<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only [as permitted
by Rule 14a-6(e)(2)]
[X] 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)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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 is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
STAR ADV PROXY COVER FINAL August 15, 1997
snipe across right corner: Your Vote Counts! Reply
Immediately!
September xx, 1997
Dear New England Star Advisers Fund Shareholder,
The enclosed Proxy Statement contains detailed information regarding four
important proposals affecting New England Star Advisers Fund. The most pertinent
information is summarized on the enclosed page. Please take some time to review
this summary before carefully reading the Proxy Statement.
VOTING IS EASY!
To vote your shares, simply sign and date the enclosed proxy voting card and
mail in the postage-paid envelope provided.
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, an added expense to the Fund. If
we do not receive enough votes, we will resolicit shareholders and 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 your financial representative or New England
Funds at 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
<PAGE>
NEW ENGLAND STAR ADVISERS FUND PROXY SUMMARY
Q. WHAT IS THE FIRST PROPOSAL ABOUT?
A. We are asking you to APPROVE THE APPOINTMENT OF HARRIS ASSOCIATES L.P. AS A
NEW SUBADVISER of New England Star Advisers Fund, succeeding Berger Associates.
Under the terms of the proposal, Harris assumed day-to-day management of
Berger's segment of the Fund under the oversight of New England Funds
Management, L.P. on July 25, 1997. Your vote is necessary to make this
management change permanent. Harris is an affiliate of New England Funds
Management, L.P. The other three subadvisers, Founders Asset Management, Inc.,
Loomis, Sayles & Company, and Janus Capital Corporation, will remain in place.
Q. WHY WAS THIS APPROVED BY THE TRUSTEES?
A. As Star Advisers Fund built a performance history, New England Funds
Management monitored how the portfolio segments worked together and complemented
each other. Based upon a review of the investment style and performance record
achieved by Berger as compared to the proposed investment style and record of
Harris, the Trustees believe this positive change is in the best interest of the
shareholders. HARRIS ASSOCIATES AND PORTFOLIO MANAGER ROBERT SANBORN HAVE VERY
STRONG REPUTATIONS, BROAD VISIBILITY AND A PROVEN TRACK RECORD.
Q. HOW WILL THIS PROPOSED CHANGE AFFECT THE FUND?
A. Sanborn is a bottom-up investment manager who uses a value investment style
when evaluating companies. This will complement the two growth style subadvisers
of the Fund. THE STYLE COMBINATION WILL ATTEMPT TO MAKE THE FUND LESS VOLATILE
IN VARYING MARKET CONDITIONS, WITHOUT AFFECTING RETURNS.
Q. WHAT ARE THE SECOND AND THIRD PROPOSALS I NEED TO CONSIDER?
A. Shareholders of New England Star Advisers Fund are also being asked to
APPROVE NEW SUB-ADVISORY AGREEMENTS BETWEEN NEW ENGLAND FUNDS MANAGEMENT, L. P.
AND FOUNDERS ASSET MANAGEMENT, INC. IN PROPOSAL TWO AND BETWEEN NEW ENGLAND
FUNDS MANAGEMENT, L.P. AND LOOMIS, SAYLES & COMPANY, L.P. IN PROPOSAL THREE.
These new sub-advisory agreements will be identical to the existing agreements
except for the inclusion of a reduction in the sub-advisory fees paid by New
England Funds Management to Founders and Loomis Sayles.
EFFECTIVE MAY 9, 1997, THE MANAGEMENT FEE PAID TO NEW ENGLAND FUNDS MANAGEMENT,
L.P. WAS REDUCED from 1.05% to 1% of net assets over one billion dollars. New
England Funds Management, L.P. pays part of its fees to the four subadvisers who
manage a segment of the Fund's portfolio. The subadvisory fee paid by New
England Funds Management to Founders and Loomis Sayles on net assets over $250
million will be reduced from 0.50% to 0.475%.
Q. HOW WILL THE SECOND AND THIRD PROPOSAL CHANGES BENEFIT THE FUND?
A. Trustees believe that these proposals are in the best interest of the Fund
and its shareholders. The assets in the fund currently exceed one billion
dollars. The proposals leverage the increase in assets by REDUCING THE AVERAGE
FUND EXPENSES, which directly benefits the shareholders. A reduced fund expense
is also attractive to financial representatives who sell the Fund and increase
the assets.
Q. WHAT IS THE FOURTH PROPOSAL I NEED TO CONSIDER?
A. Shareholders of New England Star Advisers 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 UNAFFILIATED INVESTMENT FIRM AS SUBADVISER WITHOUT SHAREHOLDER VOTE.
This proposal is subject to the approval of the Securities and Exchange
Commission as well.
Q. HOW WILL THE FOURTH PROPOSAL CHANGE BENEFIT THE FUND?
A. Trustees believe that this proposal is in the best interest of the Fund and
its shareholders for two reasons. The new proposal WILL ALLOW TRUSTEES TO CHANGE
SUBADVISERS QUICKLY WHEN NECESSARY, for example, when a subadviser's performance
falls short of expectations or a subadviser resigns. In addition, the new
proposal may REDUCE UNNECESSARY FUND EXPENSES by eliminating the need to change
subadvisers through proxy solicitations.
<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.
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 25,931,223.
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 $90,000, 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 (the "Segment"), 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") for the Segment 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 and to approve
its continuation following 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 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 the Segment to
Berger, pursuant to the Old Sub-Advisory Agreement, which was dated August 30,
1996. From January 2 to August 30, 1996, Berger managed the Segment pursuant to
a previous Sub-Advisory Agreement between NEFM and Berger. Prior to January 2,
1996, Berger managed the Segment 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 the Segment, subject to the
supervision of NEFM. Under the terms of the Old Sub-Advisory Agreement, Berger
was authorized to effect portfolio transactions for the Segment, 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 and
to approve its continuation following the MetLife Merger. 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 and 0.50%
of such assets in excess of $50 million. Berger voluntarily agreed, beginning
May 9, 1997, to waive a portion of its sub-advisory fee under the Old Sub-
Advisory Agreement equal to 0.025% annually of the excess, if any, of the
average daily net assets of the Segment over $250 million.
INTERIM AND NEW SUB-ADVISORY AGREEMENTS
Based on a review of the investment approach used by Berger in managing the
Segment, the 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 the Segment. 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 the Segment 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 the 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 0.55% of the first $50 million of the average daily
net assets of the Segment, 0.50% of the next $200 million of such assets and
0.475% of such assets in excess of $250 million. This is in effect identical to
the fee rate payable by NEFM to Berger under the Old Sub-Advisory Agreement
after giving effect to the waiver by Berger described above. The fee rate
payable to Harris Associates under the New Sub-Advisory Agreement is set forth
below. Berger consented to the termination of the Old Sub-Advisory Agreement as
of the close of business on July 25, 1997. Harris Associates has agreed to waive
payment of its entire sub-advisory fee by NEFM under the Interim Sub-Advisory
Agreement from July 25, 1997 through August 31, 1997, and NEFM will pay such
waived fees to Berger. This waiver 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 the Segment. Harris Associates' investment philosophy is
predicated on the belief that over time market price and value converge and that
investment in securities priced significantly below long-term value presents the
best opportunity to achieve long term growth of capital.
In conjunction with the appointment of Harris Associates as sub-adviser, the
investment policies for the Segment were changed as of July 25, 1997 to provide
that the 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 the Segment, Harris Associates uses several qualitative and
quantitative methods in analyzing economic value, but considers the primary
determinant of value to be the enterprise's long-run ability to generate cash
for its owners. Once Harris Associates has determined that a security is
undervalued, Harris Associates will consider it for purchase by the Segment. In
making investment decisions, a key additional factor is the quality of
management, and for equity securities particular emphasis is 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 the Segment, common stocks generally constituted all or most of the
Segment's assets, 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
the Segment, it commenced restructuring the Segment to reflect Harris
Associates' judgments as to stock selection. The majority of this restructuring,
which will take place over time, has been completed. 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 will 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 $280,000, 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 the Segment, 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 the Segment,
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, 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, 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 and 0.50% of such assets in excess of $50 million. The
annual sub-advisory fee rate currently payable by NEFM to Harris Associates
under the Interim Sub-Advisory Agreement is 0.55% of the first $50 million of
the Segment's average daily net assets, 0.50% of the next $200 million of such
assets and 0.475% of such assets in excess of $250 million. (As noted above,
Berger agreed to waive a portion of its sub-advisory fee payable under the Old
Sub-Advisory Agreement beginning May 9, 1997). As of June 30, 1997, the net
assets of the Segment 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 unanimously 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, 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 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 and to approve their continuation following
the MetLife Merger. 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 $252,755,172 and $249,306,466, respectively. For
the fiscal year ended December 31, 1996, NEFM paid sub-advisory fees of $884,453
and $832,262 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 each of 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 any 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 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. segment managed by Harris
Associates $ 98 0.65% first $50 million
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 Associates Value
Portfolio $ 2 0.75% first $25 million
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 voting stock of Founders. The address
of Founders and Mr. Borgen is 2930 East Third Avenue, Denver, Colorado 80206.
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>
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>
Founders Growth Fund $1,432 1.00% first $30 million
0.75% next $270 million
0.70% next $200 million
0.65% over $500 million
*NASL Series Trust
Growth Trust $ 105 0.45% first $50 million
0.45% next $150 million
0.35% next $300 million
0.30% over $500 million
*North American Funds
Growth Equity Fund $ 23 0.50% first $50 million
0.45% next $150 million
0.425% next $300 million
0.40% over $500 million
</TABLE>
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
President, Chairman, Director and Chief Executive Officer 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 and policies 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>
Loomis Sayles Small Cap
Value Fund $200 0.75% All assets
*New England Zenith Fund -
Loomis Sayles Small Cap
Series $137 0.55% first $25 million
0.50% next $75 million
0.45% next $100 million
0.40% over $200 million
Maxim Series -
Maxim Small Cap Aggressive
Growth Fund $139 0.55% first $10 million
0.45% next $15 million
0.40% next $75 million
0.30% over $100 million
Loomis Sayles Small
Cap Growth Fund $ 3 0.75% All assets
*New England Star
Small Cap Fund - Segment
managed by Loomis Sayles $ 71 0.55% first $50 million
0.50% over $50 million
</TABLE>
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 Conduct 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 they manage
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, respectively, 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 its 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 with Harris Associates, 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:
NUMBER
CLASS SHAREHOLDER OF SHARES PERCENT
----- ----------- --------- -------
Y New England Mutual Life Ins. Co. 1,153,176.1190 73.09%
Separate Investment Accounting
Attn: Victor Soohoo
501 Boylston Street
Boston, MA 02116-3706
Y New England Life Insurance Co. 158,025.5030 10.02%
Insurance Acctg & Reporting
Attn: Michael Crowley
501 Boylston Street, 6th Floor
Boston, MA 02116-3706
Y Metropolitan Life Insurance 239,144.9580 15.16%
c/o GADC-Gerald Hart-Agency
Operations NELICO
501 Boylston Street, 10th floor
Boston, MA 02116-3706
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 PROPOSED 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 partnership, 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 ______________________________
