALER OR CALL THE DISTRIBUTOR
TOLL FREE AT 1-800-225-5478.
MAY 1, 1995
as Revised August 21, 1995
New England Capital Growth Fund, New England Balanced Fund, New England Growth
Fund, New England International Equity Fund, New England Star Advisers Fund and
New England Value Fund, series of New England Funds Trust I, and New England
Growth Opportunities Fund, a series of New England Funds Trust II, are separate
mutual funds (the "Funds" and each a "Fund"). New England Funds Trust I and New
England Funds Trust II are referred to in this prospectus as the "Trusts."
Each Fund offers three classes of shares to the general public (Classes A, B and
C) except that New England Growth Fund offers one class of shares (Class A), to
the general public. 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 ("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." Through a separate prospectus, New England Capital Growth Fund, New
England Balanced Fund, New England International Equity Fund, New England Star
Advisers Fund, New England Value Fund and New England Growth Opportunities Fund
also offer Class Y shares to certain institutional investors.
This prospectus sets forth information you should know before investing in the
Funds. Please read it carefully and keep it for future reference. A statement of
additional information in two parts (the "Statement") about the Funds dated May
1, 1995 has been filed with the Securities and Exchange Commission (the "SEC")
and is available free of charge. Write to New England Funds, L.P. (the
"Distributor"), SAI Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or
call toll free at 1-800-225-5478. The Statement contains more detailed
information about the Funds and is incorporated into this prospectus by
reference.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page NEW ENGLAND FUNDS
<S> <C>
1 Investment Objectives The investment goal for each Fund.
1 New England Investment Companies and
the Funds' Advisers and Subadvisers
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FUND EXPENSES AND FINANCIAL INFORMATION
2 Schedule of Fees Sales charges, yearly operating expenses.
4 Financial Highlights Historical information on the Funds' performance.
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INVESTMENT STRATEGY
11 How the Funds Pursue Their Objectives
11 Fund Investments
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15 INVESTMENT RISKS It is important to understand the risks inherent
in a Fund before you invest.
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20 FUND MANAGEMENT
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BUYING FUND SHARES
23 Minimum Investment Everything you need to know to open and add to
23 6 Ways to Buy Fund Shares a New England Funds account.
[] Through your investment dealer
[] By mail
[] By wire transfer
[] By Investment Builder
[] By electronic purchase through ACH
[] By exchange from another New England Fund
24 Sales Charges
27 Reduced Sales Charges
(Class A Shares Only)
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OWNING FUND SHARES
29 Exchanging Among New England Funds New England Funds offers three convenient ways to
exchange Fund shares.
30 Fund Dividend Payments
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SELLING FUND SHARES
31 4 Ways to Sell Fund Shares How to withdraw money or close your account.
[] Through your
investment dealer
[] By telephone
[] By mail
[] By Systematic Withdrawal Plan
32 Repurchase Option An opportunity to reinvest your
redemption proceeds (Class A Shares Only) within 120
days for no sales charge.
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FUND DETAILS
33 How Fund Share Price is Determined Additional information you may find important.
33 Income Tax Considerations
34 The Funds' Expenses
35 Performance Criteria
36 Additional Facts About the Funds
38 Glossary of Terms
</TABLE>
<PAGE>
NEW ENGLAND FUNDS
INVESTMENT OBJECTIVES
NEW ENGLAND CAPITAL GROWTH FUND NEW ENGLAND STAR ADVISERS FUND
(the "Capital Growth Fund") (the "Star Advisers Fund")
The Fund seeks long-term growth of The Fund seeks long-term growth
capital. of capital.
Adviser: Loomis, Sayles & Company, L.P. Adviser: New England Investment
NEW ENGLAND BALANCED FUND Companies, L.P.
(the "Balanced Fund") Subadvisers: Berger Associates, Inc.
The Fund seeks a reasonable long-term Founders Asset Management,
investment return from a combination of Inc.
long-term capital appreciation and Janus Capital Corporation
moderate current income. Loomis, Sayles & Company,
Adviser: Loomis, Sayles & Company, L.P.
L.P., Pasadena, CA NEW ENGLAND VALUE FUND
NEW ENGLAND GROWTH FUND (the "Value Fund")
(the "Growth Fund") The Fund seeks a reasonable
The Fund seeks long-term growth of long-term investment return from
capital through investment in equity a combination of market
securities of companies whose earnings appreciation and dividend income
are expected to grow at a faster rate from equity securities.
than the United States economy. Shares Adviser: Loomis, Sayles &
of the Growth Fund are currently Company, L.P.
offered for sale only to certain Pasadena, CA
eligible investors. See "Growth Fund NEW ENGLAND GROWTH
Eligibility" on page 24. OPPORTUNITIES FUND
Adviser: Capital Growth Management, (the "Growth Opportunities
Limited Partnership Fund")
NEW ENGLAND INTERNATIONAL EQUITY FUND The Fund seeks opportunities for
(the "International Equity Fund") long-term growth of capital and
The Fund seeks total return from long- income.
term growth of capital and dividend Adviser: New England Funds
income, primarily through investment in Management, L.P.
international equity securities. Subadviser: Westpeak Investment
Adviser: Draycott Partners, Ltd.
Advisors, L.P.
NEW ENGLAND INVESTMENT COMPANIES AND THE FUNDS' ADVISERS AND SUBADVISERS
The investment advisers of each of the Funds, except the Star Advisers Fund, are
independently-operated subsidiaries of New England Investment Companies, L.P.
("NEIC"), the fifth-largest publicly traded investment management firm in the
United States. NEIC is listed on the New York Stock Exchange and through its
subsidiaries or an affiliate manages over $60 billion in assets for individuals
and institutions. Each adviser and subadviser operates independently and is
staffed by experienced investment professionals. All the advisers and
subadvisers apply specialized knowledge and careful analysis to the pursuit of
each Fund's objectives.
LOOMIS, SAYLES & COMPANY, L.P. ("Loomis Sayles"), with over $35 billion of
assets under management, manages portfolios for institutional investors,
individuals and mutual funds. Loomis Sayles serves as investment adviser to the
Capital Growth, Balanced and Value Funds.
DRAYCOTT PARTNERS, LTD. ("Draycott"), a London-based firm, manages the
International Equity Fund as well as other international equity portfolios.
CAPITAL GROWTH MANAGEMENT, LIMITED PARTNERSHIP ("CGM"), manager of the Growth
Fund, has $4.7 billion of assets under management. CGM specializes in managing
aggressive growth-oriented equity portfolios for mutual funds and other
institutions.
NEW ENGLAND INVESTMENT COMPANIES, L.P. ("NEIC") serves as investment adviser to
the Star Advisers Fund.
BERGER ASSOCIATES, INC. ("Berger") subadvises the Star Advisers Fund, as well
as other mutual funds, pension and profit sharing plans and other
institutional and private investors.
FOUNDERS ASSET MANAGEMENT, INC. ("Founders"), a subadviser of the Star
Advisers Fund, has acted as an investment adviser since 1938.
JANUS CAPITAL CORPORATION ("Janus Capital") subadvises the Star Advisers Fund
and has managed mutual funds since 1969. Janus Capital also advises
individual, corporate, charitable and retirement accounts.
LOOMIS SAYLES also serves as a subadviser to the Star Advisers Fund.
NEW ENGLAND FUNDS MANAGEMENT, L.P. ("NEFM"), investment adviser of the Growth
Opportunities Fund, is a newly-organized investment adviser.
WESTPEAK INVESTMENT ADVISORS, L.P. ("Westpeak") subadvises the Growth
Opportunities Fund and also provides investment management services to other
mutual funds and institutional clients, including accounts of New England
Mutual Life Insurance Company ("The New England").
FUND EXPENSES AND FINANCIAL INFORMATION
SCHEDULE OF FEES
Expenses are one of several factors to consider when you invest in the Funds.
The following table summarizes your maximum transaction costs from investing
in the Funds and estimated annual expenses for each class of the Funds'
shares. The Example on the following page shows the cumulative expenses
attributable to a hypothetical $1,000 investment in each class of shares of
the Funds for the periods specified.
SHAREHOLDER TRANSACTION EXPENSES -- PAID DIRECTLY BY SHAREHOLDERS
ALL FUNDS NEW ENGLAND
(EXCEPT NEW ENGLAND GROWTH FUND) GROWTH FUND
-------------------------------- -----------
CLASS A CLASS B CLASS C
------- ------- -------
Maximum Initial Sales Charge
Imposed on a Purchase
(as a percentage of offering
price)(1)(2) ................. 5.75% None None 6.50%
Maximum Contingent Deferred
Sales Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable)(2) .. (3) 4.00% None (3)
Deferred Sales Charge .......... None None None None
Redemption Fee ................. None None None None
Exchange Fee ................... None None None None
(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 "Sales Charges."
<TABLE>
ANNUAL OPERATING EXPENSES -- PAID DIRECTLY BY THE FUND, AND INDIRECTLY BY ITS SHAREHOLDERS
(as a percentage of net assets)
<CAPTION>
NEW ENGLAND
NEW ENGLAND NEW ENGLAND NEW ENGLAND INTERNATIONAL
CAPITAL GROWTH FUND BALANCED FUND GROWTH FUND EQUITY FUND
------------------------- ------------------------- ------------ -----------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees ...... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.68% 0.75%<F2> 0.75%<F2> 0.75%<F2>
12b-1 Fees ........... 0.25 1.00<F1> 1.00<F1> 0.25 1.00<F1> 1.00<F1> 0.25 0.25 1.00<F1> 1.00<F1>
Administrative
Services Fees ........ None None None None None None None 0.09 0.09 0.09
Other Expenses ....... 0.63 0.63 0.63 0.40 0.40 0.40 0.26 0.66 0.66 0.66
Total Expenses ....... 1.63 2.38 2.38 1.40 2.15 2.15 1.19 1.75<F2> 2.50<F2> 2.50<F2>
<PAGE>
<CAPTION>
NEW ENGLAND NEW ENGLAND NEW ENGLAND
STAR ADVISERS FUND VALUE FUND GROWTH OPPORTUNITIES FUND
------------------------------------- ------------------------------- ----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees ......... 1.05% 1.05% 1.05% 0.75% 0.75% 0.75% 0.70% 0.70% 0.70%
12b-1 Fees .............. 0.25 1.00<F1> 1.00<F1> 0.25 1.00<F1> 1.00<F1> 0.25 1.00<F1> 1.00<F1>
Administrative Services
Fees .................... None None None None None None None None None
Other Expenses .......... 0.44<F3> 0.44<F3> 0.44<F3> 0.37 0.37 0.37 0.43 0.43 0.43
Total Expenses .......... 1.74 2.49 2.49 1.37 2.12 2.12 1.38 2.13 2.13
<FN>
<F1> 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.
<F2> After fee waiver and expense reduction by the Fund's adviser and/or the Distributor. Without the voluntary limitations,
Management Fees would be 0.80%; and Total Expenses would be 1.80% for Class A shares, 2.55% for Class B shares and 2.55% for
Class C shares.
<F3> Other Expenses are based on estimated amounts for the current fiscal year.
</FN>
</TABLE>
The adviser of the International Equity Fund and the Distributor have agreed
voluntarily, until further notice to the Fund, to waive certain fees and
expenses in order to limit expenses to the following annual rates: 1.75% for
Class A shares, 2.50% for the Class B shares and 2.50% for the Class C shares.
The Fund's adviser and the Distributor may terminate the voluntary agreements at
any time. In that event, the Fund would supplement its prospectus.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) unless otherwise noted, redemption at period end. The 5%
return and expenses in the Example should not be considered indicative of actual
or expected Fund performance or expenses, both of which will vary.
<TABLE>
<CAPTION>
NEW ENGLAND
NEW ENGLAND NEW ENGLAND NEW ENGLAND INTERNATIONAL
CAPITAL GROWTH BALANCED FUND GROWTH FUND EQUITY FUND
-------------- ------------- ----------- -----------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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1 year .............. $ 73 $ 64 $ 24 $ 24 $ 71 $ 62 $ 22 $ 22 $ 76 $ 74 $ 65 $ 25 $ 25
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3 years ............. $106 $104 $ 74 $ 74 $ 99 $ 97 $ 67 $ 67 $100 $109 $108 $ 78 $ 78
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5 years ............. $141 $137 $127 $127 $130 $125 $115 $115 $126 $147 $143 $133 $133
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10 years<F1>......... $240 $253 $253 $272 $216 $229 $229 $248 $200 $252 $265 $265 $284
<PAGE>
<CAPTION>
NEW ENGLAND NEW ENGLAND NEW ENGLAND
STAR ADVISERS FUND VALUE FUND GROWTH OPPORTUNITIES
------------------ ---------- --------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 year .................. $ 74 $ 65 $ 25 $ 25 $ 71 $ 62 $ 22 $ 22 $ 71 $ 62 $ 22 $ 22
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3 years ................. $109 $108 $ 78 $ 78 $ 98 $ 96 $ 66 $ 66 $ 99 $ 97 $ 67 $ 67
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5 years ................. <F2> <F2> <F2> <F2> $128 $124 $114 $114 $129 $124 $114 $114
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10 years<F1>............. <F2> <F2> <F2> <F2> $213 $226 $226 $245 $214 $227 $227 $246
(1)Assumes redemption at end of period. (2) Assumes no redemption.
<FN>
<F1> Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
<F2> New England Star Advisers Fund is a recently organized fund. Federal regulations require that examples for this Fund include
information for 1 and 3 years only.
</FN>
</TABLE>
The purpose of this fee schedule is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly if you invest in
the Funds.
For information about the expenses of the Capital Growth, Balanced,
International Equity, Star Advisers, Value and Growth Opportunities Funds' Class
Y shares, which differ from the expenses of the Class A, Class B and Class C
shares, see "Additional Facts about the Funds." To obtain more information about
Class Y shares, please call the Distributor toll-free at 1- 800-225-5478.
For additional information about the Funds' fees and other expenses, please see
"Fund Management," "Additional Facts about the Funds" and "The Funds" Expenses."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect to
transfer redemption proceeds by wire.
Please keep in mind that the Example shown above is hypothetical. The
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.
<PAGE>
FINANCIAL HIGHLIGHTS
(For Class A and B shares (and Class C shares in the case of New England Star
Advisers Fund) of each Fund outstanding throughout the indicated periods.)
The Financial Highlights presented on pages 4 through 10 have been included in
financial statements for the Funds. The financial statements for New England
Capital Growth, New England Balanced, New England International Equity, New
England Star Advisers and New England Value Funds' Class A and B shares (and
Class C shares in the case of New England Star Advisers Fund) and for the Class
A shares of New England Growth Fund (which has only one class) have been
examined by Price Waterhouse LLP, independent accountants. The financial
statements for New England Growth Opportunities Fund's Class A shares for the
years ended May 31, 1985, 1986, 1987 and 1988, the seven month period ended
December 31, 1988 and the years ended December 31, 1989, 1990, 1991, 1992, 1993
and 1994 and the Fund's Class B shares for the period from September 13, 1993
through December 31, 1993 and the year ended December 31, 1994 have been
examined by Coopers & Lybrand LLP, independent accountants. The Financial
Highlights should be read in conjunction with the financial statements and the
notes thereto incorporated by reference in Part II of the Statement.
NEW ENGLAND CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------------- -----------------------
AUGUST 3(A) SEPT. 13(A) YEAR
THROUGH YEAR ENDED THROUGH ENDED
DEC. 31, DECEMBER 31, DEC. 31 DEC. 31,
------------- -------------------------- ------------ ---------
1992 1993 1994 1993 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.50 $14.23 $15.27 $14.79 $15.24
- ---------------------------------------------------------------------------------------------------------
Income from investment operations
- ---------------------------------------------------------------------------------------------------------
Net investment income 0.02 0.00 (0.08) 0.00 (0.08)
Net gains or losses on investments
(both realized and unrealized) 1.84 1.12 (0.17) 0.53 (0.27)
- ---------------------------------------------------------------------------------------------------------
Total income from investment operations 1.86 1.12 (0.25) 0.53 (0.35)
- ---------------------------------------------------------------------------------------------------------
Less distributions
Distributions (from net investment income) (0.02) 0.00 0.00 0.00 0.00
Distributions (from net realized capital
gains) (0.11) (0.08) 0.00 (0.08) 0.00
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Total distributions (0.13) (0.08) 0.00 (0.08) 0.00
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.23 $15.27 $15.02 $15.24 $14.89
=========================================================================================================
Total return (%)<F3> 14.9 7.9 (1.6) 3.6 (2.3)
Ratios/Supplemental data
Net assets, end of period (000) $34,772 $98,735 $95,803 $ 6,748 $15,390
Ratio of operating expenses to average
net assets (%)<F4> 1.00<F3> 1.23 1.63 2.29<F3> 2.38
Ratio of net investment income (loss)
to average net assets (%) 0.74<F3> (0.03) (0.45) (1.15)<F3> (1.20)
Portfolio turnover rate (%) 15 77 82 77 82
<FN>
<F1> The Fund commenced operations on August 3, 1992. Class B shares were first offered on September 13, 1993.
<F2> Computed on an annualized basis.
<F3> A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares
are not reflected in total return calculations. Periods of less than one year are not annualized.
<F4> The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitations in effect
from August 3, 1992 through September 30, 1993 would have been: (%)
2.20(b) 1.58 2.97(b)
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND BALANCED FUND<F1>
CLASS A CLASS B
-------------------------------------------------------------------------------------------------------------
SEPT. 13<F2> YEAR
YEAR ENDED DECEMBER 31, THROUGH ENDED
---------------------------------------------------------------------------------- DEC. 31, DEC. 31,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1993 1994
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 9.34 $10.97 $10.30 $8.94 $9.50 $9.47 $ 8.11 $10.15 $11.16 $12.13 $12.16 $12.11
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.43 0.34 0.23 0.39 0.34 0.35 0.30 0.30 0.31 0.33 0.16 0.26
Net gains or losses on investments
(both realized and
unrealized) 1.68 1.87 (0.11) 0.50 0.65 (1.34) 2.05 1.10 1.26 (0.65) 0.24 (0.66)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operation 2.11 2.21 0.12 0.89 0.99 (0.99) 2.35 1.40 1.57 (0.32) 0.40 (0.40)
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from
net investment
income) (0.48) (0.37) (0.39) (0.33) (0.41) (0.35) (0.30) (0.30) (0.31) (0.33) (0.16) (0.26)
Distributions (from
net realized
capital gains) 0.00 (2.51) (1.09) 0.00 (0.61) 0.00 0.00 (0.09) (0.29) (0.21) (0.29) (0.21)
Distributions (from
paid-in capital) 0.00 0.00 0.00 0.00 0.00 (0.02) (0.01) 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (2.88) (1.48) (0.33) (1.02) (0.37) (0.31) (0.39) (0.60) (0.54) (0.45) (0.47)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value end
of period $10.97 $10.30 $ 8.94 $9.50 $9.47 $8.11 $10.15 $11.16 $12.13 $11.27 $12.11 $11.24
===================================================================================================================================
Total return(%)<F4> 23.1 22.1 0.8 10.0 10.4 (10.6) 29.2 13.9 14.2 (2.7) 3.3 (3.4)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000) $24,076 $33,332 $46,632 $51,902 $59,405 $52,134 $67,467 $90,527 $158,308 $158,332 $4,691 $21,607
Ratio of operating
expenses to average
net assets(%) 1.15 1.19 1.52<F5> 1.52 1.52 1.58 1.53 1.48 1.40 1.40 2.36<F3> 2.15
Ratio of net
investment income
to average net
assets(%) 4.37 3.25 2.33 4.19 3.35 4.00 3.18 2.84 2.66 2.91 1.92<F3> 2.16
Portfolio turnover
rate(%) 99 91 63 58 111 68 51 38 50 36 50 36
<FN>
<F1>The Fund was changed from an "equity income" fund to a "balanced" fund on March 1, 1990. Results for periods prior to March 1,
1990 reflect former investment policies and are not necessarily representative of results that would have been achieved had the
Fund's current investment policies then been in effect.
<F2>Commencement of offering of Class B shares.
<F3>Computed on an annualized basis.
<F4>A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are
not reflected in total return calculations. Periods of less than one year are not annualized.
<F5>In 1987, the Fund's adviser and principal underwriter voluntarily agreed to waive a portion of their fees in order to limit the
Fund's expenses (exclusive of trustees' fees) to 1.50% of the Fund's average daily net assets. The ratio of expenses to average
net assets without giving effect to the voluntary expense limitation would have been 1.64%.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND GROWTH FUND
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $6.58 $8.77 $8.88 $7.59 $7.46 $8.49 $ 8.85 $11.19 $10.08 $10.44
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.07 0.05 (0.01)<F1> 0.28 0.09 0.07 0.10 0.09 0.02 0.11
Net gains or losses
on investments
(both realized and
unrealized) 2.20 1.45 1.62 (0.17) 1.56 0.38 4.92 (0.83) 1.12 (0.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income from
investment
operations 2.27 1.50 1.61 0.11 1.65 0.45 5.02 (0.74) 1.14 (0.73)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions (from
net investment
income) (0.08) (0.07) (0.05) (0.24) (0.11) (0.09) (0.10) (0.09) (0.01) (0.11)
Distributions (from
net realized
capital gains) 0.00 (1.32) (2.85) 0.00 (0.46) 0.00 (2.57) (0.28) (0.77) (0.73)
Distributions (from
paid-in capital) 0.00 0.00 0.00 0.00 (0.05) 0.00 (0.01) 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08) (1.39) (2.90) (0.24) (0.62) (0.09) (2.68) (0.37) (0.78) (0.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $8.77 $8.88 $7.59 $7.46 $8.49 $8.85 $11.19 $10.08 $10.44 $8.87
====================================================================================================================================
Total return (%)<F2> 34.9 18.6 18.5 1.5 22.3 5.1 56.7 (6.6) 11.3 (7.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000) $236,317 $304,381 $440,851 $462,495 $555,659 $614,018 $996,813 $1,173,948 $1,200,515 $988,430
Ratio of operating
expenses to average
net assets (%) 0.84 0.84 1.29 1.26 1.22 1.23 1.14 1.15 1.18 1.19
Ratio of net
investment income
to average net
assets (%) 0.96 0.62 (0.06) 3.64 1.19 0.77 0.89 0.89 0.16 1.05
Portfolio turnover
rate (%) 203 153 154 283 203 185 186 218 145 141
<FN>
<F1>Net investment income per share has been calculated based upon the averages of monthly shares outstanding.
<F2>A sales charge was not reflected in total return calculations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND INTERNATIONAL EQUITY FUND
CLASS A CLASS B
------------------------------------------ ---------------------------
MAY 21<F1> YEAR ENDED SEPT. 13<F1> YEAR
THROUGH DECEMBER 31, THROUGH ENDED
DEC. 31, -------------------------- DEC. 31, DEC. 31,
1992 1993 1994 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.50 $11.80 $14.85 $15.19 $14.81
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.01 0.11 0.00 0.12 0.00
Net gains or losses on investments (both realized
and unrealized) (0.63) 3.37 1.19 (0.06) 1.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations (0.62) 3.48 1.19 0.06 1.08
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
Distributions (from net investment income) (0.01) (0.11) 0.00 (0.12) 0.00
Distributions (from net realized capital gains) 0.00 (0.32) (0.53) (0.32) (0.53)
Distributions (from paid-in capital) (0.07) 0.00 (0.01) 0.00 (0.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08) (0.43) (0.54) (0.44) (0.54)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.80 $14.85 $15.50 $14.81 $15.35
===================================================================================================================================
Total return(%)<F3> (5.0) 29.4 8.1 0.3 7.3
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $21,731 $80,937 $142,917 $ 9,176 $41,601
Ratio of operating expenses to average net assets(%)<F4> 1.50<F2> 1.60 1.75 2.50<F2> 2.50
Ratio of net investment income to average net assets(%) 0.10<F2> 0.24 0.01 (1.69)<F2> (0.74)
Portfolio turnover rate(%) 62 101 123 101<F5> 123
<FN>
<F1>The Fund commenced operations on May 21, 1992. Class B shares were first offered on September 13, 1993.
<F2>Computed on an annualized basis.
<F3>A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are
not reflected in total return calculations. Periods of less than one year are not annualized.
<F4>The ratio of operating expenses to average net assets
without giving effect to the voluntary expense
limitations would have been: (%) 2.89<F2> 2.16 1.79 3.36<F2> 2.54
<F5>Not computed on an annualized basis.
</FN>
</TABLE>
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
JULY 7, 1994 (a)
THROUGH
DECEMBER 31 1994
-------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- ------------------------------------------------------------------------------
Net asset value, beginning of period $12.50 $12.50 $12.50
- ------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------
Net investment income 0.05 0.02 0.02
Net gains or losses on investments
(both realized and
unrealized) 0.75 0.73 0.74
- ------------------------------------------------------------------------------
Total income from investment
operations 0.80 0.75 0.76
- ------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------
Distributions (from net
investment income) (0.05) (0.02) (0.02)
- ------------------------------------------------------------------------------
Total distributions (0.05) (0.02) (0.02)
- ------------------------------------------------------------------------------
Net asset value, end of period $13.25 $13.23 $13.24
==============================================================================
Total return(%)(c) 6.4 6.0 6.0
- ------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period (000) $91,218 $72,889 $20,096
Ratio of operating expenses to
average net assets(%)(d) 1.94(b) 2.69(b) 2.69(b)
Ratio of net investment income to
average net assets(%) 1.06(b) 0.31(b) 0.31(b)
Portfolio turnover rate(%) 100 100 100
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge of 5.75% (maximum) in the case of Class A shares and a
contingent deferred sales charge in the case of Class B shares are not
reflected in total return calculations. Periods of less than one year are
not annualized.
(d) The ratio of operating expenses to average net assets (computed on an
annualized basis) for Class A, B and C shares without giving effect to the
voluntary expense limitations in effect from July 7, 1994 through December
31, 1994 would have been 1.98%, 2.75% and 2.75%, respectively.
<PAGE>
NEW ENGLAND VALUE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------------------------------------------------------------------------
SEPT. 13<F2> YEAR
YEAR ENDED DECEMBER 31, THROUGH ENDED
---------------------------------------------------------------------------------- DEC. 31, DEC. 31,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $6.10 $8.06 $8.73 $6.42 $6.07 $6.51 $5.44 $6.69 $7.28 $7.87 $7.97 $7.85
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.14 0.10 0.04 0.20 0.12 0.16 0.13 0.09 0.07 0.08 0.11 0.04
Net gains or losses on investments
(both realized and
unrealized) 2.00 1.62 0.90 (0.34) 1.25 (1.04) 1.35 1.02 1.16 (0.19) 0.39 (0.20)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operation 2.14 1.72 0.94 (0.14) 1.37 (0.88) 1.48 1.11 1.23 (0.11) 0.50 (0.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from
net investment
income) (0.18) (0.14) (0.14) (0.21) (0.12) (0.16) (0.13) (0.09) (0.07) (0.08) (0.05) (0.05)
Distributions (from
net realized
capital gains) 0.00 (0.91) (3.11) 0.00 (0.80) 0.00 (0.10) (0.43) (0.57) (0.41) (0.57) (0.41)
Distributions (from
paid-in capital) 0.00 0.00 0.00 0.00 (0.01) (0.03) 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.18) (1.05) (3.25) (0.21) (0.93) (0.19) (0.23) (0.52) (0.64) (0.49) (0.62) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value end
of period $8.06 $8.73 $6.42 $6.07 $6.51 $5.44 $6.69 $7.28 $7.87 $7.27 $7.85 $7.23
===================================================================================================================================
Total return(%)<F4> 35.8 24.2 11.6 (2.2) 22.6 (13.6) 27.1 16.6 17.0 (1.4) 6.5 (2.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000) $79,418 $104,002 $141,775 $136,443 $146,831 $139,248 $145,790 $156,240 $189,779 $190,869 $2,182 $13,830
Ratio of operating
expenses to average
net assets(%) 0.84 0.90 1.29 1.29 1.29 1.31 1.28 1.32 1.34 1.37 2.16<F2> 2.12
Ratio of net
investment income
to average net
assets(%) 1.91 1.28 0.55 3.13 1.69 2.87 1.84 1.26 0.83 1.00 0.05<F2> 0.25
Portfolio turnover
rate(%) 173 164 202 243 111 68 51 38 40 29 40 29
<FN>
<F1>Commencement of offering of Class B shares.
<F2>Computed on an annualized basis.
<F3>A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are
not reflected in total return calculations. Periods of less than one year are not annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND GROWTH OPPORTUNITIES FUND<F1>
CLASS A CLASS B
-------------------------------------------------------------------------------------------- ----------------
SEPT.
13<F3> YEAR
SEVEN THROUGH ENDED
YEAR ENDED MAY 31, MONTHS YEAR ENDED DECEMBER 31, DEC. 31, DEC. 31,
------------------------------- ENDED ----------------------------------------------- ----------------
1985 1986 1987 1988<F2> 12/31/88<F2> 1989 1990 1991 1992 1993* 1994 1993* 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assst value,
beginning of
period $ 8.58 $10.77 $12.70 $11.92 $10.37 $ 9.55 $10.88 $ 9.54 $11.79 $12.20 $12.67 $12.95 $12.66
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income
income 0.30 0.35 0.35 0.33 0.19 0.29 0.30 0.26 0.23 0.21 0.22 0.06 0.16
Net gains or losses on
investments (both
realized and
unrealized) 2.43 2.97 0.73 (1.22) 0.25 2.32 (0.76) 2.63 0.86 0.75 (0.10) 0.01 (0.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 2.73 3.32 1.08 (0.89) 0.44 2.61 (0.46) 2.89 1.09 0.96 0.12 0.07 0.07
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from
net investment
income) (0.29) (0.34) (0.34) (0.35) (0.18) (0.29) (0.30) (0.26) (0.23) (0.21) (0.21) (0.03) (0.14)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions in
excess of net
investment income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 (0.06) 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from
net realized
capital gains) (0.25) (1.05) (1.52) (0.30) (1.08) (0.95) (0.56) (0.38) (0.45) (0.27) (0.17) (0.27) (0.17)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from
paid-in capital) 0.00 0.00 0.00 (0.01) 0.00 (0.04) (0.02) 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.54) (1.39) (1.86) (0.66) (1.26) (1.28) (0.88) (0.64) (0.68) (0.49) (0.38) (0.36) (0.31)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $10.77 $12.70 $11.92 $10.37 $ 9.55 $10.88 $ 9.54 $11.79 $12.20 $12.67 $12.41 $12.66 $12.42
===================================================================================================================================
Total return(%)<F6> 32.2 31.3 8.9 (7.3) 7.3<F5> 27.6 (4.3) 30.6 9.3 8.0 1.00 0.60 0.60
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000) $61,688 $72,862 $70,427 $58,552 $55,041 $62,688 $55,726 $70,263 $90,945 $109,168 $104,081 $1,498 $5,185
Ratio of operating
expenses to average
net assets(%) 0.97 1.00 1.24 1.25<F4> 1.33<F5> 1.15 1.18 1.23 1.94 1.21 1.28 2.08<F5> 1.93
Ratio of net investment
income to average net
assets (%) 3.08 3.01 2.65 2.90 3.10<F5> 2.68 2.92 2.28 1.18 1.70 1.75 0.71<F5> 1.10
Portfolio turnover
rate (%) 26 21 25 8 83<F5> 17 6 12 10 4 6 4 6
<FN>
<F1>Information shown for all years is audited. The accountants' report incorporated by reference in the Statement covers years
ended May 31, 1987 through December 31, 1994. Accountants' reports for years ended May 31, 1985 through May 31, 1986 are on
file with the SEC.
<F2>Fiscal year end changed in 1988 from May 31 to December 31. The Fund's former adviser, Back Bay Advisors, L.P., assumed that
function on July 27, 1988.
<F3>Commencement of offering of Class B shares.
<F4>Until May 18, 1988, the Fund's former adviser, Back Bay Advisors, L.P., voluntarily agreed to limit total Fund expenses to
1.25% of the Fund's average annual net assets. Without such limitation, Fund expenses would have been 1.31% of average net
assets.
<F5>Computed on an annualized basis.
<F6>A sales charge of 5.75% (maximum) in the case of the Class A shares and a contingent deferred sales charge in the case of the
Class B shares are not reflected in total return calculations. Unless otherwise indicated, periods of less than one year are
not annualized.
* As of January 1, 1993, the Fund discontinued the use of equalization accounting.
The Fund's current adviser and subadviser assumed those functions on May 1, 1995. These financial highlights reflect results
achieved by earlier advisers under investment policies that are no longer in effect.
</FN>
</TABLE>
<PAGE>
INVESTMENT STRATEGY
HOW THE FUNDS PURSUE THEIR OBJECTIVES
Each Fund is a "diversified" mutual fund, except for the Star Advisers Fund.
Investments in each Fund will be pooled with money from other investors in that
Fund to invest in a managed and diversified portfolio consisting of securities
appropriate to each Fund's investment objective and policies. There can be no
assurance that any Fund will achieve its objective.
FUND INVESTMENTS
[] CAPITAL GROWTH FUND
The Capital Growth Fund seeks to attain its objective by investing
substantially all of its assets in 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). Investments are selected based on their growth potential; current
income is not a consideration. The Fund normally will invest primarily in
equity securities of companies with medium to large market capitalization
(capitalization of $1 billion to $5 billion and over $5 billion,
respectively), but will also invest a portion of its assets in equity
securities of companies with relatively small market capitalization (under $1
billion).
The Fund's adviser selects investments based upon fundamental research and
analysis of individual companies and industries. The adviser selects
investments for the Fund based on qualitative and quantitative criteria
including, among others, industry dominance and competitive position,
consistent earnings growth, a history of high profitability, the adviser's
expectation of continued high profitability and overall financial strength,
although not every investment will have all of these characteristics. The
Fund may invest in foreign securities.
[] GROWTH FUND
Most of the Growth Fund's investments are normally in common stocks, although
the Fund may invest in any type of equity securities. The Fund does not
consider current income as a factor in selecting its investments.
[] VALUE FUND
Substantially all of the Value Fund's investments are normally in equity
securities. In selecting investments for the Fund, the emphasis is ordinarily
placed on undervalued securities. Although long-term market appreciation is
ordinarily the basis for security selection, current income may be a
significant consideration when yields appear to be favorable compared to
overall opportunities for capital appreciation. The Fund may invest in
foreign securities.
[] BALANCED FUND
The Balanced Fund is "flexibly managed" in that sometimes it invests more
heavily in equity securities and at other times it invests more heavily in
fixed-income securities, depending on management's view of the economic and
investment outlook. Most of the Fund's equity investments are normally in
dividend-paying common stocks of recognized investment quality that are
expected to achieve growth in earnings and dividends over the long term. In
selecting equity investments for the Fund, an emphasis is ordinarily placed
on undervalued securities. Fixed-income securities include notes, bonds,
non-convertible preferred stock and money market instruments. The Fund
invests at least 25% of its assets in fixed-income senior securities and,
under normal market conditions, more than 50% of its assets in equity
securities. The Fund may invest in foreign securities.
[] INTERNATIONAL EQUITY FUND
The International Equity Fund seeks to achieve its objective by investing
primarily in common stocks, although the Fund may invest in any type of
equity securities. Normally the Fund will invest at least 65% of its total
assets in equity securities of issuers headquartered outside the United
States, and substantially all of its assets (other than cash and short-term
investments) in such equity securities or equity securities of issuers
(including closed-end investment companies) that derive a substantial part of
their revenues or profits from countries outside the United States. Under
normal conditions the Fund's portfolio will contain equity securities of
issuers from at least three countries outside the United States. The Fund may
also engage in certain options and futures transactions.
The Fund's adviser will make investment decisions on behalf of the Fund by,
first, selecting countries where it anticipates sustainable growth that will
exceed current market expectations. Within the selected countries, the
adviser will identify economic sectors that appear to present the most
potential for risk-adjusted growth and, finally, within the chosen economic
sectors, the adviser will select securities that are expected to offer the
best value.
[] GROWTH OPPORTUNITIES FUND
It is normally the policy of the Growth Opportunities Fund to invest in a
diversified portfolio of common stocks considered by Westpeak, the Fund's
subadviser, to have possibilities for long-term appreciation of capital and
income. Emphasis will be given to both undervalued securities ("value" style)
and securities of companies with growth potential ("growth" style). The Fund
will ordinarily invest substantially all of its assets in equity securities.
[] STAR ADVISERS FUND
The Star Advisers Fund seeks to attain its objective by investing primarily
in equity securities. The Fund may also invest in other securities, as
described below. Under normal market conditions, however, at least 65% of the
Fund's assets will be invested in equity securities. The Fund may in the
discretion of each subadviser invest without limit in securities of foreign
issuers (including issuers in emerging markets) as well as in securities of
U.S. issuers. For more information about investments in foreign securities,
see the next section, "Investment Risks -- Foreign Securities."
Capital invested in the Fund will be allocated on a substantially equal basis
among four different subadvisers. Each subadviser will manage its segment of
the Fund's assets in accordance with that subadviser's own investment style
and strategy.
NEIC, the adviser of the Star Advisers Fund, believes that a multi-adviser
approach to equity investing - one that combines the varied styles of a
number of subadvisers in selecting securities for the Fund's portfolio -
offers a different investment opportunity than equity funds run by a single
adviser using a single style.
Any given management style tends to produce better returns than other styles
under certain market and economic conditions, and to perform less well under
other conditions. Therefore, most single-adviser funds have not consistently
maintained superior performance rankings relative to their peers over long
periods. The Fund's adviser believes that consistency of results, minimizing
under-performance even at the cost of out-performance at times, is likely to
produce higher performance over time.
The Fund's adviser believes that assigning portfolio management responsi-
bility for the Star Advisers Fund to four subadvisers, whose varying styles
have resulted in records of success, may increase the likelihood that the
Fund may produce superior long-term results for its shareholders, with less
variability of return and less risk of persistent under-performance than a
single-adviser fund. Of course, past results should not be considered a
prediction of future performance, and there is no assurance that the Fund
will in fact achieve superior results over any time period. The investment
styles described below will be those applied by each of the subadvisers to
the segment of the Fund's portfolio for which that subadviser is responsible.
BERGER places primary emphasis on established companies which it believes
have favorable growth prospects. Berger emphasizes stocks with potential for
rapid earnings expansion. Berger seeks companies with the capability to
perform well under varying economic conditions, including the ability to
compete in the global marketplace. Berger also seeks companies with the
ability to market increasing amounts of products or services, in order to
increase shareholder equity at an above-average rate. Berger also places
considerable emphasis on the quality of the corporate leadership of companies
under consideration. Common stocks will generally constitute all or most of
the segment of the Fund managed by Berger, but this segment of the portfolio
may from time to time take substantial positions in securities convertible
into common stocks, and may also purchase preferred stocks, government
securities, zero-coupon securities and other senior securities when Berger
believes it is appropriate to do so. This segment of the portfolio may also
invest in Rule 144A securities (see "Investment Risks -- Miscellaneous"
below) and may purchase put and call options on stock indices and futures
contracts and options thereon for the purpose of hedging.
FOUNDERS' segment of the portfolio will invest primarily in common stocks of
well-established, high-quality growth companies with mid or high market
capitalization. Founders manages its segment of the Fund's portfolio by
investing primarily in established companies with above-average prospects for
growth in earnings per share. This segment will invest primarily in mid-cap
and large capitalization stocks. Founders believes that mid-cap companies
(companies with between $1.5 billion and $3.5 billion of market
capitalization) can produce returns close to those of smaller-cap companies,
but with less risk because of their stronger infrastructures and performance
records and more solid market positions, and that large-capitalization stocks
add stability to the portfolio. These companies tend to have strong
performance records, with solid continuous operating records of three years
or more. Founders' approach to investment management gives greater emphasis
to the fundamental financial, marketing and operating characteristics of
individual companies, and is less concerned with the short-term impact of
changes in macroeconomics and market conditions, than some other investment
firms. This segment of the portfolio may invest in bonds, debentures and
other corporate obligations when Founders believes that these investments
offer opportunity for growth of capital. This segment of the portfolio may
also invest in Rule 144A securities and may enter into futures contracts or
options thereon for hedging purposes.
JANUS CAPITAL pursues the Fund's investment objective by investing
substantially all of Janus Capital's segment of the portfolio in common
stocks when its portfolio manager believes that the relevant market
environment favors profitable investing in such securities. Janus Capital
manages its segment of the portfolio to seek long-term capital growth
primarily from investing in common stocks of companies of any size, including
large, well-established companies and smaller, emerging growth companies.
Janus Capital's analysis and selection process focus on stocks with earnings
growth potential that may not be recognized by the market. This segment of
the portfolio may also invest in preferred stocks, warrants, government
securities, corporate bonds and debentures or other debt securities or
repurchase agreements when its portfolio manager perceives an opportunity for
capital growth from such securities or to receive a return on idle cash.
Janus Capital's segment may also invest in Rule 144A securities and may enter
into options, futures and forward contracts.
LOOMIS SAYLES manages its segment of the portfolio by investing primarily
in stocks of small cap companies with good earnings growth potential,
that Loomis Sayles believes are undervalued by the market. Typically,
such companies range in size from $100 million ot $500 million in market
capitalization, have better than average growth rates at below average
price/earnings ratios and have strong balance sheets and cash flow. Loomis
Sayles seeks to build a core small cap portfolio of solid growth companies'
stock, with a smaller emphasis on special situations and turnarounds
(companies that have experienced significant business problems but which
Loomis Sayles believes have favorable prospects for recovery), as well
as unrecognized stocks.
Under unusual market conditions as determined by any of the four subadvisers,
all or any portion of the segment of the portfolio managed by that subadviser
may be invested, for temporary, defensive purposes, in short-term debt
instruments or in cash. In addition, under normal conditions, a portion of
each segment's assets may be invested in short-term assets for liquidity
purposes or pending investment in other securities. Short-term investments
may include U.S. Government securities, obligations of corporate issuers
rated in the top two rating categories by two major rating agencies or, if
unrated, determined to be of comparable quality by the subadviser, and
repurchase agreements that are fully collateralized by U.S. Government
securities.
[] ADDITIONAL INFORMATION
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). The Capital Growth, Growth, International
Equity, Value and Growth Opportunities Funds seek to attain their objectives
by normally investing substantially all of their assets in equity securities.
When the particular Fund's adviser or subadviser deems it appropriate,
however, the Capital Growth, Growth, Value and Growth Opportunities Funds
may, for temporary defensive purposes, hold a substantial portion of their
assets in cash or fixed-income investments, including U.S. Government
obligations, investment grade (and comparable unrated) corporate bonds or
notes, money market instruments and repurchase agreements. Corporate
obligations in the lowest investment grade category (rated BBB by Standard &
Poor's Corporation ["S&P"] or Baa by Moody's Investors Service, Inc.
["Moody's"]) have some speculative characteristics and may be more adversely
affected by changing economic conditions than are higher grade obligations.
The International Equity Fund may, for temporary purposes, hold all or any
portion of its assets in cash, repurchase agreements, short- term debt
obligations of U.S. or foreign corporate issuers or U.S. or foreign
government obligations of any maturity rated AAA, AA, A or BBB by S&P, Aaa,
Aa, A or Baa by Moody's or unrated but determined by the Fund's adviser to be
of comparable quality to securities in those rating categories. No estimate
can be made as to when or for how long a Fund will employ these defensive
strategies. Under some market conditions, the Balanced Fund may, for
temporary purposes, invest less than 50% of its assets in equity securities
and the balance in cash and fixed- income investments.
<PAGE>
INVESTMENT RISKS
It is important to understand the following risks inherent in a Fund before you
invest.
[] EQUITY SECURITIES
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 a Fund may sometimes decrease instead of
increase. Each 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. Each 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.
Each 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 and
S&P. Less than 35% of the Star Advisers Fund's assets will be invested in
convertible or debt securities rated below investment grade and unrated
convertible or debt securities of comparable quality. All convertible
securities purchased by any other Funds will, at the time of purchase, either
be rated investment grade by at least one major rating agency or be unrated
but determined to be of investment grade quality by the Fund's adviser or
subadviser.
[] 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 a 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. All fixed-income securities purchased by
any Fund, except the Balanced Fund and the Star Advisers Fund, will, at the
time of purchase either be rated investment grade by at least one major
rating agency or be unrated but determined to be of investment grade quality
by the Fund's adviser or subadviser.
[] REPURCHASE AGREEMENTS
In repurchase agreements, a 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 a Fund to earn a return on available
cash at minimal market risk, although the Fund may be subject to various
delays and risks of loss if the seller is unable to meet its obligation to
repurchase.
[] SHORT-TERM TRADING
Although each Fund seeks long-term growth or return, each 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 Funds'
portfolios, which may produce higher transaction costs and a higher level of
taxable capital gains. Portfolio turnover considerations will not limit any
Fund's adviser's or subadviser's investment discretion in managing the Fund's
assets.
Recent portfolio turnover rates of each Fund are set forth above under
"Financial Highlights."
[] SMALL COMPANIES
The Star Advisers Fund, in the discretion of each subadviser, may 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 (BALANCED AND STAR ADVISERS FUNDS)
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 own credit analysis than for a fund
investing in higher quality bonds. The market for lower quality fixed-income
securities may be more severely affected than some other financial markets by
economic recession or substantial interest rate increases, by changing public
perceptions of this market or by legislation that limits the ability of
certain categories of financial institutions to invest in these securities.
In addition, the secondary market may be less liquid for lower rated
fixed-income securities. This lack of liquidity at certain times may affect
the valuation of these securities and may make the valuation and sale of
these securities more difficult. During the fiscal year ended December 31,
1994, the Balanced Fund had on average less than 5% of its assets invested in
fixed-income securities rated BB or Ba, the rating categories just below
investment grade, and B. The Fund had no assets invested in securities rated
below these rating categories. During the same period, the Star Advisers Fund
had no assets invested in fixed-income securities rated below investment
grade. Securities of below investment grade are commonly known as "junk
bonds." For more information, see the Statement's "Appendix A -- Description
of Bond Ratings."
[] FOREIGN SECURITIES (CAPITAL GROWTH, BALANCED, INTERNATIONAL EQUITY, STAR
ADVISERS AND VALUE FUNDS)
Investments in foreign securities present risks not typically associated with
investments in comparable securities of U.S. issuers.
There may be less information publicly available about a foreign corporate or
government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
securities custody costs are often higher than those in the United States,
and judgments against foreign entities may be more difficult to obtain and
enforce. With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or
financial instability and diplomatic developments that could affect the value
of investments in those countries. The receipt of interest on foreign
government securities may depend on the availability of tax or other revenues
to satisfy the issuer's obligations.
The International Equity and Star Advisers Funds' 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 Capital Growth, Balanced, International
Equity, Star Advisers and Value Funds' portfolios 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 Capital Growth, Balanced, International Equity, Star Advisers and Value
Funds may incur costs in connection with conversions between various
currencies. In addition, those Funds may be required to liquidate portfolio
assets, or may incur increased currency conversion costs, to compensate for a
decline in the dollar value of a foreign currency occurring between the time
when the Fund declares and pays a dividend, or between the time when the Fund
accrues and pays an operating expense in U.S. dollars.
[] OPTIONS (INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS)
The International Equity and the Star Advisers Fund may each 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. A 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 a Fund has written call options on a substantial portion of its
portfolio, the Fund's ability to profit from changes in market prices of
portfolio securities will be limited. Appreciation in securities covering the
options would likely be partially or wholly offset by losses on the options.
The termination of options positions under such conditions would generally
result in the realization of short-term capital losses, which would reduce
the Fund's current return. Accordingly, the Fund may seek to realize capital
gains to offset realized losses by selling securities.
As described in Part II of the Statement, over-the-counter options involve
certain special risks (including liquidity and credit risks) not necessarily
present with exchange-listed options. A Fund will treat as illiquid any
over-the-counter options and assets maintained as "cover" for
over-the-counter options that the Fund has written.
The options markets of foreign countries are small compared to those of the
United States and consequently are characterized in most cases by less
liquidity than are the U.S. markets. In addition, foreign markets may be
subject to less detailed reporting requirements and regulatory controls than
U.S. markets. See "Foreign Securities" above.
[] HEDGING TRANSACTIONS (INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS)
At the discretion of its adviser or any of its subadvisers, respectively, the
International Equity and Star Advisers Funds may 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 Funds may also buy put or call options on
securities that they hold or intend to buy, respectively. In addition to
engaging in options transactions on established exchanges, the Funds may
purchase over-the-counter options from brokerage firms and other financial
institutions.
The Funds may invest in options and futures contracts on various stock
indices to hedge against changes in the value of securities they hold or
expect to acquire. The Funds may also invest in options on stock index
futures. Neither Fund will 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 a Fund becomes obligated
under a hedging instrument. There is no assurance that the Funds' hedging
strategies will be effective. These strategies involve costs and the risk of
loss to the Funds. See Part II of the Statement for more information.
[] ZERO COUPON BONDS (STAR ADVISERS FUND)
The Star Advisers 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 (BALANCED, INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS)
The International Equity Fund may invest up to 10% of its assets in
securities of other investment companies. As a shareholder of an investment
company, the Fund may indirectly bear investment management fees of that
investment company, which are in addition to the management fees the Fund
pays its adviser.
No Fund will invest more than 15% of its assets in "illiquid securities,"
that is, securities which are not readily resalable, which include securities
whose disposition is restricted by federal securities laws.
The Balanced, International Equity and Star Advisers Funds may purchase Rule
144A securities. These are privately offered securities that can be resold
only to certain qualified institutional buyers. Rule 144A securities are
treated as illiquid, unless an adviser or subadviser has determined, under
guidelines established by New England Funds Trust I's trustees, that the
particular issue of Rule 144A securities is liquid. Investment in restricted
or other illiquid securities involves the risk that a Fund may be unable to
sell such a security at the desired time. Also, a Fund may incur expenses,
losses or delays in the process of registering restricted securities prior to
resale.
The International Equity and Star Advisers Funds may purchase securities on a
"when-issued" or "delayed-delivery" basis. This means that a 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 a Fund commits to buy the
security and the delivery date, a 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 Star Advisers 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 Star Advisers Fund is a "non-diversified" fund and as such is not
required to meet any diversification requirements under the Investment
Company Act of 1940 (the "1940 Act"), although the Fund must meet certain
diversification standards to qualify as a "regulated investment company"
under the Internal Revenue Code. Since the Fund may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers,
the Fund may be more susceptible than a more widely-diversified fund to any
single economic, political or regulatory occurrence.
[] SPECIAL CONSIDERATIONS REGARDING THE MULTI-ADVISER APPROACH (STAR ADVISERS
FUND)
NEIC, the adviser of the Star Advisers Fund, oversees the portfolio
management services provided to the Fund by each of the four subadvisers. The
adviser does not, however, determine what investments will be purchased or
sold for any segment of the portfolio. Because each subadviser will be
managing its segment of the portfolio independently from the other
subadvisers, the same security may be held in two different segments of the
portfolio, or may be acquired for one segment of the portfolio at a time when
another subadviser deems it appropriate to dispose of the security from
another segment of the portfolio. Similarly, under some market conditions,
one or more of the subadvisers may believe that temporary, defensive
investments in short-term instruments or cash are appropriate when another
subadviser or subadvisers believe continued exposure to the equity markets is
appropriate for their segments of the portfolio. Because each subadviser
directs the trading for its own segment of the portfolio, and does not
aggregate its transactions with those of the other subadvisers, the Fund may
incur higher brokerage costs than would be the case if a single adviser or
subadviser were managing the entire portfolio. Also, because each segment of
the portfolio will perform differently from the other segments depending upon
the investments it holds and changing market conditions, the segment of the
Fund's assets managed by a subadviser may be larger or smaller at various
times than the segments managed by other subadvisers. Net cash inflows or
outflows resulting from sales and redemptions of the Fund shares will,
however, be allocated on a substantially equal basis among the four segments
of the portfolio.
<PAGE>
FUND MANAGEMENT
The adviser of the Capital Growth Fund, the Balanced Fund and the Value Fund is
Loomis Sayles. Founded in 1926, Loomis Sayles, One Financial Center, Boston,
Massachusetts 02111, is one of the country's oldest and largest investment
counsel firms.
In 1994, the Capital Growth Fund, the Balanced Fund and the Value Fund each paid
0.75%, respectively, of their net assets in advisory fees to Loomis Sayles.
Richard W. Hurckes, Vice President of Loomis Sayles and Vice President of New
England Funds Trust I, and Scott S. Pape, Vice President of Loomis Sayles and
New England Funds Trust I, have served as the portfolio managers of the Capital
Growth Fund since its inception in 1992. Carol C. McMurtrie, Vice President,
Managing Partner and Director of Loomis Sayles and Vice President of New England
Funds Trust I, and Tricia H. Mills and Douglas D. Ramos, Vice Presidents of
Loomis Sayles and New England Funds Trust I, have served as portfolio managers
of the Value Fund since March 1993. Douglas D. Ramos and Meri Anne Beck have
served as portfolio managers of the Balanced Fund since 1990; Ms. Beck is also a
Vice President of Loomis Sayles and New England Funds Trust I. All of the
foregoing persons have been employed by Loomis Sayles for five years except Ms.
McMurtrie and Mr. Pape who, prior to the time they joined Loomis Sayles, were
Vice President of Addison Capital Management and Equity Portfolio Manger of the
Illinois State Board of Investment, respectively.
The adviser of the Growth Fund is CGM, One International Place, Boston,
Massachusetts 02110. In 1994, the Growth Fund paid 0.68% of its net assets in
advisory fees to CGM. CGM, organized in 1989, serves as investment adviser to
seven mutual funds and to other institutional investors. The general partner of
CGM is a corporation owned in equal shares by Robert L. Kemp and G. Kenneth
Heebner, who are officers of New England Funds Trust I. Mr. Heebner, Senior
Portfolio Manager of CGM and Senior Vice President of New England Funds Trust I,
has served as portfolio manager of the Growth Fund since 1976.
NEFM, 399 Boylston Street, Boston, Massachusetts 02116 is the adviser of the
Growth Opportunities Fund and has entered into subadvisory arrangements for this
Fund with Westpeak, 1050 Walnut Street, Boulder, Colorado 80302. NEFM oversees,
evaluates and monitors the subadvisory services provided to the Fund and
furnishes general business management and administration to the Fund. NEFM has
not previously served as investment adviser to a mutual fund. The Fund pays NEFM
a management fee at the annual rate of 0.70% of the first $200 million of the
Fund's average net assets, 0.65% of the next $300 million of such assets and
0.60% of such assets in excess of $500 million. NEFM pays Westpeak for providing
subadvisory services at the annual rate of 0.50% of the first $25 million of the
Fund's average net assets, 0.40% of the next $75 million of such assets, 0.35%
of the next $100 million of such assets and 0.30% of such assets in excess of
$200 million. The portfolio manager of the Growth Opportunities Fund is Gerald
H. Scriver, President and Chief Executive Officer of Westpeak and Vice President
of New England Funds Trust II. Mr. Scriver has been with Westpeak since its
inception in 1991. Mr. Scriver was Director of Quantitative Strategies of
INVESCO from 1989 through 1991. Prior to May 1, 1995, the Fund was advised by a
different adviser and paid a lower rate of advisory fees.
The International Equity Fund is advised by Draycott, 8 City Road, London EC2Y
1HE. Draycott was organized in 1991 to provide investment advice and management
services to institutional investors' accounts and to mutual funds distributed to
both institutional and retail customers. Draycott is a member of the Investment
Management Regulatory Organization Limited (IMRO), the U.K. regulator of
investment advisers. In addition to the Fund, Draycott currently manages three
separate investment accounts that invest substantially all of their assets in
international equity securities. The International Equity Fund pays Draycott
0.80% of its average daily net assets annually without giving effect to any
voluntary expense limitation. Nicholas D. P. Carn, Chief Investment Officer,
President and Chief Executive Officer of Draycott, Timothy S. Griffen, Senior
Portfolio Manager and Pacific Rim Specialist of Draycott, Gregory D. Eckersley,
Portfolio Manager and United Kingdom Specialist of Draycott, and Nigel Hankin,
Portfolio Manager and European Specialist of Draycott, have served as the
portfolio managers of the International Equity Fund since the Fund's inception
in 1992. Prior to Draycott's organization in 1991, Mr. Carn was Managing
Director, International Equities Group, Mr. Griffen was a Vice President and
Portfolio Manager, Mr. Eckersley was Investment Manager and Mr. Hankin was
European Fund Manager, all at CIGNA International Investment Advisors, Ltd.
Short-term U.S. cash management services for the International Equity Fund are
provided by Back Bay Advisors, L.P., 399 Boylston Street, Boston, Massachusetts
02116, as subadviser to Draycott. For these services, Draycott has agreed to
compensate Back Bay Advisors at the annual rate of .08% of the value of the
Fund's average daily net assets.
The advisory fee rates payable by the Capital Growth, Balanced, Growth,
International Equity and Value Funds are higher than those paid by most other
mutual funds but are comparable to fee rates paid by many funds that have
investment objectives similar to the Funds'.
NEIC, 399 Boylston Street, Boston, Massachusetts 02116, serves as the Star
Advisers Fund's adviser. NEIC 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 NEIC a management fee
at the annual rate of 1.05% of the Fund's average daily net assets. This fee
rate payable by the Fund is higher than that paid by most other mutual funds.
This difference in the fee rate is partially due to the multi-adviser format.
NEIC pays each subadviser an advisory fee at the annual rate of 0.55% of the
first $50 million of the average daily net assets of the segment of the Fund
that the subadviser manages and 0.50% of such assets in excess of $50 million.
The Distributor in its discretion may award an incentive bonus to the subadviser
whose segment of the Star Advisers Fund's portfolio has the highest total return
for the prior year.
Subject to the supervision of NEIC, each subadviser manages its segment of the
Star Advisers Fund's portfolio in accordance with the Fund's investment
objective and policies, makes investment decisions for that segment of the
portfolio, places orders to purchase and sell securities for that segment of the
portfolio, and employs professional advisers and securities analysts who provide
research services to that segment of the portfolio. The Fund pays no direct fees
to any of the subadvisers. Below is a brief description of the subadvisers.
BERGER, 210 University Boulevard, Suite 900, Denver, Colorado 80206. Rodney L.
Linafelter, Vice President of Berger, has day-to-day responsibility for the
management of the segment of the Fund managed by Berger. Kansas City Southern
Industries, Inc. ("KCSI") controls Berger.
FOUNDERS, 2930 East Third Avenue, Denver, Colorado 80206. To facilitate
day-to-day investment management, Founders employs a unique
team-and-lead-manager system. The management team for a portfolio or fund is
comprised of Founders' Chief Investment Officer Bjorn K. Borgen, a lead
portfolio manager, assistant portfolio managers, traders and research analysts.
Daily decisions on portfolio selection rest with the lead portfolio manager,
who, through participation in the committee process, utilizes the input of other
team members in making purchase and sale determinations. Edward F. Keely is lead
portfolio manager for the segment of the Fund that is managed by Founders. Mr.
Borgen has served as Founders' Chief Investment Officer since 1969 and owns all
of Founders' outstanding shares.
JANUS CAPITAL, 100 Fillmore Street, Suite 300, Denver, Colorado 80206. Warren B.
Lammert has day-to-day management responsibility for those assets of the Fund
allocated to Janus Capital where he serves as a portfolio manager and Vice
President of Investments. KCSI owns approximately 83% of Janus Capital.
LOOMIS SAYLES, Jeffrey C. Petherick, Vice President of Loomis Sayles and
New England Funds Trust I, and Mary Champagne, Vice President of Loomis
Sayles, have day-to-day management responsibility for the segment of the
Fund that is allociated to Loomis Sayles. Mr. Petherick has co-managed
the Loomis Sayels segment of the Fund since the Fund's inception. Mr.
Petherick was an investment manager at Masco Corporation prior to joining
Loomis Sayles in 1990. Ms. Champagne has co-managed the Loomis Sayles segment
of the Fund since July 1995. Prior to joining Loomis Sayles in 1993, Ms.
Champagne served as a portfolio manager at NBD Bank for 10 years.
The general partners of each of Loomis Sayles, NEFM, Westpeak and Back Bay
Advisors are special purpose corporations. These corporations are indirect
wholly-owned subsidiaries of NEIC, whose sole general partner, New England
Investment Companies, Inc., is a wholly-owned subsidiary of The New England.
NEIC is also the parent of Draycott.
In placing portfolio transactions for the Funds, each adviser or subadviser
seeks the best execution. Subject to this policy, the advisers or subadviser may
consider sales of shares of the Funds and other mutual funds they manage as a
factor in the selection of broker-dealers. Subject to procedures adopted by the
trustees of the Trusts, Fund brokerage transactions may be executed by brokers
that are affiliated with any adviser or subadviser.
Draycott, Westpeak, Loomis Sayles, NEFM and CGM provide executive and other
personnel for the management of the Trusts. Each Trust's Board of Trustees
supervises the affairs of the Trust.
Under agreements between the investment advisers and the Distributor or New
England Securities Corporation ("New England Securities"), an affiliate of the
Distributor, either the Distributor or New England Securities provides certain
administrative services to the Capital Growth, Balanced, Growth, Star Advisers,
Value and Growth Opportunities Funds, at no extra cost to those Funds.
Under an Administrative Services Agreement between the International Equity Fund
and the Distributor, the Distributor provides the Fund with office space,
facilities and equipment, services of executive and other personnel and certain
administrative services. Under this agreement, the Fund pays the Distributor a
fee at the annual rate of 0.10% of the average daily net assets of the Fund's
Class A, Class B and Class C shares.
Draycott and the Distributor have agreed to reduce their fees and to bear
certain operating expenses charged to the International Equity Fund to the
extent that the total of such fees and expenses would exceed 1.75% annually of
the average daily net assets of the Fund's Class A shares and 2.50% annually of
the average daily net assets of the Fund's Class B and Class C shares. Draycott
and the Distributor may terminate these expense limitations at any time.
<PAGE>
BUYING FUND SHARES
MINIMUM INVESTMENT
$2,500 is the minimum for an initial investment in any Fund and $50 is the
minimum for each subsequent investment. There are special initial investment
minimums for the following plans:
[] $25 (for initial and subsequent investments) for payroll deduction investment
programs for 401(k), SARSEP, 403(b)(7) 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 Funds (except the
Growth Fund, which offers only Class A shares) in the following ways:
[LOGO] THROUGH YOUR INVESTMENT DEALER:
Many investment dealers have a sales agreement with the Distributor and would be
pleased to accept your order.
[LOGO] 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.
[LOGO] BY WIRE TRANSFER OF FEDERAL FUNDS:
FOR AN INITIAL INVESTMENT, call us at 1-800-225-5478 between 8:00 a.m. and 6:00
p.m. (Eastern time) to obtain an account number and wire transfer instructions.
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.
FOR SUBSEQUENT INVESTMENTS, direct your bank to transfer funds to State Street
Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Fund (Fund name
and 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.
[LOGO] 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 or deposit slip from your bank account.
TO ADD INVESTMENT BUILDER TO AN EXISTING ACCOUNT, please call us at 1-800-225-
5478 for a Service Options form.
[LOGO] 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 6 p.m.
(Eastern time) for instructions or call Tele#Facts at 1-800-346-5984 twenty-four
hours a day. If you purchase your shares through ACH, you will receive the net
asset value next determined after your order is received. Proceeds of
redemptions of Fund shares purchased through ACH may not be available for up to
ten days after the purchase date.
[LOGO] BY EXCHANGE FROM ANOTHER NEW ENGLAND FUND:
You may also purchase shares of a Fund by exchanging shares from another New
England Fund. Please see "
England Funds" for complete
details.
TO MAKE INVESTING EASIER, YOU CAN ALSO ORDER PERSONALIZED INVESTMENT SLIPS BY
CALLING 1-800-225-5478.
GENERAL
All purchase orders are subject to acceptance by the Funds 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 Funds do not anticipate doing so, they
reserve 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 Funds' "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.
GROWTH FUND ELIGIBILITY: Shares of the Growth Fund are currently available for
purchase by the following categories of investors only:
(1) Shareholders of any fund in the New England Funds (and participants in
retirement or salary savings plans that invest in such funds, as such
participants) who have accounts established on or before August 3, 1992;
(2) Current and retired employees of The New England, its subsidiaries, general
agencies or any company affiliated with The New England;
(3) Current and former directors and trustees of the Trusts, The New England
or its affiliates;
(4) Registered representatives of broker-dealers that have selling arrangements
with the Distributor relating to the New England Funds; and
(5) The spouses, parents, children, siblings, grandparents or grandchildren of
any of the above persons.
The Growth Fund offers only one class of shares.
SALES CHARGES
Each Fund (except the Growth Fund) offers three classes of shares to the general
public:
CLASS A SHARES
Class A 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:
CAPITAL GROWTH FUND
VALUE FUND
BALANCED FUND
INTERNATIONAL EQUITY FUND
STAR ADVISERS FUND
GROWTH OPPORTUNITIES FUND
SALES CHARGE AS A % OF DEALER'S
-------------------------- CONCESSION
NET AS % OF
VALUE OF TOTAL OFFERING AMOUNT OFFERING
INVESTMENT PRICE INVESTED PRICE
- --------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
- --------------------------------------------------------------------------------
$50,000 - $99,999 4.50% 4.71% 4.00%
- --------------------------------------------------------------------------------
$100,000 - $249,999 3.50% 3.63% 3.00%
- -------------------------------------------------------------------------------
$250,000 - $499,999 2.50% 2.56% 2.15%
- --------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04% 1.70%
- --------------------------------------------------------------------------------
$1,000,000 or more None None *
GROWTH FUND
SALES CHARGE AS A % OF DEALER'S
-------------------------- CONCESSION
NET AS % OF
VALUE OF TOTAL OFFERING AMOUNT OFFERING
INVESTMENT PRICE INVESTED PRICE
- --------------------------------------------------------------------------------
Less than $25,000 6.50% 6.95% 5.75%
- --------------------------------------------------------------------------------
$25,000 - $49,999 5.50% 5.82% 4.75%
- --------------------------------------------------------------------------------
$50,000 - $99,999 4.50% 4.71% 4.00%
- --------------------------------------------------------------------------------
$100,000 - $249,999 3.50% 3.63% 3.00%
- --------------------------------------------------------------------------------
$250,000 - $499,999 2.50% 2.56% 2.15%
- --------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 2.04% 1.70%
- --------------------------------------------------------------------------------
$1,000,000 or more None None *
*The Distributor may, at its discretion, pay investment dealers who initiate and
are responsible for such purchases a commission of up to the following amounts:
1% on the first $2 million invested; .80% on the next $1 million; .20% on the
next $2 million; and .08% on the excess over $5 million. These commissions are
not payable if the purchase represents the reinvestment of a redemption made
during the previous 12 calendar months.
CONTINGENT DEFERRED SALES CHARGE (CLASS A SHARES ONLY). For purchases of
$1,000,000 or more of Class A shares of the Funds, 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 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:
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
- ------------------- ------------------------
1st ................................................. 4%
2nd ................................................. 3%
3rd ................................................. 3%
4th ................................................. 2%
5th ................................................. 1%
thereafter .......................................... 0%
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 Each Fund (except the Growth Fund) also offers a fourth class of
shares (which are not available to the general public) to certain qualified
investors. See "Additional Facts About the Funds" 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 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 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. In addition, there is no CDSC on certain withdrawals pursuant to a
Systematic Withdrawal Plan. See "Systematic Withdrawal Plan" below.
The Funds receive 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 Funds 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 of the Funds or 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 Funds. 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, gift certificates or vouchers through
membership in the New England Funds Flagship Club. 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 any 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 a 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.
[] CLIENTS OF AN ADVISER OR SUBADVISER (AFFILIATED WITH NEIC) -- no sales charge
or CDSC applies to investments of $100,000 or more in the Funds 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 Funds 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.
[] Current shareholders of the Growth Opportunities Fund who were participants
in a certain Trust Securities Program, administered through State Street
Bank, may purchase additional shares of the Growth Opportunities Fund at net
asset value.
[] There is no sales charge or CDSC related to investments by 401(a), 401(k),
457 or 403(b) plans that have total investment assets equal to or in excess
of $5 million.
[] There is no sales charge, CDSC or initial investment minimum related to
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 and 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 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 the New England Growth Fund,
which is subject to special eligibility restrictions) without paying a sales
charge. Class A shares of the New England Intermediate Term Tax Free Fund of
California and New England Intermediate Term Tax Free Fund of New York (and
shares of the Money Market Funds acquired through exchanges of such shares) may
be exchanged for Class A shares of the Funds at net asset value only if you have
held them for at least six months; otherwise, sales charges apply to the
exchange. If you exchange your Class A shares of the New England Adjustable Rate
U.S. Government Fund (the "Adjustable Rate Fund") for shares of another fund
that has a higher sales charge, you will pay the difference between any sales
charge you have already paid on your Adjustable Rate Fund shares and the higher
sales charge of the fund into which you are exchanging. In addition, you may
redeem Class A shares of any Money Market Fund that were not acquired through
exchanges from any series of the Trusts and have the proceeds directly applied
to the purchase of Fund shares at the applicable sales charge.
CLASS B SHARES
You may exchange Class B shares of any Fund or series of the Trusts (and Class B
shares of the Money Market Funds or Class A shares of the Money Market Funds
which have not been subject to a previous sales charge) for Class B shares of
any other series of the Trusts (except New England Growth Fund). Such exchanges
will be made at the next determined net asset value of the shares. Class B
shares will automatically convert on a tax-free basis to Class A shares eight
years after they are purchased (excluding the time the shares are held in a
Money Market Fund). See "Sales Charges -- Class B Shares" above.
AUTOMATIC EXCHANGE PLAN
THE FUNDS HAVE AN AUTOMATIC EXCHANGE PLAN UNDER WHICH SHARES OF A CLASS OF A
FUND ARE AUTOMATICALLY EXCHANGED EACH MONTH FOR SHARES OF THE SAME CLASS OF
OTHER SERIES OF THE TRUSTS (OTHER THAN THE 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 C SHARES
You may exchange Class C shares of the Funds (except the Growth 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 6 p.m.
(Eastern time), call Tele#Facts at 1-800-346-5984 twenty-four hours a day or
write to New England Funds. The exchange must be for a minimum of $500 (or the
total net asset value of your account, whichever is less), except that under the
Automatic Exchange Plan the minimum is $50. All exchanges are subject to the
minimum investment and eligibility requirements of the series into which you are
exchanging. In connection with any exchange, you must receive a current
prospectus of the series into which you are exchanging. The exchange privilege
may be exercised only in those states where shares of such other series may be
legally sold.
You have the automatic privilege to exchange your Fund shares by telephone. New
England Funds, L.P. will employ reasonable procedures to confirm that your
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 Capital Growth Fund, the Growth Fund, the International Equity Fund, the
Value Fund and the Star Advisers Fund pay dividends annually and the Balanced
Fund and the Growth Opportunities Fund pay dividends quarterly. Each 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 Trusts may adopt a different schedule as long as payments are
made at least annually. If you intend to purchase shares of a 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 respective
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 invest-ment 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
[logo] THROUGH YOUR INVESTMENT DEALER:
Call your authorized investment dealer for information.
[logo] 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 6 p.m. (Eastern time).
Class A shares only may also be redeemed by calling Tele#Facts at 1-
800-346-5984 twenty-four hours a day. Redemption requests accepted after the
Exchange has closed (4:00 p.m. Eastern time) will be processed at the next-
determined net asset value. The proceeds (LESS ANY APPLICABLE CDSC) generally
will be wired on the next business day to the bank account previously chosen by
you on your application. A wire fee (currently $5.00) will be deducted from the
proceeds.
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 p.m., 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.
[logo] 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 Funds recommend
that certificates be sent by registered mail.
[logo] 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.
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 Funds 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 Funds to
dispose of their securities or to determine fairly the value of their 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.
FUND DETAILS
HOW FUND SHARE PRICE IS DETERMINED
Each 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. Loomis Sayles, under
the supervision of New England Funds Trust I's Board of Trustees, determines the
value of the fixed-income securities held by the Balanced Fund, and is
authorized to delegate certain price determination functions to pricing services
or facilities selected by Loomis Sayles. All other securities and assets of each
Fund are valued at their fair market value as determined in good faith by the
Fund's adviser or subadviser (or a pricing service selected by the adviser or
subadviser) under the supervision of the relevant Trust's Board of Trustees. The
net asset value of each 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), including dividends and interest
receivable but not collected, less all liabilities (including accrued expenses),
by the number of shares of such class outstanding. The public offering price of
each Fund's Class A shares is determined by adding the applicable sales charge
to the net asset value. 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 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.
INCOME TAX CONSIDERATIONS
Each 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 a 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 a Fund's long-term capital gains
("capital gains distributions"), if designated as such by a 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.
================================================================================
CALCULATING THE PRICE OF SHARES
Total Market Value of Other Any
Portfolio Securities + Assets - Liabilities
- ---------------------------------------------- = Net Asset Value (NAV)
Total Number of Outstanding Shares in a Class
THE PUBLIC OFFERING PRICE FOR CLASS A SHARES IS THE NAV PLUS THE APPLICABLE
SALES CHARGE. THE PUBLIC OFFERING PRICE FOR CLASS B AND CLASS C SHARES IS THE
NAV.
================================================================================
To avoid an excise tax, each 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.
Each 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 a Fund is notified that you have underreported income
in the past, or if you fail to certify to a Fund that you are not subject to
such withholding. In addition, each 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 a 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 International Equity 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 International Equity 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 a 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 a Fund on their particular federal, state and local tax
situations. Shareholders of the International Equity Fund should also consult
their tax advisers about consequences of their investment under foreign laws.
THE FUNDS' EXPENSES
In addition to the management fee paid to its adviser and (in the case of the
International Equity Fund) the administrative services fees paid to the
Distributor, each Fund pays all expenses not borne by its adviser, subadviser or
the Distributor, including, but not limited to, the charges and expenses of each
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 who are not directors, officers or employees of The New
England or its affiliates, other than affiliated registered investment
companies. In the case of Funds that offer Class Y shares, 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 Funds," below.)
Under Service Plans adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, each 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 (except the Growth Fund which pays such
fee rate with respect to all its net assets). 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. In the case of each Fund except the Growth Opportunities Fund, the
Class A service fee is payable only to reimburse the Distributor for amounts it
pays or expends in connection with the provision of personal services to
investors and/or the maintenance of shareholder accounts. In the case of the
Class A shares of the Growth, Value and Balanced Funds, reimbursable expenses
may include such expenses incurred by those Funds' former distributor (an
affiliate of the Distributor) in prior years. 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 amounts of unreimbursed Class A expenses carried over into 1995 from
previous plan years were $563,284 for the Capital Growth Fund, $2,041,399 for
the Balanced Fund, $2,030,882 for the Growth Fund, $514,256 for the
International Equity Fund and $1,651,994 for the Value Fund. The Class B and C
service fees for all funds (except the Growth Fund, which has only Class A
shares), and the Class A service fee of the Growth Opportunities Fund, are
payable regardless of the amount of the Distributor's related expenses.
Each 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 respective 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
Each Fund may include total return information for each class of shares in
advertisements or other written sales material. Each 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, or, in the case of the Growth Opportunities Fund's Class A shares, for
the period since July 27, 1988, when there was a change in that Fund's
investment adviser. 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' total return is higher.
The Balanced Fund may also include the yield of its Class A, Class B and Class C
shares, accompanied by the total return, in advertising and other written
material. Yield will be computed in accordance with the SEC's standardized
formula by dividing the adjusted net investment income per share earned during a
recent thirty-day period by the maximum offering price of a share of the
relevant class (reduced by any earned income expected to be declared shortly as
a dividend) on the last day of the period. Yield calculations will reflect any
voluntary expense limitations in effect for the Fund during the relevant period.
The Balanced Fund may also present one or more distribution rates for each class
in its sales literature. These rates will be determined by annualizing the
class's distributions from net investment income and net short-term capital gain
over a recent twelve-month, three-month or thirty-day period and dividing that
amount by the maximum offering price or the net asset value on the last day of
such period. If the net asset value, rather than the maximum offering price, is
used to calculate the distribution rate, the rate will be higher.
Total return will generally be higher for Class A shares than for Class B and
Class C shares of the same Fund, because of the higher levels of expenses borne
by the Class B and Class C shares. An investor should balance this expected
lower total return against the benefit gained by 100% immediate investment of
the purchase price of Class B or Class C shares. As a result of lower operating
expenses, Class Y shares of each Fund that offers such shares can be expected to
achieve a higher investment return than the Fund's Class A, Class B or Class C
shares.
All performance information is based on past results and is not an indication of
likely future performance.
ADDITIONAL FACTS ABOUT THE FUNDS
[] 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 Growth, Value and Balanced Funds were
organized prior to 1985 and conducted investment operations as separate
corporations until their reorganization as series of New England Funds Trust
I in January 1987. The International Equity Fund and the Capital Growth Fund
were organized in 1992 and the Star Advisers Fund was organized in 1994.
[] New England Funds Trust II was organized in 1931 as a Massachusetts business
trust and is authorized to issue an unlimited number of full and fractional
shares in multiple series. The Growth Opportunities Fund is the original
series of shares of the Trust and has been in operation since 1931.
[] When you invest in a Fund, you acquire freely transferable shares of
beneficial interest that entitle you to receive annual or quarterly dividends
as determined by the respective Trust's trustees and to cast a vote for each
share you own at shareholder meetings. Shares of each Fund vote separately
from shares of other series of the same Trust, except as otherwise required
by law. Shares of all classes of a 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 each Fund
may be changed without shareholder approval or, in most cases, prior notice.
The investment objectives of the Growth, Value and Balanced Funds are
fundamental. The investment objectives of the Capital Growth, International
Equity and Star Advisers Funds are not fundamental. The investment objective
of the Growth Opportunities Fund is not fundamental but, as a matter of
policy, the trustees would not change the objective without shareholder
approval. If there is a change in the Capital Growth, International Equity,
Star Advisers or Growth Opportunities Funds' objectives, shareholders should
consider whether these Funds remain appropriate investments in light of their
current financial position and needs.
[] CLASS Y SHARES: Each Fund except the Growth Fund offers Class Y shares to
certain investors. Class Y shares may be purchased 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 $10 million. Plan sponsors' investment assets in multiple Retirement
Plans can be aggregated for purposes of meeting this minimum. Class Y shares
may also be purchased by any separate account of The New England or of any
other insurance company affiliated with The New England ("Separate Accounts")
and, in the case of International Equity Fund, by bank common trust funds,
bank collective trust funds and dedicated corporate trustee funds, such as
nuclear decommissioning trusts and hospital depreciation funds ("Special
Accounts"). There is no minimum initial or subsequent investment amount for
Retirement Plans, Separate Accounts or Special Accounts. Investments in Class
Y shares may also 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.
[] Class Y shares are identical to Class A, Class B and Class C shares, except
that Class Y shares have no sales charge or CDSC, bear no Rule 12b-1 fees and
have separate voting rights in certain circumstances. Class Y bears its own
transfer agency and prospectus printing costs and does not bear any portion
of those costs relating to other classes of shares. In the case of the
International Equity Fund, Class Y shares bear a lower rate of administrative
services fee.
[] The Trusts do not generally hold regular shareholder meetings and will do so
only when required by law. Shareholders of a Trust may remove the trustees of
that Trust from office by votes cast at a shareholder meeting or by written
consent.
[] The transfer and dividend paying agent for the Funds is New England Funds,
L.P., 399 Boylston Street, Boston, MA 02116. New England Funds, L.P. has
subcontracted certain of its obligations as such to State Street Bank, 225
Franklin Street, Boston, MA 02110.
[] If the balance in your account with a Fund is less than a minimum amount set
by the trustees of the Trusts from time to time (currently $500), that 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 tax-qualified plans
(such as IRAs, Keoghs and pension and profit sharing plans), automatic
investment plans or accounts that have fallen below the minimum solely
because of fluctuations in a Fund's net asset value per share.
[] Each Trust offers only its own Funds' shares for sale, but it is possible
that a Trust might become liable for any misstatements in this prospectus
that relate to the other Trust. The trustees of each Trust have considered
this possible liability and approved the use of this combined prospectus for
Funds of both Trusts.
[] Each Fund's annual report contains additional performance information and is
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.
<PAGE>
GLOSSARY OF TERMS
Capital gain distributions -- Payments to shareholders of profits earned from
selling securities in the 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 investment management company -- A mutual fund that allows investors to
redeem fund shares directly from the fund company on any business day.
Public offering price (POP) -- The price of one share of a mutual fund,
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.
