<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
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[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only [as permitted
by Rule 14a-6(e)(2)]
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
NEW ENGLAND FUNDS TRUST I
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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number, or the Form or Schedule and the date of its filing.
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<PAGE>
NEW ENGLAND STAR ADVISERS FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 17, 1997
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of New
England Star Advisers Fund (the "Fund"), a series of New England Funds Trust I
(the "Trust"), will be held at the offices of New England Funds, L.P., 399
Boylston Street, Boston, Massachusetts 02116, on Friday, October 17, 1997 at
2:30 p.m. (Eastern time), for the following purposes:
1. To approve or disapprove a new Sub-Advisory Agreement for the Fund
between New England Funds Management, L.P. ("NEFM") and Harris
Associates L.P.
2. To approve or disapprove a new Sub-Advisory Agreement for the Fund
between NEFM and Founders Asset Management, Inc.
3. To approve or disapprove a new Sub-Advisory Agreement for the Fund
between NEFM and Loomis, Sayles & Company, L.P.
4. To approve or disapprove a proposal with respect to the future
operation of the Fund whereby the Fund may from time to time, to the
extent permitted by any exemption or exemptions granted by the
Securities and Exchange Commission, permit NEFM to enter into new and
amended agreements with sub-advisers with respect to the Fund without
obtaining shareholder approval of such agreements, and to permit such
sub-advisers to manage the assets of the Fund (or a segment thereof)
pursuant to such sub-advisory agreements.
5. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
By order of the President of the Trust,
ROBERT E. O'HARE,
Assistant Secretary
September 3, 1997
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YOUR VOTE IS IMPORTANT
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PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING.
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of New England Funds Trust I (the "Trust") for
use at the Special Meeting of Shareholders of New England Star Advisers Fund
(the "Fund"), a series of the Trust, to be held at the offices of New England
Funds, L.P. ("NEF"), 399 Boylston Street, Boston, Massachusetts 02116, on
Friday, October 17, 1997 at 2:30 p.m. (Eastern time), and at any adjournment or
adjournments thereof (the "Meeting"). This proxy statement and its enclosures
are being mailed to shareholders beginning on or about September 3, 1997. A copy
of the Fund's Annual Report for the year ended December 31, 1996 and the Fund's
Semiannual Report for the six months ended June 30, 1997 may be obtained without
charge by writing to NEF at the above address or by calling (800) 225-5478.
This Proxy Statement consists of five parts.
PART I contains general information relating to the Meeting.
PART II contains information relating to Proposal 1, the new Sub-Advisory
Agreement for the Fund between New England Funds Management, L.P. ("NEFM") and
Harris Associates L.P. ("Harris Associates").
PART III contains information relating to Proposal 2, the new Sub-Advisory
Agreement for the Fund between NEFM and Founders Asset Management, Inc.
("Founders") and Proposal 3, the new Sub-Advisory Agreement between NEFM and
Loomis, Sayles & Company, L.P. ("Loomis Sayles").
PART IV contains information relating to Proposal 4, the proposal with
respect to the future operation of the Fund whereby the Fund may from time to
time, to the extent permitted by any exemption or exemptions granted by the
Securities and Exchange Commission (the "SEC"), permit NEFM to enter into new
and amended agreements with sub-advisers with respect to the Fund without
obtaining shareholder approval of such agreements, and to permit such
sub-advisers to manage the assets of the Fund (or a segment thereof) pursuant to
such sub-advisory agreements.
PART V contains information about the Trust, NEFM, Harris Associates,
Founders, Loomis Sayles and certain brokerage and other miscellaneous matters.
<PAGE>
I. GENERAL
The Fund's shareholders of record on August 20, 1997 (the "Record Date")
are entitled to one vote for each share of beneficial interest of the Fund held
as of that date. The number of shares of beneficial interest of the Fund issued
and outstanding as of the Record Date was __________.
Timely, properly executed proxies will be voted as you instruct. If you
return your proxy card and no choice is indicated, your shares will be voted in
favor of the Proposals set forth in the attached Notice of Meeting. At any time
before it has been voted, the enclosed proxy may be revoked by the signer by a
written revocation received by the Secretary of the Trust, by properly executing
a later-dated proxy or by attending the Meeting, requesting return of any
previously delivered proxy and voting in person.
The costs of solicitation of proxies will be borne by the Fund.
Solicitation of proxies by personal interview, mail, telephone and telegraph may
be made by officers and Trustees of the Trust and employees of NEF. In addition,
the firm of D.F. King & Co., Inc. has been retained to assist in the
solicitation of proxies, at a cost which is not expected to exceed $______, plus
reimbursement of such firm's out-of-pocket expenses.
II. NEW SUB-ADVISORY AGREEMENT WITH HARRIS ASSOCIATES
The Fund is a multi-manager mutual fund. NEFM acts as the adviser to the
Fund. The portfolio of the Fund is divided into four segments, each of which is
managed by a different money management firm, as sub-adviser to NEFM. Until
recently, Berger Associates, Inc. ("Berger") managed one of the segments of the
Fund, pursuant to a Sub-Advisory Agreement between NEFM and Berger (the "Old
Sub-Advisory Agreement").
The Trustees of the Trust have approved, and recommend that the
shareholders of the Fund approve, a new Sub-Advisory Agreement (the "New
Sub-Advisory Agreement") between NEFM and Harris Associates. The New
Sub-Advisory Agreement would be substantially similar to the Old Sub-Advisory
Agreement, except: (i) references to Berger would be changed to references to
Harris Associates, (ii) the effective dates would be changed and (iii) the
sub-advisory fee paid by NEFM to Harris Associates would, after shareholder
approval of the New Sub-Advisory Agreement is obtained, be higher than the fee
paid by NEFM to Berger (see "Comparison of Old and New Sub-Advisory Agreements"
below). The proposed New Sub-Advisory Agreement would not affect the rate of the
management fee paid by the Fund to NEFM.
ADVISORY AGREEMENT
NEFM has acted as the Fund's adviser since January 2, 1996, and currently
acts as the Fund's adviser pursuant to an Advisory Agreement dated August 30,
1996, as amended May 9, 1997 (the "Advisory Agreement"). (Prior to January 2,
1996, New England Investment Companies, L.P. ("NEIC") acted as the Fund's
adviser.) The Fund's shareholders last approved such Advisory Agreement on
December 28, 1995. The purpose of the submission of this agreement for
shareholder approval at such time was for its initial approval. The Trustees of
the Trust, at a meeting held on May 9, 1997, approved an amendment to the
Advisory Agreement to reduce the management fees payable by the Fund thereunder
and approved the continuation of the Advisory Agreement, as so amended, for a
one-year period beginning on June 1, 1997.
Under the Advisory Agreement, NEFM has overall advisory and administrative
responsibility with respect to the Fund. The Advisory Agreement also provides
that NEFM will, subject to NEFM's rights to delegate such responsibilities to
other parties, provide to the Fund both (1) portfolio management services
(defined to mean managing the investment and reinvestment of the assets of the
Fund, subject to the supervision and control of the Trustees of the Trust) and
(2) administrative services (defined to mean furnishing or paying the expenses
of the Fund for office space, facilities and equipment, services of executive
and other personnel of the Trust and certain other administrative and general
management services). The Advisory Agreement provides for a management fee
payable by the Fund to NEFM at the annual rate of 1.05% of the first $1 billion
of the Fund's average daily net assets and 1.00% of such assets in excess of $1
billion. Prior to May 9, 1997, the Advisory Agreement provided for a management
fee payable by the Fund to NEFM at the annual rate of 1.05% of all such assets.
Prior to August 30, 1996, NEFM provided the same services and the Fund paid NEFM
a management fee at the same annual rate under a previous Advisory Agreement.
For the fiscal year ended December 31, 1996, the aggregate management fee
payable by the Fund to NEFM under the Advisory Agreement (and its predecessor)
was $6,821,099.
OLD SUB-ADVISORY AGREEMENT
NEFM has delegated its responsibility under the Advisory Agreement to
provide portfolio management services to the Fund to four sub-advisers, each
sub-adviser managing a different segment of the Fund's portfolio. Until July 25,
1997, NEFM delegated responsibility for managing the assets of one segment of
the Fund to Berger, pursuant to the Old Sub-Advisory Agreement, which is dated
August 30, 1996. From January 2 to August 30, 1996, Berger managed this segment
of the Fund pursuant to a previous Sub-Advisory Agreement between NEFM and
Berger. Prior to January 2, 1996, Berger managed this segment of the Fund
pursuant to a Sub-Advisory Agreement between NEIC and Berger. The Old
Sub-Advisory Agreement required Berger to manage the investment and reinvestment
of the assets of its segment of the Fund, subject to the supervision of NEFM.
Under the terms of the Old Sub-Advisory Agreement, Berger was authorized to
effect portfolio transactions for its segment of the Fund, using its own
discretion and without prior consultation with NEFM. Berger was also required to
report periodically to NEFM and the Trustees of the Trust.
The Old Sub-Advisory Agreement was last submitted to the Fund's
shareholders for approval on December 28, 1995. The purpose of the submission of
this agreement for shareholder approval at such time was for its initial
approval. The Trustees of the Trust, at a meeting held on May 9, 1997, approved
the continuation of the Old Sub-Advisory Agreement for a one-year period
beginning on June 1, 1997.
Under the Old Sub-Advisory Agreement, Berger was entitled to receive
from NEFM (and not from the Fund) a sub-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 it manages and 0.50% of such assets in excess of $50 million. Berger
agreed, beginning, May 9, 1997, to waive a portion of its sub-advisory fee under
the Old Sub-Advisory Agreement equal to 0.025% of the excess, if any, of the
average daily net assets of the segment of the Fund managed by Berger over $250
million.
INTERIM AND NEW SUB-ADVISORY AGREEMENTS
Based on a review of the investment approach used by Berger in managing
its segment of the Fund's portfolio, such segment's performance record under
Berger's management, the performance record of Harris Associates and its
portfolio management personnel in managing other equity mutual funds and the
performance of other equity funds, NEFM recommended and the Trustees of the
Trust determined that it would be appropriate for Harris Associates to assume
responsibility for the day-to-day management of such segment of the Fund's
portfolio. Thus, upon the recommendation of NEFM, the Trustees voted on July 25,
1997 to terminate the Old Sub-Advisory Agreement as of the close of business on
July 25, 1997 and to approve both (i) a Sub-Advisory Agreement between NEFM and
Harris Associates dated July 25, 1997 (the "Interim Sub-Advisory Agreement"), by
which NEFM appointed Harris Associates to act as sub-adviser to such segment of
the Fund beginning July 25, 1997, and (ii) the New Sub-Advisory Agreement
between NEFM and Harris Associates, by which Harris Associates would, following
approval of the New Sub-Advisory Agreement by the Fund's shareholders (assuming
such approval is obtained), continue to act as sub-adviser to such segment. The
New Sub-Advisory Agreement is substantially identical to the Interim
Sub-Advisory Agreement, except that the rate of fees payable by NEFM to Harris
Associates is higher under the New Sub-Advisory Agreement. The fee rate payable
by NEFM to Harris Associates under the Interim Sub-Advisory Agreement is
identical to the fee rate payable by NEFM to Berger under the Old Sub-Advisory
Agreement. The fee rate payable to Harris Associates under the New Sub-Advisory
Agreement is set forth below. Berger has consented to the termination of the Old
Sub-Advisory Agreement as of the close of business on July 25, 1997. Harris
Associates has agreed, until further notice to the Fund, to waive a portion of
its sub-advisory fee under the Interim Sub-Advisory Agreement equal to 0.025% of
the excess, if any, of the average daily net assets of the segment of the Fund
managed by Harris Associates over $250 million. Furthermore, Harris Associates
has agreed to waive payment of its sub-advisory fee by NEFM under the Interim
Sub-Advisory Agreement (to the extent not waived as provided in the preceding
sentence) through August 31, 1997, and NEFM will pay such waived fees to Berger.
These waivers by Harris Associates will not reduce the management fee paid by
the Fund to NEFM.
The New Sub-Advisory Agreement is subject to approval by the Fund's
shareholders. Shareholder approval of a sub-advisory agreement ordinarily must
be obtained before such an agreement takes effect. However, the Interim
Sub-Advisory Agreement went into effect as of the close of business on July 25,
1997, pursuant to a rule of the SEC which under certain circumstances allows
such agreements to take effect, and to remain in effect for up to 120 days,
without receiving prior shareholder approval, as long as the fees payable under
such agreement do not exceed the fees payable under the predecessor agreement.
If the New Sub-Advisory Agreement is approved by the Fund's shareholders, it
will take effect at the close of business on the date such approval is obtained.
It is expected that such approval will be obtained on or shortly after October
17, 1997, at which time the Interim Sub-Advisory Agreement will terminate and
Harris Associates will begin earning sub-advisory fees at a higher rate under
the New Sub-Advisory Agreement. The Trustees recommend that the shareholders
approve the New Sub-Advisory Agreement.
In determining to approve the appointment of Harris Associates as
sub-adviser to a segment of the Fund, to approve the Interim and New
Sub-Advisory Agreements and to recommend the New Sub-Advisory Agreement for
shareholder approval, the Trustees considered the qualifications of Harris
Associates and its personnel to provide portfolio management services to this
segment of the Fund. The Trustees also reviewed information about Harris
Associates' proposed approach to managing such segment of the Fund's portfolio.
Harris Associates' investment philosophy is predicated on the belief that over
time market price and value converge and that investment in securities priced
significantly below long-term value presents the best opportunity to achieve
long term growth of capital.
In conjunction with the appointment of Harris Associates as sub-adviser,
the investment policies for this segment are changed as of July 25, 1997 in that
this segment will invest primarily in common stocks and securities convertible
into common stocks, but may also invest in other securities that are suited to
the Fund's investment objective, including preferred stocks and fixed-income
securities (including lower quality fixed-income securities). In managing its
segment of the Fund's portfolio, Harris Associates will use several qualitative
and quantitative methods in analyzing economic value, but will consider the
primary determinant of value to be the enterprise's long-run ability to general
cash for its owners. Once Harris Associates has determined that a security is
undervalued, Harris Associates will consider it for purchase by this segment of
the Fund. In making investment decisions, a key additional factor will be the
quality of management, and for equity securities particular emphasis will be
placed on significant stock ownership by the company's management. Harris
Associates believes that the risks of equity investing are often reduced if
management's interests are strongly aligned with the interests of stockholders.
When Berger was managing this segment of the Fund, common stocks generally
constituted all or most the segment, although the segment had the ability from
time to time to take substantial positions in securities convertible into common
stocks, to purchase preferred stocks, government securities, zero-coupon
securities and other senior securities when Berger believed it was appropriate
to do so, and to invest in Rule 144A securities and to purchase put and call
options on stock indices and futures contracts and options thereon for the
purpose of hedging. This change in investment policies is not separately subject
to shareholder approval.
Harris Associates has informed the Fund that shortly after it began
managing its segment of the Fund's portfolio, it commenced restructuring the
segment to reflect Harris Associates' judgments as to stock selection. Harris
Associates estimates that the majority of this restructuring, which will take
place over time, will be completed by September 1, 1997. Harris Associates
estimates that the costs of this restructuring, which will be paid by the Fund,
could equal approximately 0.26% of the segment's net asset value. Based on the
segment's net asset value at June 30, 1997, these estimated costs would be
approximately $550,000. There can be no assurance that actual costs would not be
significantly higher or lower than this estimate. Restructuring costs consist
primarily of brokerage fees and dealer spreads or markups related to purchasing
and selling securities for the segment. These amounts are treated as capital
items, rather than operating expenses. They will thus reduce the Fund's net
asset value, rather than increase its operating expenses. The costs of holding
the Meeting, estimated at _______, are in addition to these restructuring costs
and will be borne by the Fund, regardless of whether the New Sub-Advisory
Agreement is approved.
The New Sub-Advisory Agreement. The text of the New Sub-Advisory Agreement
is set forth as Exhibit A to this Proxy Statement. The following description of
the New Sub-Advisory Agreement is qualified in its entirety by reference to the
full text of the Agreement as so set forth.
The New Sub-Advisory Agreement requires Harris Associates to manage the
investment and reinvestment of the assets of its segment of the Fund, subject to
the supervision of NEFM. Under the terms of the New Sub-Advisory Agreement,
Harris Associates will be authorized to effect portfolio transactions for its
segment of the Fund, using its own discretion and without prior consultation
with NEFM. Harris Associates will be required to report periodically to NEFM and
the Trustees of the Trust. The New Sub-Advisory Agreement provides that NEFM
shall compensate Harris Associates at the annual rate of 0.65% of the first $50
million of the average daily net assets of the segment of the Fund that Harris
Associates manages, 0.60% of the next $50 million of such assets and 0.55% of
any such assets in excess of $100 million.
The New Sub-Advisory Agreement provides that it will continue in effect
for two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund
and (ii) by vote of a majority of the Trustees who are not "interested persons,"
as that term is defined in the Investment Company Act of 1940 (the "1940 Act"),
of the Trust, NEFM or Harris Associates, cast in person at a meeting called for
the purpose of voting on such approval. Any amendment to the New Sub-Advisory
Agreement must be approved by NEFM and Harris Associates and, if required by
law, by vote of a majority of the outstanding voting securities of the Fund and
by a majority of the Trustees who are not such interested persons, cast in
person at a meeting called for the purpose of voting on such approval. The New
Sub-Advisory Agreement may be terminated without penalty by vote of the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty days' written notice, or by Harris Associates or NEFM upon
sixty days' written notice, and will terminate automatically in the event of its
assignment. The New Sub-Advisory Agreement will automatically terminate if the
Advisory Agreement is terminated. The New Sub-Advisory Agreement provides that
Harris Associates shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
As noted above, the Interim Sub-Advisory Agreement currently in effect
differs from the proposed New Sub-Advisory Agreement only in its date and in the
rate of the sub-advisory fee payable by NEFM to Harris Associates.
COMPARISON OF OLD, INTERIM AND NEW SUB-ADVISORY AGREEMENTS
The proposed New Sub-Advisory Agreement is substantially identical to the
Old Sub-Advisory Agreement for the Fund, except that, under the New Sub-Advisory
Agreement: (i) references to Berger are changed to references to Harris
Associates, (ii) the Old Sub-Advisory Agreement was dated August 30, 1996,
whereas the New Sub-Advisory Agreement will be dated the date that it takes
effect, expected to be October 17, 1997 or shortly thereafter; and (iii) the
sub-advisory fees payable under the agreements differ as set forth below.
Under the New Sub-Advisory Agreement, Harris Associates would be entitled
to receive a sub-advisory fee, paid by NEFM, at the annual rate of 0.65% of the
first $50 million of the average daily net assets of the segment of the Fund
that Harris Associates manages, 0.60% of the next $50 million of such assets and
0.55% of such assets in excess of $100 million. Under the Old Sub-Advisory
Agreement, NEFM paid Berger a sub-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 Berger managed and 0.50% of such assets in excess of $50 million; this is
the sub-advisory fee rate currently payable by NEFM to Harris Associates under
the Interim Sub-Advisory Agreement. (As noted above, Berger agreed to waive a
portion of its sub-advisory fee payable under the Old Sub-Advisory Agreement
beginning on May 9, 1997, and Harris Associates agreed to a similar waiver of a
portion of its sub-advisory fees payable under the Interim Sub-Advisory
Agreement.) As of June 30, 1997, the net assets of the segment of the Fund then
managed by Berger (and now managed by Harris Associates) were $210,643,733. For
the fiscal year ended December 31, 1996, NEFM paid sub-advisory fees of $796,201
to Berger. If the Interim Sub-Advisory Agreement had been in effect during 1996,
NEFM would have paid this same amount in sub-advisory fees to Harris Associates.
If the New Sub-Advisory Agreement had been in effect during 1996, NEFM would
have paid sub-advisory fees of $923,321 to Harris Associates, or 15.97% more
than the sub-advisory fees paid to Berger under the Old Sub-Advisory Agreement.
All sub-advisory fees under the Old Sub-Advisory Agreement, the Interim
Sub-Advisory Agreement and the New Sub-Advisory Agreement are paid by NEFM and
not by the Fund. As noted above, the Fund pays NEFM a management fee at the
annual rate of 1.05% of the first $1 billion of the Fund's average daily net
assets, and 1.00% of such assets in excess of $1 billion.
TRUSTEES' APPROVAL AND RECOMMENDATION
The Trustees of the Trust believe that the terms of the New Sub-Advisory
Agreement are fair to, and in the best interest of, the Fund and its
shareholders. The Trustees of the Trust, including all of the disinterested
Trustees, recommend that the shareholders of the Fund approve the New
Sub-Advisory Agreement for the Fund between NEFM and Harris Associates.
The required vote for approval of the New Sub-Advisory Agreement for the
Fund is the lesser of (1) 67% of the shares of the Fund represented at the
Meeting, if more than 50% of the shares of the Fund are represented at the
Meeting, or (2) more than 50% of the outstanding shares of the Fund. If the
shareholders of the Fund do not approve the New Sub-Advisory Agreement, the
Trustees of the Trust will consider alternative arrangements for the management
of the assets of the segment of the Fund that is currently being managed by
Harris Associates pursuant to the Interim Sub-Advisory Agreement, and the
Interim Sub-Advisory Agreement will be terminated not later than 120 days after
it took effect.
III. NEW SUB-ADVISORY AGREEMENTS WITH FOUNDERS AND LOOMIS SAYLES
As noted above in Part II, the Fund is a multi-manager mutual fund,
whose portfolio is divided into four segments, each managed by a different
sub-adviser. NEFM has delegated its responsibility under the Advisory Agreement
to provide portfolio management services to four sub-advisers, each sub-adviser
managing a different segment of the Fund's portfolio. NEFM has delegated
responsibility for managing the assets of one segment of the Fund to Founders
pursuant to a Sub-Advisory Agreement between NEFM and Founders (the "Founders
Sub-Advisory Agreement"), and has delegated responsibility for managing the
assets of another segment of the Fund to Loomis Sayles pursuant to a
Sub-Advisory Agreement between NEFM and Loomis Sayles (the "Loomis Sayles
Sub-Advisory Agreement").
The Trustees of the Trust have approved, and recommend that the
shareholders of the Fund approve, new Sub-Advisory Agreements between NEFM and
each of Founders and Loomis Sayles (the "New Founders Sub-Advisory Agreement"
and the "New Loomis Sayles Sub-Advisory Agreement," respectively). Such new
Sub-Advisory Agreements would be substantially identical to the Founders
Sub-Advisory Agreement and the Loomis Sayles Sub-Advisory Agreement currently in
effect, except for their dates and except for a reduction in the sub-advisory
fees payable by NEFM to Founders and Loomis Sayles thereunder. The proposed New
Founders Sub-Advisory Agreement and New Loomis Sayles Sub-Advisory Agreement
would not affect the rate of the management fee payable by the Fund to NEFM.
The Founders Sub-Advisory Agreement and the Loomis Sayles Sub-Advisory
Agreement are each dated August 30, 1996. From January 2 to August 30, 1996,
Founders and Loomis Sayles managed the segments of the Fund currently managed by
them pursuant to separate Sub-Advisory Agreements between NEFM and each of
Founders and Loomis Sayles. Prior to January 2, 1996, Founders and Loomis Sayles
managed these segments of the Fund pursuant to separate Sub-Advisory Agreements
between NEIC and each of Founders and Loomis Sayles. The Founders and Loomis
Sayles Sub-Advisory Agreements each require Founders or Loomis Sayles, as the
case may be, to manage the investment and reinvestment of the assets of its
segment of the Fund, subject to the supervision of NEFM. Under the terms of the
Founders and Loomis Sayles Sub-Advisory Agreements, each of Founders and Loomis
Sayles is authorized to the effect portfolio transactions for its segment of the
Fund, using its own discretion and without prior consultation with NEFM.
Founders and Loomis Sayles are required to report periodically to NEFM and the
Trustees of the Trust.
The Founders and Loomis Sayles Sub-Advisory Agreements were each last
submitted to the Fund's shareholders for approval on December 28, 1995. The
purpose of the submission of these agreements for shareholder approval at such
time was for their initial approval. The Trustees of the Trust, at a meeting
held on May 9, 1997, approved the continuation of both the Founders Sub-Advisory
Agreement and the Loomis Sayles Sub-Advisory Agreement for a one-year period
beginning on June 1, 1997. Under the Founders and Loomis Sayles Sub-Advisory
Agreements, Founders and Loomis Sayles are each entitled to receive from NEFM
(and not from the Fund) a sub-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 it manages and 0.50% of such assets in excess of $50 million.
Based on the rapid growth in the size of the Fund since its inception
in 1994, and a review of advisory fee rates payable by comparable mutual funds,
NEFM recommended and the Trustees determined that it would be appropriate to
reduce the management fee payable by the Fund on net assets of the Fund in
excess of $1 billion, and to reduce the sub-advisory fees payable by NEFM to
Founders and Loomis Sayles for managing their segments of the Fund on assets of
those segments in excess of $250 million. Thus, on the recommendation of NEFM,
the Trustees voted on May 9, 1997 to approve an amendment to the Advisory
Agreement to reduce the rate of management fees payable thereunder (as discussed
above in Part II) and to approve the New Founders Sub-Advisory Agreement and the
New Loomis Sayles Sub-Advisory Agreement, by which the sub-advisory fees payable
by NEFM to Founders and Loomis Sayles would be reduced on the assets of the
segments of the Fund managed by Founders and Loomis Sayles in excess of $250
million. The New Founders Sub-Advisory Agreement and the New Loomis Sayles
Sub-Advisory Agreement are substantially identical to the existing Founders and
Loomis Sayles Sub-Advisory Agreements, except that the sub-advisory fee rate
payable by NEFM to Founders and Loomis Sayles under both the New Founders
Sub-Advisory Agreement and the New Loomis Sayles Sub-Advisory Agreement is 0.55%
of the first $50 million of the net assets of the segment managed by Founders or
Loomis Sayles, as the case may be, 0.50% of the next $200 million of such assets
and 0.475% of such assets in excess of $250 million.
The New Founders Sub-Advisory Agreement and the New Loomis Sayles Sub-
Advisory Agreement are each separately subject to approval by the Fund's
shareholders. If such Sub-Advisory Agreements are approved by the Fund's
shareholders, they will take effect at the close of business on the date such
approval is obtained, expected to be on or shortly after October 17, 1997, at
which time the existing Founders and Loomis Sayles Sub-Advisory Agreements will
terminate, and Founders and Loomis Sayles will begin earning sub-advisory fees
at a lower rate under the new agreements. The Trustees recommend that the
shareholders approve both the New Founders Sub-Advisory Agreement (Proposal 2)
and the New Loomis Sayles Sub-Advisory Agreement (Proposal 3).
The terms of each of the New Founders Sub-Advisory Agreement and the
New Loomis Sayles Sub-Advisory Agreement are substantially similar to those of
the New Sub-Advisory Agreement with Harris Associates, as set forth in Exhibit A
to this Proxy Statement and as described above in Part II under "The New
Sub-Advisory Agreement," except for the sub-advisory fee rates payable
thereunder and except that references to Harris Associates are changed to
references to Founders or Loomis Sayles, as the case may be.
Each of Founders and Loomis Sayles has agreed, beginning May 9, 1997
and until further notice to the Fund, to waive payment of its sub-advisory fee
under the Founders Sub-Advisory Agreement or the Loomis Sayles Sub-Advisory
Agreement, as the case may be, to the extent that such fee is in excess of the
fee that would be payable under the New Founders Sub-Advisory Agreement or the
New Loomis Sayles Sub-Advisory Agreement.
As of June 30, 1997, the net assets of the segments of the fund managed
by Founders and Loomis Sayles were $_________________ and $__________________,
respectively. For the fiscal year ended December 31, 1996, NEFM payed
sub-advisory fees of $______________ and $_______________ to Founders and Loomis
Sayles, respectively. If the New Founders Sub-Advisory Agreement and the New
Loomis Sayles Sub-Advisory Agreement had been in effect during 1996, NEFM would
have paid [these same amounts] in sub-advisory fees to Founders and Loomis
Sayles.
The Trustees of the Trust believe that the terms of the New Founders
Sub-Advisory Agreement and the New Loomis Sayles Sub-Advisory Agreement are in
the best interests of the Fund and its shareholders. The Trustees of the Trust,
including all of the disinterested Trustees, recommend that the shareholders of
the Fund approve both the New Founders Sub-Advisory Agreement for the Fund
between NEFM and Founders and the New Loomis Sayles Sub-Advisory Agreement for
the Fund between NEFM and Loomis Sayles.
The required vote for approval of both the New Founders Sub-Advisory
Agreement and the New Loomis Sayles Sub-Advisory Agreement is the lesser of (1)
67% of the shares of the Fund represented at the Meeting, if more than 50% of
the shares of the Fund are represented at the Meeting, or (2) more than 50% of
the outstanding shares of the Fund. If the shareholders of the Fund do not
approve either the New Founders Sub-Advisory Agreement or the new Loomis Sayles
Sub-Advisory Agreement, then the existing Founders Sub-Advisory Agreement and/or
Loomis Sayles Sub-Advisory Agreement, as the case may be, will remain in effect,
and the Trustees will consider such actions as may be in the best interests of
the Fund's shareholders.
IV. FUTURE SUB-ADVISORY AGREEMENTS WITHOUT SHAREHOLDER VOTE
The Fund proposes to operate in a manner in which it may from time to
time, to the extent permitted by any exemption or exemptions granted by the SEC,
permit NEFM to enter into new and amended agreements with sub-advisers with
respect to the Fund without obtaining shareholder approval of such agreements,
and to permit such sub-advisers to manage the assets of the Fund (or a segment
thereof) pursuant to such sub-advisory agreements.
The 1940 Act generally provides that an investment adviser or sub-adviser
to a mutual fund may act as such only pursuant to a written contract which has
been approved by a vote of the fund's shareholders and by a vote of a majority
of the trustees of the fund who are not parties to such contract or agreement or
interested persons of any party to such contract or agreement. The Trust and
NEFM have applied to the SEC, however, for an exemption from the shareholder
approval requirement with respect to certain new and amended sub-advisory
agreements entered into from time to time by NEFM and a sub-adviser with respect
to the Fund, under certain circumstances and subject to certain conditions (the
"Exemption Application"). If the SEC grants an exemptive order (the "Exemptive
Order") to the Trust as sought in the Exemption Application or any amendment
thereto, NEFM would be permitted, under certain conditions, to enter into new
and amended sub-advisory agreements, including agreements with new sub-advisers
(including, if permitted by Exemptive Order, a sub-adviser that is affiliated
with the Fund or NEFM), and agreements with existing sub-advisers if there is a
material change in the existing sub-advisory agreement or if there is an
"assignment," as defined in the 1940 Act, or other event causing termination of
the existing sub-advisory agreement. Nonetheless, even if the Exemptive Order is
granted, any sub-advisory agreement would, under the 1940 Act, be subject to
approval by a majority of the Trustees of the Trust who are not parties to or
interested persons of any party to the agreement. Furthermore, the Fund would
still require shareholder approval to amend its Advisory Agreement with NEFM
(including an amendment to raise the management fee rate payable under such
agreement) or to enter into a new Advisory Agreement with NEFM or any other
adviser.
It is expected that, if the Exemptive Order is granted, it will be a
condition to such exemption that, among other things, the shareholders of the
Fund first approve the operation of the Fund as proposed in the Exemption
Application, i.e., permitting NEFM to enter into sub-advisory agreements with
sub-advisers in the future without obtaining shareholder approval of each
agreement. It is also expected that the Exemptive Order may include as a
condition a requirement that within 90 days after the hiring of any new
sub-adviser or the implementation of any proposed material change in a
Sub-Advisory Agreement, the Fund will furnish shareholders the information about
a new sub-adviser or sub-advisory agreement that would be included in a proxy
statement relating to shareholder approval of such agreement.
The Fund has applied for this exemption for several reasons. As described
under Proposal 1, the Fund utilizes an adviser/sub-adviser management structure,
where NEFM acts as the Fund's investment adviser, delegating the day-to-day
portfolio management for the Fund to four sub-advisers. Under such a structure,
the Fund's sub-advisers act in a capacity similar to that of the portfolio
manager in a more traditional structure that does not involve a sub-adviser.
Specifically, the Fund's sub-advisers, like portfolio managers in a more
traditional structure, manage the segments of the Fund's portfolio, under the
oversight and supervision of the Fund's adviser. If the Fund were to change
sub-advisers, NEFM would continue in its role as adviser and would continue to
exercise oversight and supervision of the Fund's investment affairs as conducted
by the new sub-adviser. Changing the Fund's sub-advisers is, therefore,
analogous to replacing the portfolio manager of a single-manager managed fund,
which does not require shareholder approval under the 1940 Act.
In addition, given the Fund's management structure, the shareholder
approval requirement under the 1940 Act may cause the Fund's shareholders to
incur unnecessary expenses and could hinder the prompt implementation of
sub-advisory changes that are in the best interest of the shareholders, such as
prompt removal of a sub-adviser if circumstances warrant such removal. The
Trustees of the Trust believe that without the ability to employ promptly a new
sub-adviser or re-employ promptly the current sub-adviser, as the case may be,
investors' expectations may be frustrated and the Fund and its shareholders
could be seriously disadvantaged under the following circumstances: (a) where a
sub-adviser has been terminated because its performance was unsatisfactory or
its retention was otherwise deemed inadvisable, (b) where a sub-adviser has
resigned and (c) where there has been an "assignment" causing the termination of
a sub-advisory agreement (i.e., a change in the actual control or management of
a sub-adviser).
In the absence of an exemption, to obtain the shareholder approval
required by the 1940 Act for a sub-advisory agreement, the Fund must convene a
shareholder's meeting, which invariably involves considerable delay and expense.
Where NEFM, as adviser, has recommended replacement of a sub-adviser, and the
Trustees of the Trust have determined that such replacement is necessary, the
Fund could receive less than satisfactory sub-advisory services prior to the
time that an agreement with a new subadviser is approved by shareholders. Also,
in that situation or where there has been an unexpected resignation or change in
control of a sub-adviser (events which, in many cases, are beyond the control of
the Fund), the Fund may be forced to operate with a less than satisfactory
sub-adviser for some period of time. In such circumstances, without the ability
to engage a new sub-adviser promptly, NEFM, as the Fund's adviser, might have to
assume direct responsibility on a temporary basis for management of the assets
previously assigned to a sub-adviser.
The Trustees of the Trust unanimously recommend that the shareholders
approve Proposal 4 with respect to the operation of the Fund in order to permit
NEFM to enter into new and amended agreements with sub-advisers with respect to
the Fund without obtaining shareholder approval of such agreements, and to
permit such sub-advisers to manage the assets of the Fund (or a segment thereof)
pursuant to such sub-advisory agreements.
The required vote for approval of this Proposal is, the lesser of (1) 67%
of the shares of the Fund represented at the Meeting, if more than 50% of the
shares of the Fund are represented at the Meeting, or (2) more than 50% of the
outstanding shares of the Fund. If the shareholders of the Fund do not approve
the Proposal, the Trustees of the Trust will consider such alternative actions
as may be in the best interests of the Fund.
V. ADDITIONAL INFORMATION
INFORMATION ABOUT THE TRUST
The Trust is a diversified, open-end management investment company
organized in 1985 as a business trust under the laws of Massachusetts. The Trust
is a series type company with twelve investment portfolios. The Fund is one of
those portfolios. The address of the Trust is 399 Boylston Street, Boston,
Massachusetts 02116.
INFORMATION ABOUT NEFM
NEFM is a limited partnership. Its sole general partner, NEF Corporation,
is a wholly-owned subsidiary of NEIC Holdings, Inc. ("NEIC Holdings"), which is
a wholly-owned subsidiary of NEIC. NEF Corporation is also the sole general
partner of NEF, which is the principal underwriter for the Fund. NEIC owns the
entire limited partnership interest in each of NEF and NEFM. The sole general
partner of NEIC is New England Investment Companies, Inc. ("NEIC Inc."), which
is a wholly-owned subsidiary of MetLife New England Holdings, Inc., which is in
turn a wholly-owned subsidiary of Metropolitan Life Insurance Company
("MetLife"). MetLife owns indirectly a majority of the outstanding limited
partnership interests in NEIC.
The principal executive officer of NEF and NEFM is Henry L.P. Schmelzer,
who is the President and a Trustee of the Trust and whose principal occupation
is his positions with NEF and NEFM. The address of NEF, NEFM, NEF Corporation,
NEIC Holdings, NEIC, NEIC Inc. and Mr. Schmelzer is 399 Boylston Street, Boston,
Massachusetts 02116. The address of MetLife New England Holdings, Inc. and
MetLife is One Madison Avenue, New York, New York 10010.
INFORMATION ABOUT HARRIS ASSOCIATES
Harris Associates is a limited partnership. Its sole general partner,
Harris Associates Inc. ("HAI"), is a wholly-owned subsidiary of NEIC Holdings.
NEIC owns the entire limited partnership interest in Harris Associates. The
principal executive officer of Harris Associates is Robert M. Levy, whose
principal occupation is his position with Harris Associates. The address of
Harris Associates, HAI and Mr. Levy is Two North LaSalle Street, Chicago,
Illinois 60602.
Harris Associates acts as investment adviser (or sub-adviser, in the case
of the funds marked with an asterisk below) to the following other mutual funds
that have similar investment objectives to the Fund, for compensation at the
annual fee rates of the corresponding average net asset levels of those funds
set forth in the table below. The table also sets forth the net assets of those
other funds at June 30, 1997:
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND
OTHER FUND WITH (IN MILLIONS) ANNUAL AVERAGE NET
SIMILAR OBJECTIVE AT 6/30/97 FEE RATE ASSET LEVELS
----------------- ---------- -------- ------------
<S> <C> <C> <C>
*New England Star Worldwide Fund - U.S. $98 0.65% first $50 million
segment managed by Harris Associates 0.60% next $50 million
0.55% over $100 million
The Oakmark Fund $5,767 1.00% first $2.5 billion
0.95% next $2.5 billion
0.90% over $5 billion
*LPT Variable Insurance Series Trust - Harris $2 0.75% first $25 million
Associates Value Portfolio 0.60% next $75 million
0.50% over $100 million
</TABLE>
INFORMATION ABOUT FOUNDERS
The principal executive officer of Founders is Bjorn K. Borgen, whose
principal occupation is his position as Chief Executive Officer and Director of
Founders. Mr. Borgen owns all of the stock of Founders. The address of Founders
and Mr. Borgen is 2930 East Third Avenue, Denver, Colorado 80206. [Any other
directors?]
Founders acts as investment adviser (or sub-adviser, in the case of the
funds marked with an asterisk below) to the following other mutual funds that
have similar investment objectives to the Fund, for compensation at the annual
fee rates of the corresponding average net asset levels of those funds set forth
in the table below. The table also sets forth the net assets of those other
funds at June 30, 1997:
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Other Fund With Similar Net Assets of Other Fund Annual Fee Rate Average Net Asset Levels
Objective (in millions) at 6/30/97
- ------------------------------ ---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
Founders Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
[Any fee waivers?]
INFORMATION ABOUT LOOMIS SAYLES
Loomis Sayles is a limited partnership. Its sole general partner,
Loomis, Sayles & Company, Incorporated ("LSCI"), is a wholly owned subsidiary of
NEIC Holdings. NEIC owns the entire limited partnership interest in Loomis
Sayles. The principal executive officer of Loomis Sayles is Robert Blanding, who
is of Loomis Sayles and whose principal occupation is his position with Loomis
Sayles. The address of Loomis Sayles and LSCI is One Financial Center, Boston,
Massachusetts 02111. Mr. Blanding's address is 465 First Street West, Sonoma,
California 95476.
Loomis Sayles acts as investment adviser (or sub-adviser), in the case
of the funds marked with an asterisk below, to the following other mutual funds
that have similar investment objectives to the Fund, for compensation at the
annual fee rates of the corresponding average net asset levels of those funds
set forth in the table below. The table also sets forth the net assets of those
other funds at June 30, 1997:
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Other Fund With Similar Net Assets of Other Fund Annual Fee Rate Average Net Asset Levels
Objective (in millions) at 6/30/97
- ------------------------------ ---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
Loomis Sayles Small Cap Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
New England Zenith
Fund-Loomis Sayles Small Cap
Growth Series *
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Maxim Series-Maxim Small Cap
Aggressive Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
[Any waivers?]
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of portfolio securities for
their segments of the Fund, Harris Associates, Founders and Loomis Sayles always
seek best execution, subject to the considerations set forth below. Transactions
in unlisted securities are carried out through broker-dealers who make the
market for such securities unless, in the judgment of Harris Associates,
Founders or Loomis Sayles, a more favorable execution can be obtained by
carrying out such transactions through other brokers or dealers.
Harris Associates, Founders and Loomis Sayles select only brokers or
dealers which they believe are financially responsible, will provide efficient
and effective services in executing, clearing and settling an order and will
charge commission rates which, when combined with the quality of the foregoing
services, will produce best execution for the transaction. This does not
necessarily mean that the lowest available brokerage commission will be paid.
However, the commissions are believed to be competitive with generally
prevailing rates. Harris Associates, Founders and Loomis Sayles will use their
respective best efforts to obtain information as to the general level of
commission rates being charged by the brokerage community from time to time and
will evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account.
Receipt of brokerage or research services from brokers may sometimes be
a factor in selecting a broker which Harris Associates, Founders or Loomis
Sayles believe will provide best execution for a transaction. These services
include not only a wide variety of reports on such matters as economic and
political developments, industries, companies, securities, portfolio strategy,
account performance, daily prices of securities, stock and bond market
conditions and projections, asset allocation and portfolio structure, but also
meetings with management representatives of issuers and with other analysts and
specialists. Although it is not possible to assign an exact dollar value to
these services, they may, to the extent used, tend to reduce Harris Associates',
Founders' or Loomis Sayles' expenses. Such services may be used by Harris
Associates, Founders or Loomis Sayles in servicing other client accounts and in
some cases may not be used with respect to the Fund. Consistent with the Rules
of the National Association of Securities Dealers, Inc., and subject to seeking
best execution, Harris Associates, Founders or Loomis Sayles may, however,
consider purchases of shares of the Fund and other mutual funds that it manages
by customers of broker-dealers as a factor in the selection of broker-dealers to
execute Fund portfolio transactions.
Harris Associates, Founders or Loomis Sayles may cause their segments
of the Fund to pay a broker-dealer that provides brokerage and research services
to Harris Associates, Founders or Loomis Sayles an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. Harris
Associates, Founders or Loomis Sayles must determine in good faith that such
greater commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
that particular transaction or Harris Associates', Founders' or Loomis Sayles'
overall responsibilities to the Fund and its other clients. Harris Associates',
Founders' and Loomis Sayles' authority to cause their segments of the Fund to
pay such greater commissions is also subject to such policies as the Trustees of
the Trust may adopt from time to time.
Subject to the overriding objective of obtaining the best possible
execution of orders, Harris Associates may allocate brokerage transactions for
its segment of the Fund to Harris Associates Securities L.P. ("Harris
Securities"), a broker-dealer affiliated with Harris Associates. In order for
Harris Securities to effect portfolio transactions for the Fund, the
commissions, fees or other remuneration received by Harris Securities must be
reasonable and fair compared to the commissions, fees and other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period. The Trustees of the Trust, including a majority of those
Trustees who are not "interested persons" of the Trust as defined in the 1940
Act, have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid by the Fund to an affiliated broker
are consistent with the foregoing standard.
CERTAIN PAYMENTS TO AFFILIATES
In addition to management fees payable to NEFM, the Fund compensates NEF
(an affiliate of NEFM) for providing various services to the Fund and its
shareholders. In 1996, these payments for the Fund amounted to $1,108,669 for
transfer agency services, $711,078 for service (Rule 12b-1) fees for Class A
shares, $2,916,149 for service and distribution (Rule 12b-1) fees for Class B
shares, $627,802 for service and distribution (12b-1) fees for Class C shares
and $98,321 for the provision of certain legal and accounting services. In
addition, in 1996 NEF received from the Fund's shareholders $3,745,074 in sales
charges (including contingent deferred sales charges on Class A and B shares).
These arrangements are not affected in any way by the Interim and New
Sub-Advisory Agreements, or by the New Founders Sub-Advisory Agreement and New
Loomis Sayles Sub-Advisory Agreement.
CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
The following persons are both (1) Trustees or officers of the Trust and
(2) officers or employees of NEFM (or officers or directors of NEFM's corporate
general partner): Henry L.P. Schmelzer, Bruce Speca and Frank Nesvet. In
addition, Peter S. Voss, President and Chief Executive Officer of NEIC, is a
Trustee and an officer of the Trust.
SHAREHOLDERS AS OF THE RECORD DATE
As of the Record Date, the following persons owned beneficially (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), the
following numbers of shares of each class of shares of the Fund, representing
the indicated percentage of the outstanding shares of such class:
CLASS SHAREHOLDER NUMBER OF SHARES PERCENT
[As of the Record Date, the officers and Trustees of the Trust as a group
owned less than 1% of the outstanding shares of each of the Funds.]
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE
FUND VOTE TO APPROVE PROPOSAL 1, THE PROPOSED NEW SUB-ADVISORY AGREEMENT WITH
HARRIS ASSOCIATES, PROPOSAL 2, THE PROPSED NEW SUB-ADVISORY AGREEMENT WITH
FOUNDERS, PROPOSAL 3, THE PROPOSED NEW SUB-ADVISORY AGREEMENT WITH LOOMIS
SAYLES, AND PROPOSAL 4 WITH RESPECT TO THE FUTURE OPERATION OF THE FUND.
OTHER MATTERS
Forty percent of the shares of the Fund outstanding on the Record Date,
present in person or represented by proxy, constitutes a quorum for the
transaction of business at the Meeting, although it is necessary for at least a
majority of shares of the Fund to be represented at the Meeting in order for any
Proposal to be approved. Votes cast by proxy or in person at the Meeting will be
counted by persons appointed by the Trust as tellers for the Meeting. The
tellers will count the total number of votes cast "for" approval of the Proposal
for purposes of determining whether sufficient affirmative votes have been cast.
The tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which instructions have not been received from the beneficial owners or the
persons entitled to vote) for purposes of determining the presence of a quorum.
Assuming the presence of a quorum for the Fund, abstentions and broker non-votes
have the effect of a negative vote on each Proposal.
In the event that a quorum is not present for purposes of acting on each
Proposal, or if sufficient votes in favor of each Proposal are not received by
October 17, 1997, the persons named as proxies may vote on those matters for
which a quorum is present and as to which sufficient votes have been received,
and may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the shares present in person or represented by proxy at the
session of the Meeting to be adjourned. The persons named as proxies will vote
in favor of such adjournment those proxies which they are entitled to vote in
favor of the Proposals. They will vote against any such adjournment those
proxies required to be voted against either Proposal and will not vote any
proxies that direct them to abstain from voting on such Proposals.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present or
knows that others will present is Proposals 1, 2, 3 and 4 mentioned in the
Notice of Special Meeting. However, you are being asked on the enclosed proxy to
authorize the persons named therein to vote in accordance with their judgment
with respect to any additional matters which properly come before the Meeting,
and on all matters incidental to the conduct of the Meeting.
SHAREHOLDER PROPOSALS AT FUTURE MEETINGS
The Fund does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Fund must be received by the Trust a reasonable time before the Trust's
solicitation of proxies for that meeting in order for such proposals to be
considered for inclusion in the proxy materials relating to that meeting.
September 3, 1997
<PAGE>
EXHIBIT A
NEW ENGLAND STAR ADVISERS FUND
SUB-ADVISORY AGREEMENT
HARRIS ASSOCIATES L.P.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
______________, 1997 by and between New England Funds Management, L.P., a
Delaware limited partnership (the "Manager"), and Harris Associates L.P., a
Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with New England Funds Trust I (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to New England Star Advisers Fund, a series of the Trust
(the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of such portion of the assets of the
Series as the Manager may from time to time allocate to the Sub-Adviser for
management (such portion, the "Segment"), and the Sub-Adviser shall have the
authority on behalf of the Series to vote all proxies and exercise all other
rights of the Series as a security holder of companies in which the Segment from
time to time invests. The Sub-Adviser shall manage the Segment in conformity
with (1) the investment objective, policies and restrictions of the Series set
forth in the Trust's prospectus and statement of additional information relating
to the Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing to the
Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. For purposes of compliance with the
Policies, the Sub-Adviser shall be entitled to treat the Segment as though the
Segment constituted the entire Series, and the Sub-Adviser shall not be
responsible in any way for the compliance of any assets of the Series, other
than the Segment, with the Policies, or for the compliance of the Series, taken
as a whole, with the Policies. Subject to the foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation with the Manager,
to buy, sell, lend and otherwise trade in any stocks, bonds and other securities
and investment instruments on behalf of the Series, without regard to the length
of time the securities have been held and the resulting rate of portfolio
turnover or any tax considerations; and the majority or the whole of the Segment
may be invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
Notwithstanding the foregoing provisions of this Section 1.a, however, the
Sub-Adviser shall, upon written instructions from the Manager, effect such
portfolio transactions for the Segment as the Manager shall determine are
necessary in order for the Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning transactions and
performance of the Segment in such form as may be mutually agreed upon, and
agrees to review the Segment and discuss the management of it. The Sub-Adviser
shall permit all books and records with respect to the Segment to be inspected
and audited by the Manager and the Administrator at all reasonable times during
normal business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may reasonably be
requested by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets in the Segment,
cash requirements and cash available for investment in the Segment, and all
other information as may be reasonably necessary for the Sub-Adviser to perform
its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable to
the Series to the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Harris Associates L.P." and "Oakmark"
and that all use of any designation consisting in whole or part of "Harris
Associates L.P." or "Oakmark" (a "Harris/Oakmark Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Harris Mark in any advertisement
or sales literature or other materials promoting the Series, except with the
prior written consent of the Sub-Adviser. Without the prior written consent of
the Sub-Adviser, the Manager shall not, and the Manager shall use its best
efforts to cause the Series not to, make representations regarding the
Sub-Adviser or the Oakmark Funds in any disclosure document, advertisement or
sales literature or other materials relating to the Series. Upon termination of
this Agreement for any reason, the Manager shall cease, and the Manager shall
use its best efforts to cause the Series to cease, all use of any Harris/Oakmark
Mark(s) as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Segment may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.65% of the first $50 million of the average daily net assets (including
cash or cash equivalents) of the Segment for such period as compensation is
payable, 0.60% of the next $50 million of such assets and 0.55% of such assets
in excess of $100 million. Such compensation shall be payable monthly in arrears
or at such other intervals, not less frequently than quarterly, as the Manager
is paid by the Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on
sixty days' written notice to the Manager and the Trust, or by the Manager on
sixty days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall not be
entitled to the advice, recommendation or judgment of any specific person;
provided, however, that the persons identified in the prospectus of the Series
shall perform the portfolio management duties described therein until the
Sub-Adviser notifies the Manager that one or more other employees, officers or
agents of the Sub-Adviser, identified in such notice, shall assume such duties
as of a specific date.
b. If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: __________________________
Name: Bruce R. Speca
Title: Executive Vice President
HARRIS ASSOCIATES L.P.
By Harris Associates Inc., its general partner
By: __________________________
Name: Robert M. Levy
Title: Chief Executive Officer
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
Your vote is needed!
Please vote on the reverse side of this form and sign in the space provided.
Return your completed proxy in the enclosed envelope today.
You may receive additional proxies for other accounts. These are not duplicates;
you should sign and return each proxy card in order for your votes to be
counted. Please return them as soon as possible to avoid additional mailings.
NOTE: Please sign exactly as your name appears on this card. All joint owners
should sign. When signing as executor, administrator, attorney, trustee or
guardian or as custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name and indicate the signer's
office. If a partner, sign in the partnership name.
The undersigned hereby appoints Henry L.P. Schmelzer, Bruce R. Speca and Frank
Nesvet, and each of them, proxies, with full power of substitution to each, and
hereby authorizes them to represent and to vote, as designated on the reverse
side hereof, at the Special Meeting of Shareholders of New England Star Advisers
Fund on October 17, 1997, at 2:30 p.m. Eastern time, and at any adjournments
thereof, all of the shares of the Fund which the undersigned would be entitled
to vote if personally present.
If you complete and sign the proxy, we'll vote it exactly as you tell us. If you
simply sign the proxy, it will be voted FOR the proposals.
This proxy is solicited on behalf of the Board of Trustees.
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
NEW ENGLAND STAR ADVISERS FUND
The Trustees recommend a vote FOR the proposals listed hereon:
<TABLE>
For Against Abstain
<S> <C> <C> <C>
1. To approve or disapprove a new Sub-Advisory Agreement [ ] [ ] [ ]
for the Fund between New England Funds Management, L.P.
("NEFM") and Harris Associates L.P.
2. To approve or disapprove a new Sub-Advisory Agreement [ ] [ ] [ ]
for the Fund between NEFM and Founders Asset Managment,
Inc.
3. To approve or disapprove a new Sub-Advisory Agreement [ ] [ ] [ ]
for the Fund between NEFM and Loomis, Sayles & Company,
L.P.
4. To approve or disapprove a proposal with respect to the [ ] [ ] [ ]
future operation of the Fund whereby the Fund may, from
time to time, to the extent permitted by any exemption
or exemptions granted by the Securities and Exchange
Commission, permit NEFM to enter into new and amended
agreements with sub-advisers with respect to the Fund
without obtaining shareholder approval of such
agreements, and to permit such sub-advisers to manage
the assets of the Fund (or a segment thereof) pursuant
to such sub-advisory agreements.
5. To consider and act upon any other matters which may [ ] [ ] [ ]
properly come before the meeting or any adjournments
thereof.
</TABLE>
Please be sure to sign and date this Proxy.
Date ___________________
Shareholder sign here ____________________________
Co-owner sign here ______________________________
