SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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14a-11(c) or Rule 14a-12
NEW ENGLAND FUNDS TRUST I
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
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May 31, 1997
Dear Shareholder:
The enclosed Proxy Statement contains detailed information regarding two
important proposals affecting sub-advisory agreements of NEW ENGLAND STAR
WORLDWIDE FUND and NEW ENGLAND STAR SMALL CAP FUND. We have summarized the
proposals below. Please take some time to review this summary before carefully
reading the Proxy Statement.
Q. WHAT IS THE FIRST PROPOSAL ABOUT?
In accordance with the current prospectus, we're asking you to approve the
appointment of Montgomery Asset Management, LLC ("New Montgomery") as one of the
sub-advisers for New England Star Worldwide Fund and New England Star Small Cap
Fund. New Montgomery, a subsidiary of Commerzbank A.G., intends to acquire
Montgomery Asset Management L.P. ("Montgomery"), one of the Funds' current
sub-advisers, on or about July 31, 1997. Such an acquisition terminates the
existing sub-advisory agreements for each Fund with Montgomery. As a result, new
sub-advisory agreements between New England Funds Management, L.P. and New
Montgomery for each Fund must be presented to shareholders for approval.
Q. HOW WILL THIS PROPOSAL CHANGE AFFECT THE FUNDS?
The proposal change should have little impact on the day-to-day operations of
the Funds. Most senior officers and employees of Montgomery are expected to
enter into employment agreements with New Montgomery and to continue to provide
services to the Funds. In addition, the existing fee structures and terms of the
sub-advisory agreements will remain unchanged.
Q. WHAT IS THE SECOND PROPOSAL I NEED TO CONSIDER?
Shareholders of New England Star Worldwide Fund and New England Star Small Cap
Fund are also being asked to approve a proposal that in the future will allow
New England Funds Management, L.P., subject to the approval of Trustees and
under certain conditions, to appoint an investment firm as sub-adviser without
shareholder vote. This proposal is subject to the approval of the SEC as well.
Q. HOW WILL THE SECOND PROPOSAL CHANGE BENEFIT THE FUNDS?
Trustees believe that this proposal is in the best interest of each Fund and its
shareholders for two reasons. The new proposal may work to the Funds' advantage
by allowing Trustees to change sub-advisers quickly when necessary, for example,
when a sub-adviser's performance falls short of expectations or a sub-adviser
resigns. In addition, the new proposal may reduce unnecessary Fund expenses by
eliminating the need for securing shareholder approval for sub-advisory changes
through proxy solicitations.
YOUR VOTE COUNTS
Your vote is extremely important, no matter how many Fund shares you own. Voting
promptly is also important -- it will reduce the need to send follow-up proxy
packages or to contact shareholders by phone. If we do not receive enough votes,
we will need to resolicit shareholders -- an added expense to the Fund. You may
receive a call from D.F. King, a proxy solicitation firm, to remind you to
return your proxy ballot(s).
Thank you for your cooperation in voting on these important proposals. If you
have any questions, please call 800-225-5478. One of our Investor Service and
Marketing Representatives will be happy to provide you with the information you
need.
Sincerely,
Henry L.P. Schmelzer
President
NEW ENGLAND STAR WORLDWIDE FUND
NEW ENGLAND STAR SMALL CAP FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
July 16, 1997
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of New England
Star Worldwide Fund and New England Star Small Cap Fund (each, a "Fund" and
collectively, the "Funds"), each 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 Wednesday, July 16, 1997 at 2:30 p.m.
(Eastern time), for the following purposes:
1. To approve or disapprove a proposed Sub-Advisory Agreement for each
Fund between New England Funds Management, L.P. ("NEFM") and CAM
Acquisition, LLC ("New Montgomery"), pursuant to which New Montgomery
will act as sub-adviser with respect to the segment of each Fund
currently managed by Montgomery Asset Management, L.P.
("Montgomery"), to become effective upon the closing of the
acquisition of substantially all the assets of Montgomery by New
Montgomery, a subsidiary of Commerzbank Aktiengesellschaft.
(Shareholders of each Fund will vote separately with respect to this
proposal.)
2. To approve or disapprove a proposal with respect to the future
operation of each 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. (Shareholders of each Fund
will vote separately with respect to this proposal.)
3. 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 P. CONNOLLY,
Secretary
May 30, 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.
NEW ENGLAND STAR WORLDWIDE FUND
NEW ENGLAND STAR SMALL CAP 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 Worldwide Fund
(the "Star Worldwide Fund") and New England Star Small Cap Fund (the "Star Small
Cap Fund") (each, a "Fund" and collectively, the "Funds"), each 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 Wednesday, July 16, 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 May 30, 1997. A copy of each Fund's Annual
Report for the year ended December 31, 1996 may be obtained without charge by
writing to NEF at the above address or by calling (800) 225-5478.
This Proxy Statement consists of four parts.
PART I contains general information relating to the Meeting.
PART II contains information relating to Proposal 1, the proposed
Sub-Advisory Agreement for each Fund between New England Funds Management, L.P.
("NEFM") and CAM Acquisition, LLC ("New Montgomery"), pursuant to which New
Montgomery will act as sub-adviser with respect to the segment of each Fund
currently managed by Montgomery Asset Management, L.P. ("Montgomery"), to become
effective upon the closing of the acquisition of substantially all the assets of
Montgomery by New Montgomery, a subsidiary of Commerzbank Aktiengesellschaft
("Commerzbank") (the "Acquisition").
PART III contains information relating to Proposal 2, the proposal with
respect to the future operation of each 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 IV contains information about the Trust, NEFM, Montgomery, New
Montgomery, Commerzbank and certain brokerage and other miscellaneous matters.
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I. GENERAL
Each Fund's shareholders of record on May 19, 1997 (the "Record Date") are
entitled to one vote for each share of beneficial interest of the Fund held as
of that date. Shareholders of each Fund vote separately from the shareholders of
the other Fund with respect to each Proposal. The number of shares of beneficial
interest issued and outstanding as of the Record Date was 13,812,896 and
4,562,997 for the Star Worldwide Fund and Star Small Cap Fund, respectively.
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 relating to your Fund 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 portion of the costs of solicitation of proxies that is allocable to
Proposal 1 will be borne by Montgomery, and not by the Funds. The portion of
such costs that is allocable to Proposal 2 will be borne by the Funds.
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 $35,000, plus
reimbursement of such firm's out-of-pocket expenses.
II. NEW SUB-ADVISORY AGREEMENTS
The Star Worldwide Fund and the Star Small Cap Fund are multi- manager
mutual funds. NEFM acts as the adviser to each Fund. The portfolio of the Star
Small Cap Fund is divided into four segments, each of which is managed by a
different money management firm, as sub- adviser to NEFM. The portfolio of the
Star Worldwide Fund is divided into five segments, three of which are each
managed by a different money management firm and two of which are managed by the
same money management firm, as sub-adviser to NEFM. Montgomery currently manages
one of the segments of each Fund, pursuant to separate Sub-Advisory Agreements
between NEFM and Montgomery (the "Existing Sub-Advisory Agreements").
It is proposed that New Montgomery, a subsidiary of Commerzbank, acquire
substantially all the assets of Montgomery. As required by the Investment
Company Act of 1940 (the "1940 Act"), the Existing Sub-
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Advisory Agreements between NEFM and Montgomery provide for their automatic
termination in the event of an "assignment." Because the Acquisition by New
Montgomery would represent an ownership and control change of Montgomery, it
would constitute an "assignment" under the 1940 Act and thus terminate the
Existing Sub-Advisory Agreements. Accordingly, shareholders of each Fund are
being asked to approve a new Sub-Advisory Agreement between NEFM and New
Montgomery for each Fund (the "New Sub-Advisory Agreements") in order that New
Montgomery may, following the Acquisition, manage the assets of that segment of
each Fund that is currently managed by Montgomery.
The Trustees of the Trust have approved, and recommend that the shareholders
of each of the Funds approve, the New Sub-Advisory Agreements. The New
Sub-Advisory Agreements would be substantially identical to the Existing
Sub-Advisory Agreements between NEFM and Montgomery, except: (i) references to
Montgomery would be changed to references to New Montgomery, and (ii) the
effective dates would be changed. The proposed New Sub-Advisory Agreements would
not affect the rates of the management fees paid by the Funds to NEFM or the
sub-advisory fees paid by NEFM to Montgomery (under the old Sub-Advisory
Agreements) or New Montgomery (under the new Sub- Advisory Agreements).
ADVISORY AGREEMENTS
NEFM has acted as the Star Worldwide Fund's adviser since the Fund's
inception on December 29, 1995, and currently acts as the Fund's adviser
pursuant to an Advisory Agreement dated August 30, 1996. The Fund's initial
shareholder approved such Advisory Agreement on December 29, 1995. The purpose
of the submission of this agreement for shareholder approval at such time was
for its initial approval upon the Fund's inception and the approval of its
continuance following the change in control of NEFM in connection with the
merger of NEFM's former parent company, New England Mutual Life Insurance
Company, with and into Metropolitan Life Insurance Company ("MetLife"), with
MetLife as the surviving company, which merger was consummated on August 30,
1996 (the "MetLife Merger"). The Trustees of the Trust, at a meeting held on May
9, 1997, approved such Advisory Agreement's continuation for a one-year period
beginning on June 1, 1997.
NEFM has acted as the Star Small Cap Fund's adviser since the Fund's
inception on December 28, 1996, and currently acts as the Fund's adviser
pursuant to an Advisory Agreement dated December 31, 1996. The Trustees of the
Trust approved such Advisory Agreement at a meeting held on
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October 25, 1996, and the Fund's initial shareholder approved it on December 28,
1996. The purpose of the submission of this agreement for shareholder approval
at such time was for its initial approval upon the Fund's inception.
Under the Advisory Agreements for the Funds, NEFM has overall advisory and
administrative responsibility with respect to each Fund. The Advisory Agreements
also provide that NEFM will, subject to NEFM's rights to delegate such
responsibilities to other parties, provide to each 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). Under each Fund's Advisory
Agreement, the annual management fee rate payable by each Fund to NEFM is 1.05%
of the Fund's average daily net assets. Prior to August 30, 1996, NEFM provided
the same services and the Star Worldwide 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 Star Worldwide
Fund to NEFM under that Fund's Advisory Agreement (and its predecessor) was
$780,469.
EXISTING SUB-ADVISORY AGREEMENTS
For each Fund, 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 different segments of the Fund's
portfolio. NEFM has delegated responsibility for managing the assets of a
segment of each Fund to Montgomery, pursuant to the Existing Sub-Advisory
Agreements between NEFM and Montgomery. The Existing Sub-Advisory Agreement for
the Star Worldwide Fund is dated August 30, 1996, and the Existing Sub-Advisory
Agreement for the Star Small Cap Fund is dated December 31, 1996. Each Existing
Sub-Advisory Agreement requires Montgomery 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 Existing Sub-Advisory Agreements,
Montgomery is authorized to effect portfolio transactions for its segment of the
Funds, using its own discretion and without prior consultation with NEFM.
Montgomery is also required to report periodically to NEFM and the Trustees of
the Trust.
Under the Existing Sub-Advisory Agreements, Montgomery is entitled to
receive from NEFM (and not from the Funds) a sub-advisory fee,
4
based on the value of the average daily net assets of the segment of the Fund
managed by Montgomery, at the rates set forth in the following table:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
(OF THE SEGMENT MANAGED BY SUB-ADVISORY FEE
FUND NAME MONTGOMERY) (ANNUAL RATE)
--------- ----------- -------------
<S> <C> <C>
Star Worldwide Fund First $25 million 0.90%
Next $25 million 0.70%
Over $50 million 0.55%
Star Small Cap Fund First $50 million 0.65%
Over $50 million 0.50%
</TABLE>
For periods prior to July 1, 1996, Montgomery agreed to waive 0.15% of its
sub-advisory fee for the Star Worldwide Fund. As a result of this waiver, during
the fiscal year ended December 31, 1996, NEFM paid Montgomery sub-advisory fees
of $122,665 for the Star Worldwide Fund. In the absence of such waiver, the
aggregate sub-advisory fees payable by NEFM to Montgomery under the Existing
Sub-Advisory Agreement (and its predecessor) for the Star Worldwide Fund would
have been $128,198.
The Existing Sub-Advisory Agreement for the Star Worldwide Fund was approved
by such Fund's initial shareholder on December 28, 1995. The purpose of the
submission of this agreement for shareholder approval at such time was for its
approval upon the Fund's inception and approval of its continuance following the
MetLife Merger. The Trustees of the Trust, at a meeting held on May 9, 1997,
approved such agreement's continuation for a one-year period beginning on June
1, 1997.
The Existing Sub-Advisory Agreement for the Star Small Cap Fund was approved
by the Trustees of the Trust at a meeting held on October 25, 1996, and the
Fund's initial shareholder approved it on December 28, 1996. The purpose of the
submission of this agreement for shareholder approval at such time was for its
initial approval upon the Fund's inception.
THE ACQUISITION OF MONTGOMERY
On March 25, 1997, Montgomery Securities, Montgomery and New Montgomery, a
newly organized subsidiary of Commerzbank, entered into an agreement (the "Asset
Purchase Agreement") providing for the transfer of substantially all the assets
comprising Montgomery's business to New Montgomery. The purchase price paid to
Montgomery will have two components. The first component is essentially a fixed
price, subject to adjustment for (a) intercompany arrangements between
Montgomery
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Securities and Montgomery, (b) failures to obtain client consents to new
advisory agreements, (c) certain balance sheet adjustments and (d) transaction
expenses. The second component of the purchase price will be determined based on
the distributable income of Montgomery as of March 31, 1997, subject to
adjustments substantially similar to the adjustments to the fixed purchase price
and certain further adjustments. The purchase price will be paid in cash or, at
the election of Montgomery, partially in the form of a promissory note
guaranteed by Commerzbank. Under the Asset Purchase Agreement, Montgomery is
obligated to pay a portion of the purchase price it receives to certain senior
employees of Montgomery, as noted below.
New Montgomery, a Delaware limited liability company, presently has two
members. Commerzbank directly holds a 99.99% interest; Commerzbank Asset
Management USA Corporation ("CAM USA"), a Delaware corporation, which is an
indirect subsidiary of Commerzbank, holds the remaining 0.01% interest. Upon the
closing of the Acquisition, CAM USA will withdraw as a member of New Montgomery,
and New Montgomery will change its name to Montgomery Asset Management, LLC. New
Montgomery will file an application for registration as an investment adviser
with the SEC and all relevant state securities commissions. It is expected that
all such registrations will be effective before the closing of the Acquisition.
Commerzbank, the third largest publicly held commercial bank in Germany, has
total assets of approximately $268 billion as of December 31, 1996.
Commerzbank's shares are traded on all of Germany's stock exchanges and on other
exchanges around the world. Commerzbank's shares are widely held and, to its
knowledge, there is no stockholder owning 5% or more of its stock. Commerzbank
and its affiliates had over $79 billion in assets under management as of
December 31, 1996 for both its domestic and institutional clients. Commerzbank's
asset management operations involve more than 1,000 employees in 13 countries
worldwide.
As of the closing of the Acquisition, Commerzbank will hold the majority of
the voting interests in New Montgomery; certain officers and employees of
Montgomery, including substantially all of those who will receive a portion of
the purchase price, will hold the remaining interests (in the aggregate, a
significant minority equity interest) in New Montgomery. The interests of the
officers and employees of Montgomery will be subject to various put and call
rights and to repurchase in the event of an individual's termination of service
for New Montgomery. An individual's rights with respect to his or her interest
in New Montgomery differ depending upon both the nature and the timing of his or
her termination of service for New Montgomery.
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Certain senior officers and employees of Montgomery are expected to enter
into employment agreements with New Montgomery, with terms ranging from 4 1/2 to
6 years. In addition, such senior officers and employees, as well as certain
other senior employees of Montgomery, will be eligible to receive a special
bonus if they provide services to New Montgomery for the period ending December
31, 1997, or if their service for New Montgomery terminates during 1997 due to
death, disability, a termination without cause or a termination for good reason.
It is presently anticipated that the Acquisition will close on July 31,
1997, subject to satisfaction of certain conditions to closing, which include
(a) approval of the New Sub-Advisory Agreements between NEFM and New Montgomery;
(b) consents of clients accounting for specified fee revenues during the
12-month period prior to March 31, 1997; (c) execution of employment agreements
by specified senior employees of Montgomery; and (d) approval of the Board of
Governors of the Federal Reserve System. The Federal Reserve may require
satisfaction of certain conditions as part of its approval, which could affect
the terms of the Acquisition or the services New Montgomery can provide to the
Funds.
NEW SUB-ADVISORY AGREEMENTS
Like the Existing Sub-Advisory Agreements, each New Sub-Advisory Agreement
will require New Montgomery 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 Agreements, New Montgomery will be authorized to
effect portfolio transactions for its segment of the Funds, using its own
discretion and without prior consultation with NEFM. New Montgomery will also be
required to report periodically to NEFM and the Trustees of the Trust.
Each 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 1940 Act, of the Trust, NEFM or New Montgomery,
cast in person at a meeting called for the purpose of voting on such approval.
Any amendment to a New Sub- Advisory Agreement must be approved by NEFM and New
Montgomery and, if required by law, by vote of a majority of the outstanding
voting securities of the Fund and by vote of a majority of the Trustees of the
Trust who are not such interested persons, cast in person at a meeting called
for the purpose of voting on such approval.
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Each of the New Sub-Advisory Agreements may be terminated without penalty by
vote of the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, upon sixty days' written notice, or
by New Montgomery or NEFM upon sixty days' written notice, and will terminate
automatically in the event of its assignment. Each of the New Sub-Advisory
Agreements will automatically terminate if the Advisory Agreement for the
respective Fund is terminated. Each of the New Sub-Advisory Agreements provides
that New Montgomery will not be subject to any liability 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 the New Sub-Advisory Agreement, except by reason of New
Montgomery's willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard by New Montgomery
of its obligations and duties.
As compensation for its services under the New Sub-Advisory Agreements, New
Montgomery will be entitled to receive from NEFM sub- advisory fees calculated
at the same rate as those charged under the Existing Sub-Advisory Agreements
described above.
COMPARISON OF EXISTING AND NEW SUB-ADVISORY AGREEMENTS
Each proposed New Sub-Advisory Agreement is substantially identical to the
Existing Sub-Advisory Agreement for such Fund, except that, under the New
Sub-Advisory Agreements: (i) references to Montgomery will be changed to
references to New Montgomery, and (ii) the Existing Sub- Advisory Agreements are
dated August 30, 1996 or December 31, 1996, whereas the New Sub-Advisory
Agreements will be dated the date of the completion of the Acquisition.
TRUSTEES' APPROVAL AND RECOMMENDATION
The Trustees of the Trust believe that the terms of the New Sub-Advisory
Agreements are fair to, and in the best interest of, each Fund and its
shareholders. The Trustees of the Trust, including all of the disinterested
Trustees, recommend that the shareholders of each Fund approve the New
Sub-Advisory Agreement for such Fund between New Montgomery and NEFM.
On May 9, 1997, the Trustees of the Trust, none of whom is affiliated with
Montgomery, met to review the terms of the Acquisition and approved and
recommended the New Sub-Advisory Agreements to shareholders for their approval.
In evaluating the New Sub-Advisory Agreements, the Trustees of the Trust
reviewed material furnished by Montgomery and Commerzbank. Those materials
include information regarding Montgomery, Commerzbank,
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their respective affiliates and their personnel, operations and financial
condition and the terms of the Acquisition and the possible effects on the Funds
and the shareholders of the Funds as a result of the Acquisition. It was
represented to the Trustees that Montgomery and Commerzbank believe that the
operations of the Trust and the capability of Montgomery to provide services to
the Funds would not be adversely affected by the Acquisition and could be
enhanced from the resources of Commerzbank, although there could be no assurance
as to any particular benefits that would result.
In making this recommendation, the Trustees of the Trust carefully evaluated
the experience of Montgomery's key personnel in portfolio management, the
arrangements made to secure the continued service of the key personnel in
portfolio management and the high quality of services New Montgomery is expected
to continue to provide to its segment of each of the Funds, and gave careful
consideration to all factors deemed to be relevant to the Funds, including, but
not limited to: (1) the performance of the segment of each Fund managed by
Montgomery since each Fund's commencement of operations; (2) the
research-intensive nature and quality of the services expected to be rendered to
the segments of the Funds to be managed by New Montgomery; (3) the importance of
such research and services to the fulfillment of the particular investment
objective of each Fund and investment policies of the relevant segment of each
Fund; (4) that the compensation payable to New Montgomery by NEFM under the New
Sub-Advisory Agreements will be at the same rate as the compensation now payable
by NEFM to Montgomery under the Existing Sub-Advisory Agreements; (5) that the
terms of the Existing Sub-Advisory Agreements will be unchanged under the New
Sub-Advisory Agreements; (6) the reputation, qualification and background of
Montgomery and Commerzbank, as well as the qualifications of their personnel and
their respective financial conditions; (7) the commitment of Montgomery to pay
or reimburse each Fund for the expenses incurred in connection with the
Acquisition so that shareholders of the Funds would not bear those expenses; (8)
the benefits expected to be realized as a result of New Montgomery's affiliation
with Commerzbank, including the resources of Commerzbank that would be available
to New Montgomery; (9) Montgomery's current brokerage policies and practices, as
described in "Portfolio Transactions and Brokerage" in Part IV, and New
Montgomery's intentions to continue such policies and practices; and (10) other
factors they deemed relevant.
Montgomery has advised the Trustees of the Trust that it expects that there
will be no diminution in the scope and quality of sub-advisory services provided
to the Funds as a result of the Acquisition. Accordingly, the Trustees of the
Trust believe that the segment of each Fund managed by
9
Montgomery should receive services under the New Sub-Advisory Agreements
comparable to those it currently receives under the Existing Sub- Advisory
Agreements, at the same fee levels.
For each of the Funds, 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 a Fund do not approve the New Sub-Advisory
Agreement for such Fund, the Existing Sub-Advisory Agreement for the Fund will
continue in effect in accordance with its terms. In that event, the Fund
understands that the parties to the Asset Purchase Agreement could nevertheless
agree to proceed with the Acquisition and, if the transaction occurs, the
Existing Sub-Advisory Agreement would terminate automatically upon the
consummation of the Acquisition. If such a termination were to occur, the
Trustees of the Trust would then make such alternative arrangements for the
management of the assets of the segment of each Fund that is currently managed
by Montgomery as they deem appropriate and in the best interests of the
shareholders.
III. FUTURE SUB-ADVISORY AGREEMENTS WITHOUT
SHAREHOLDER VOTE
The Funds propose to operate in a manner in which each Fund 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 voting 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 Funds, 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
10
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 a transfer
of "control," as defined in the 1940 Act, or other assignment 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 Funds would still
require shareholder approval to amend their Advisory Agreements with NEFM
(including an amendment to change 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 each
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.
The Funds have applied for this exemption for several reasons. As described
under Proposal 1, the Star Worldwide and Star Small Cap Funds utilize an
adviser/sub-adviser management structure, where NEFM acts as each Fund's
investment adviser, delegating the day-to-day portfolio management for each Fund
to several sub-advisers. Under such a structure, a Fund's sub-adviser acts 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 Fund's portfolios, 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 one of
the Fund's sub-advisers is, therefore, analogous to replacing the portfolio
manager of a single-manager managed fund, which does not under the 1940 Act
require shareholder approval.
In addition, given the Funds' management structures, the shareholder
approval requirement under the 1940 Act may cause the Funds' shareholders
11
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, and in the case of (c) have the authority to re-employ promptly the
current sub-adviser, investors' expectations may be frustrated and the Funds and
their 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" of a Sub-Advisory Agreement (i.e., a change in the actual
control or management of a sub-adviser, such as the Acquisition involving
Montgomery and New Montgomery).
In the absence of an exemption, to obtain the shareholder approval required
by the 1940 Act for a sub-advisory agreement, the Funds must convene
shareholders' meetings, 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 affected Fund could receive less than satisfactory sub-advisory
services. Also, in that situation or where there has been an unexpected
sub-advisory resignation or change in control -- events which, in many cases,
are beyond the control of a Fund -- the affected 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, the
adviser might have to assume direct responsibility on a temporary basis for
management of the assets assigned to that sub-adviser.
The Trustees of the Trust unanimously recommend that the shareholders
approve Proposal 2 with respect to the operation of each 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.
For each of the Funds, 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 a
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.
12
IV. 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 Funds are two 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 New England Investment Companies, L.P. ("NEIC"). NEF
Corporation is also the sole general partner of NEF, which is the principal
underwriter for each 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 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 MONTGOMERY
Montgomery is one of the sub-advisers for each of the Funds. Montgomery, a
California limited partnership, was formed in 1990. Since then, Montgomery has
advised private accounts as well as public mutual funds. Its general partner is
Montgomery Asset Management, Inc., and its sole limited partner is Montgomery
Group Holdings, LLC. Prior to January 1, 1997, the sole limited partner was
Montgomery Securities. The members of Montgomery Group Holdings, LLC are also
owners of Montgomery Securities. Under the 1940 Act, both Montgomery Asset
Management, Inc. and Montgomery Securities may be deemed control persons of
Montgomery. The address of Montgomery is 101 California Street, San Francisco,
California 94111. The address of Montgomery Asset Management, Inc. and
Montgomery Securities is 600 Montgomery
13
Street, San Francisco, California, 94111. After the Acquisition, Commerzbank and
a number of employees who are currently employees of Montgomery will have
ownership interests in New Montgomery.
Montgomery's principal executive officers are set forth below. The position
listed with Montgomery is the principal occupation of each of the principal
executive officers. The address of each, as it relates to his duties at
Montgomery, is the same as that of Montgomery.
<TABLE>
<CAPTION>
NAME POSITION WITH MONTGOMERY
---- ------------------------
<S> <C>
R. Stephen Doyle Chairman and Chief Executive Officer
Mark B. Geist President
John T. Story Executive Vice President
Managing Director and Chief
David E. Demarest Administrative Officer
Mary Jane Fross Vice President and Controller
Dana E. Schmidt Principal and Chief Compliance Officer
Kevin T. Hamilton Managing Director and chair of the
Investment Oversight Committee
Roger W. Honour Managing Director and Senior Portfolio
Manager
Oscar A. Castro Managing Director and Senior Portfolio
Manager
Stuart O. Roberts Managing Director and Senior Portfolio
Manager
John D. Boich Managing Director and Senior Portfolio
Manager
Josephine S. Jimenez Managing Director and Senior Portfolio
Manager
Bryan L. Sudweeks, Ph.D. Managing Director and Senior Portfolio
Manager
William C. Stevens Managing Director and Senior Portfolio
Manager
John H. Brown Managing Director and Senior Portfolio
Manager
</TABLE>
Montgomery 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 Funds, for compensation at the annual
fee rates of the corresponding average net assets levels of those funds set
forth in the table below. The table also sets forth the net assets of those
other funds at December 31, 1996:
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND
OTHER FUND WITH (IN MILLIONS) ANNUAL AVERAGE NET
FUND SIMILAR OBJECTIVE+ AT 12/31/96 FEE RATE ASSET LEVELS
---- ------------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
Star Worldwide Fund Montgomery Emerging $912,450,286 1.25% first $250 million
Markets Fund 1.00% over $250 million
Montgomery Variable $ 26,706,931 1.25%
Series: Emerging
Markets Fund
</TABLE>
14
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND
OTHER FUND WITH (IN MILLIONS) ANNUAL AVERAGE NET
FUND SIMILAR OBJECTIVE+ AT 12/31/96 FEE RATE ASSET LEVELS
---- ------------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
Montgomery Institutional $271,599,512 1.25% first $50 million
Series: Emerging 1.00% next $50 million
Markets Portfolio 0.90% over $100 million
Star Small Cap Fund Montgomery Small Cap $200,197,227 1.20%
Opportunities Fund
</TABLE>
__________
+ As of December 31, 1996, Montgomery has voluntarily undertaken to reduce its
management fees or absorb fund expenses to keep each Fund's annual operating
expenses at or below the following percentages of each Fund's average net
assets: 1.90% for the Montgomery Emerging Markets Fund; the lessor of 1.75% or
the maximum allowed by applicable state expense limitations for the Montgomery
Variable Series: Emerging Markets Fund; the lesser of 1.25% or the maximum
allowed by applicable state expense limitations for the Montgomery
Institutional Series: Emerging Markets Portfolio; and 1.50% for the Montgomery
Small Cap Opportunities Fund.
New Montgomery, as an entity created solely for the purpose of acquiring
Montgomery, does not currently act as an investment adviser to any other mutual
funds, but intends to become following the Acquisition investment adviser (or
sub-adviser) to those mutual funds currently advised (or sub-advised) by
Montgomery listed above, subject to obtaining any necessary approvals.
INFORMATION ABOUT NEW MONTGOMERY AND COMMERZBANK
Commerzbank, a corporation organized under the laws of Germany, is Germany's
third largest publicly held commercial bank. To the knowledge of Commerzbank, no
person owns 5% or more of its stock.
New Montgomery, a Delaware limited liability corporation, is currently owned
by Commerzbank and New Montgomery USA, an indirect subsidiary of Commerzbank.
New Montgomery was organized for the purpose of the Acquisition. The address of
New Montgomery is 101 California Street, San Francisco, California, 94111. Its
President is Dr. Heinz J. Hockmann and its Secretary and Treasurer is Martin
Schuller, each of whom is an employee of Commerzbank. The principal offices of
Commerzbank are located at Neue Mainzer Strasse 32-36, Frankfurt am Main,
Germany. The address of Dr. Hockmann and Mr. Schuller is Gutleustrasse 82,
Frankfurt am Main, Germany. Management of New Montgomery will be the
responsibility of a Board of Directors elected by the members of New Montgomery.
The initial
15
directors of New Montgomery are expected to be Martin Kohlhaussen, Chairman of
the Board of Managing Directors of Commerzbank; Dietrich- Kurt Frowein, member
of the Board of Managing Directors of Commerzbank; Dr. Heinz J. Hockmann,
Executive Vice President of Commerzbank; Andreas Kleffel, Executive Vice
President of Commerzbank; R. Stephen Doyle; and Mark B. Geist. With the
exceptions of Mr. Doyle and Mr. Geist, each of whom will be employees of New
Montgomery, the other directors are employees of Commerzbank. The address of Mr.
Kohlhaussen and Mr. Frowein is Neue Mainzer Strasse 32-36, Frankfurt am Main,
Germany. The address of Dr. Hockmann is Gutleustrasse 82, Frankfurt am Main,
Germany. The address of Mr. Kleffel is Two World Financial Center, New York, New
York 10281. The address of Mr. Doyle and Mr. Geist is 101 California Street, San
Francisco, California 94111.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In all purchases and sales of securities for its segments of the Funds,
Montgomery's primary consideration is to obtain the most favorable execution
available. Pursuant to the Existing Sub-Advisory Agreements, Montgomery
determines which securities are to be purchased and sold by its segments and
which broker-dealers are eligible to execute its segments' portfolio
transactions, subject to oversight by NEFM and the Trustees of the Trust.
Purchases and sales of securities within the U.S. other than on a securities
exchange will generally be executed directly with a market-maker unless, in the
opinion of Montgomery, a better price and execution can otherwise be obtained by
using a broker for the transaction.
For the Star Worldwide Fund, Montgomery contemplates purchasing most equity
securities directly in the securities markets located in emerging or developing
countries or in the over-the-counter markets. In purchasing American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs") (and other similar
instruments), Montgomery's segment of the Star Worldwide Fund may purchase those
listed on stock exchanges, or traded in the over-the-counter markets in the U.S.
or Europe, as the case may be. ADRs, like other securities traded in the U.S.,
will be subject to negotiated commission rates. The foreign and domestic debt
securities and money market instruments in which Montgomery's segment of the
Star Worldwide Fund may invest may be traded in over-the-counter markets.
Purchases of portfolio securities for the segments of the Funds also may be
made directly from issuers or from underwriters. Where possible, purchase and
sale transactions will be effected through dealers (including banks) which
specialize in the types of securities which this segment will
16
be holding, unless better executions are available elsewhere. Dealers and
underwriters usually act as principals for their own account. Purchases from
underwriters will include a concession paid by the issuer to the underwriter and
purchases from dealers will include the spread between the bid and the asked
price. If the execution and price offered by more than one dealer or underwriter
are comparable, the order may be allocated to a dealer or underwriter that has
provided research or other services as discussed below.
In placing portfolio transactions, Montgomery will use its best efforts to
choose a broker-dealer capable of providing the services necessary generally to
obtain the most favorable execution available. The full range and quality of
services available will be considered in making these determinations, such as
the firm's ability to execute trades in a specific market required by the
segment of the Fund, such as in an emerging market, the size of the order, the
difficulty of execution, the operational facilities of the firm involved, the
firm's risk in positioning a block of securities, and other factors.
Montgomery may also consider the sale of the Funds' shares as a factor in
the selection of broker-dealers to execute portfolio transactions for its
segments. The placement of portfolio transactions with broker-dealers who sell
shares of the Funds is subject to rules adopted by the National Association of
Securities Dealers, Inc.
While Montgomery's general policy is to seek first to obtain the most
favorable execution available, in selecting a broker-dealer to execute portfolio
transactions, weight may also be given to the ability of a broker-dealer to
furnish brokerage, research and statistical services to Montgomery, even if the
specific services were not imputed just to the Fund and may be lawfully and
appropriately used by Montgomery in advising other clients. Montgomery considers
such information, which is in addition to, and not in lieu of, the services
required to be performed by it under its sub-advisory agreements with NEFM, to
be useful in varying degrees, but of indeterminable value. In negotiating any
commissions with a broker or evaluating the spread to be paid to a dealer, the
segments of the Funds may therefore pay a higher commission or spread than would
be the case if no weight were given to the furnishing of these supplemental
services, provided that the amount of such commission or spread has been
determined in good faith by Montgomery to be reasonable in relation to the value
of the brokerage and/or research services provided by such broker-dealer, which
services either produce a direct benefit to the segments of the Funds or assist
Montgomery in carrying out its responsibilities to the accounts as to which it
exercises investment discretion. The standard of reasonableness is to be
measured in light of Montgomery's overall responsibilities to the accounts as to
which it exercises investment discretion.
17
On occasion, until the closing of the Acquisition, situations may arise in
which legal and regulatory considerations will preclude trading for the
segments' accounts by reason of activities of Montgomery Securities, a broker-
dealer affiliated with Montgomery, or its affiliates. It is the judgment of the
Trustees of the Trust that the Funds will not be materially disadvantaged by any
such trading preclusion and that the desirability of continuing their
sub-advisory arrangements with Montgomery and Montgomery's affiliation with
Montgomery Securities and other affiliates of Montgomery Securities outweigh any
disadvantages that may result from the foregoing. After the Acquisition closes,
these same legal and regulatory considerations would govern trading for the
segments' accounts with any affiliates of New Montgomery and Commerzbank.
New Montgomery would be expected to follow similar investment practices if
the shareholders of a Fund vote to approve the New Sub- Advisory Agreement.
CERTAIN PAYMENTS TO AFFILIATES
In addition to advisory fees payable to NEFM, each Fund compensates NEF (an
affiliate of NEFM) for providing various services to the Fund and its
shareholders. In 1996, these payments for the Star Worldwide Fund amounted to
$169,601 for transfer agency services, $85,683 for service and distribution
(Rule 12b-1) fees for Class A shares, $305,294 for service and distribution
(Rule 12b-1) fees for Class B shares, $95,265 for service and distribution
(12b-1) fees for Class C shares and $24,445 for the provision of certain legal
and accounting services. In addition, in 1996 NEF received from the Star
Worldwide Fund's shareholders $1,559,365 in sales charges (including contingent
deferred sales charges on Class A and B shares). These arrangements will not be
affected in any way by the New Sub-Advisory Agreements. During the fiscal year
ended December 31, 1996, the Star Worldwide Fund paid brokerage commissions of
$32,747 on portfolio transactions to Harris Associates Securities L.P., an
affiliate of NEFM. This represents roughly 8% of the total brokerage commissions
paid by the Fund during that fiscal year. During that period, Harris Associates
L.P., a subsidiary of NEIC, was the sole limited partner of Harris Associates
Securities L.P.
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 that firm's corporate
general partner): Henry L.P. Schmelzer, Bruce Speca, Frank Nesvet and Robert P.
Connolly. In addition, Peter S. Voss, President and Chief Executive Officer of
NEIC, is a Trustee and an officer of the Trust.
18
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 Star Small Cap Fund,
representing the indicated percentage of the outstanding shares of
such class:
<TABLE>
<CAPTION>
CLASS SHAREHOLDER NUMBER OF SHARES PERCENT
----- ----------- ---------------- -------
<S> <C> <C> <C>
Class B MLPF & S For the Sole Benefit 165,204 8.52%
of It's Customers
Attn: Fund Administration
4600 Deer Lake Drive East
Jacksonville, FL 32246-6484
Class C US Clearing Corp 39,968 7.30%
FBO 166-20126-22
26 Broadway
New York, NY 10004-1796
</TABLE>
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 AGREEMENTS, AND
PROPOSAL 2 WITH RESPECT TO THE OPERATION OF THE FUNDS.
OTHER MATTERS
Forty percent of the shares of each 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 such Fund to be represented at the Meeting in order for
either 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 a 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
July 16, 1997, the persons named as proxies may vote on those matters for
19
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 and 2 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 Funds do not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Funds 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.
May 30, 1997
20
FI97-0597
[x]PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ------------------------
NEW ENGLAND
STAR WORLDWIDE FUND
- ----------------------
Please be sure to sign and date this Proxy. ___________________________
Date
__________________________________ __________________________________
Shareholder sign here Co-owner sign here
The Trustees recommend a vote FOR the proposal listed below:
[ ] For [ ] Against [ ] Abstain
1. To approve or disapprove a proposed Sub-advisory Agreement for New
England Star Worldwide Fund (the "Fund") between New England Funds
Management, L.P. ("NEFM") and CAM Acquisition, LLC ("New Montgomery"),
pursuant to which New Montgomery will act as sub-adviser with respect to
the segment of the Fund currently managed by Montgomery Asset
Management, L.P. ("Montgomery"), to become effective upon the closing of
the acquisition of substantially all the assets of Montgomery by New
Montgomery, a subsidiary of Commerzbank Aktiengesellschaft.
2. 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.
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
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 partnership, please sign in the partnership name.
The undersigned hereby appoints Henry L.P. Schmelzer, Bruce R. Speca, Frank
Nesvet and Robert P. Connolly, 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 Worldwide Fund and New England Star Small Cap Fund on July 16,
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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
[x]PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ------------------------
NEW ENGLAND
STAR SMALL CAP FUND
- ------------------------
Please be sure to sign and date this Proxy. ___________________________
Date
__________________________________ __________________________________
Shareholder sign here Co-owner sign here
The Trustees recommend a vote FOR the proposal listed below:
[ ] For [ ] Against [ ] Abstain
1. To approve or disapprove a proposed Sub-advisory Agreement for New
England Star Small Cap Fund (the "Fund") between New England Funds
Management, L.P. ("NEFM") and CAM Acquisition, LLC ("New Montgomery"),
pursuant to which New Montgomery will act as sub-adviser with respect to
the segment of the Fund currently managed by Montgomery Asset
Management, L.P. ("Montgomery"), to become effective upon the closing of
the acquisition of substantially all the assets of Montgomery by New
Montgomery, a subsidiary of Commerzbank Aktiengesellschaft.
2. 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.
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
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 partnership, please sign in the partnership name.
The undersigned hereby appoints Henry L.P. Schmelzer, Bruce R. Speca, Frank
Nesvet and Robert P. Connolly, 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 Worldwide Fund and New England Star Small Cap Fund on July 16,
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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
