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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. _____ [ ]
(Check appropriate box or boxes)
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NEW ENGLAND FUNDS TRUST III
(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices)
(617) 578-1388
(Registrant's telephone number, including Area Code)
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ROBERT P. CONNOLLY, Esquire
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
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Copy to:
EDWARD A. BENJAMIN, Esquire
Ropes & Gray
One International Place
Boston, Massachusetts 02110
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
DECLARATION PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940,
the Registrant hereby declares that an indefinite number or amount of
its shares of beneficial interest is being registered under the
Securities Act of 1933. The $500 filing fee required by said Rule is
paid herewith.
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The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall hereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
NEW ENGLAND FUNDS TRUST III
(Prospectus and Statement of Additional Information)
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No. of
Form N-1A Caption in Prospectus
1 . . . . . . . . . Cover page
2 . . . . . . . . . Schedule of Fees
3 . . . . . . . . . None
4 . . . . . . . . . Cover page; Additional Facts
about the Funds; Investment
Objectives; How the Funds
Pursue Their Objectives; Fund
Investments; Investment Risks
5 . . . . . . . . . Fund Management
6 . . . . . . . . . Cover page; Additional Facts
about the Funds; 5 Ways to Buy
Fund Shares; Fund Dividend
Payment; Income Tax
Considerations
7 . . . . . . . . . Cover page; Schedule of Fees;
5 Ways to Buy Fund Shares; How
Fund Share Price is
Determined; Sales Charges;
Reduced Sales Charges
8 . . . . . . . . . 4 Ways to Sell Fund Shares;
Repurchase Option; Exchanging
Among New England Funds
9 . . . . . . . . . None
<PAGE>
Item No. of Caption in Statement of
Form N-1A Additional Information
10 . . . . . . . . . Cover page
11 . . . . . . . . . Table of Contents
12 . . . . . . . . . Description of the Trust and
Ownership of Shares
13 . . . . . . . . . Investment Restrictions
14 . . . . . . . . . Management of the Trust
15 . . . . . . . . . Management of the Trust
16 . . . . . . . . . Fund Charges and Expenses;
Management of the Trust
17 . . . . . . . . . Portfolio Transactions and
Brokerage; Fund Charges and
Expenses
18 . . . . . . . . . Description of the Trust and
Ownership of Shares
19 . . . . . . . . . How to Buy Shares; Net Asset
Value and Public Offering
Price; Reduced Sales Charges;
Shareholder Services;
Redemptions
20 . . . . . . . . . Performance Criteria (in
prospectus); Standard
Performance Measures; Income
Dividends, Capital Gain
Distributions and Tax Status
21 . . . . . . . . . Advisory Agreements;
Distribution Agreements and
Rule 12b-1 Plans; Fund Charges
and Expenses
22 . . . . . . . . . Performance Criteria (in
prospectus); Standard
Performance Measures
23 . . . . . . . . . None
<PAGE>
New England Equity Income Fund
Prospectus and Application
November __, 1995
New England Equity Income Fund (the "Fund") is a newly-organized
series of New England Funds Trust III (the "Trust"), a registered open-
end management investment company.
The Fund's investment objective is current income and capital growth.
There can be no assurance that the Fund will achieve its objective,
which may be changed without shareholder approval. The Fund has only
one class of shares available, Class A shares.
This prospectus sets forth information you should know before
investing in the Fund. Please read it carefully and keep it for
future reference. A statement of additional information in two parts
(the "Statement") about the Fund dated November __, 1995 has been
filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. To obtain a copy of the Statement, write to
New England Funds, L.P. (the "Distributor"), SAI Fulfillment Desk, 399
Boylston Street, Boston, MA 02116 or call toll free at 1-800-225-5478.
The Statement contains more detailed information about the Fund and is
incorporated into this prospectus by reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION, ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Table of Contents
Page
FUND EXPENSES AND FINANCIAL INFORMATION
Schedule of Fees Sales charges, yearly operating expenses.
INVESTMENT STRATEGY
How the Fund Pursues Its Investment Objective
INVESTMENT RISKS It is important to understand the risks
inherent in the Fund before you invest.
FUND MANAGEMENT
BUYING FUND SHARES
Minimum Investment
5 Ways to Buy Fund Shares Everything you need to know to
open and add to a New England
Equity Income Fund account.
[ ] Through your investment dealer
[ ] By mail
[ ] By wire transfer
[ ] By Investment Builder
[ ] By electronic purchase through ACH
Sales Charges
Reduced Sales Charges
OWNING FUND SHARES
Exchanging Among New England Funds
Fund Dividend Payments
SELLING FUND SHARES
4 Ways to Sell Fund Shares How to withdraw money or close
your account.
[ ] Through your investment dealer
[ ] By telephone
[ ] By mail
[ ] By Systematic Withdrawal Plan
Repurchase Option An opportunity to reinvest your redemption
proceeds within 120 days for no sales charge.
FUND DETAILS Additional information you may find
important.
How Fund Share Price is Determined
Income Tax Considerations
The Fund's Expenses
Performance Criteria
Additional Facts About the Fund
Glossary of Terms
<PAGE>
Fund Expenses and Financial Information
Schedule of Fees
Expenses are one of several factors to consider when you invest in the
Fund. The following table summarizes your maximum transaction costs
from investing in the Fund and estimated annual expenses. The Example
shows the cumulative expenses attributable to a hypothetical $1,000
investment in the Fund for the periods specified.
Shareholder transaction expenses - paid directly by shareholders
Maximum Initial Sales Charge Imposed on a 5.75%
Purchase (as a percentage of offering
price)(1)(2)
Maximum Contingent Deferred Sales Charge (as a (3)
percentage of original purchase price or
redemption proceeds, as applicable)(2)
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
(1) A reduced sales charge applies in some cases.
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to
any portion of certain purchases greater than $1,000,000 redeemed
within approximately 1 year after purchase. See "Sales Charges."
Annual operating expenses - paid directly by the Fund, and indirectly
by its shareholders
(as a percentage of net assets)
Management Fees ___%*
12b-1 Fees ___%*
Other Expenses** ___%
Total Expenses 1.00%
*
* After fee waiver and expense reduction by the Fund's adviser
and/or the Distributor. Without the voluntary limitations,
Management Fees, 12b-1 Fees, Other Expenses and Total Expenses would
be ___%, ___%, ___% and ___%.
** Other Expenses are based on estimated amounts for the current
fiscal year.
Example
You would pay the following expenses on a $1,000 investment assuming
(1) a 5% annual return and (2) redemption at period end. The 5%
return and expenses in the Example should not be considered indicative
of actual or expected Fund performance or expenses, both of which will
vary.
1 Year $
3 Years $
The purpose of this fee schedule is to assist you in understanding
the various costs and expenses that you will bear directly or
indirectly if you invest in the Fund.
For additional information about the Fund's fees and other expenses,
please see "Fund Management," "Additional Facts About the Fund" and
"The Fund's Expenses."
A wire fee (currently $5.00) will be deducted from your proceeds if
you elect to transfer redemption proceeds by wire.
Please keep in mind that the Example shown above is hypothetical.
The information above should not be considered a representation of
past or future return or expenses; actual return or expenses may be
more or less than those shown.
Investment Strategy
The Fund's objective is current income and capital growth.
How the Fund Pursues Its Investment Objective
Under normal market circumstances, the Fund will invest at least 80%
of its assets in dividend-paying common or preferred stocks. The
Fund's portfolio will be selected to seek a current dividend yield
which is comparable to the published composite yield of the Standard &
Poor's Index of 500 Common Stocks (the "S&P Index") and significant,
long-term capital appreciation. The Fund may also invest in non
dividend-paying stocks, other equity securities, fixed income
securities, Rule 144A securities, zero coupon bonds and strips and may
engage in repurchase agreements.
Investment Risks
It is important to understand the following risks inherent in the Fund
before you invest.
[] Equity Securities
Equity securities are securities that represent an ownership interest
(or the right to acquire such an interest) in a company, and include
common and preferred stocks and securities exercisable for or
convertible into common or preferred stocks (such as warrants,
convertible debt securities and convertible preferred stock).
While offering greater potential for long-term growth, equity
securities are more volatile and more risky than some other forms of
investment. Therefore, the value of your investment in the Fund may
sometimes decrease instead of increase. The Fund may invest in
equity securities of companies with relatively small market
capitalization. Securities of such companies may be more volatile
than the securities of larger, more established companies and the
broad equity market indices. See "Small Companies" below. The
Fund's investments may include securities traded "over-the-counter"
as well as those traded on a securities exchange. Some over-the-
counter securities may be more difficult to sell under some market
conditions.
The Fund may invest in convertible securities, including corporate
bonds, notes or preferred stocks that can be converted into common
stocks or other equity securities. Convertible securities also
include other securities, such as warrants, that provide an
opportunity for equity participation. Because convertible
securities can be converted into equity securities, their values
will normally move up or down as the value of the underlying equity
securities moves up or down. The movements in the prices of
convertible securities, however, often will be smaller than the
movements in the value of the related equity securities. Warrants
have no voting rights, pay no dividends and have no rights with
respect to the assets of the corporation issuing them. They do not
represent ownership of the securities for which they are
exercisable, but only the right to buy such securities at a
particular price. The credit risk associated with convertible
securities is generally reflected by their being rated, if at all,
below investment grade by organizations such as Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P"). Less than 35% of the Fund's assets will be invested in
convertible or debt securities rated below investment grade and
unrated convertible or debt securities of comparable quality.
[] Fixed-Income Securities
Because interest rates vary, it is impossible to predict the income
of a fund that invests in fixed-income securities for any particular
period. Fluctuations in the value of the Fund's investments in
fixed-income securities will cause the Fund's net asset value to
increase or decrease.
Fixed-income securities are subject to market and credit risk.
Market risk relates to changes in a security's value as a result of
changes in interest rates generally. Credit risk relates to the
ability of the issuer to make payments of principal and interest.
[] Repurchase Agreements
In repurchase agreements, the Fund buys securities from a seller,
usually a bank or brokerage firm, with the understanding that the
seller will repurchase the securities at a higher price at a later
date. Such transactions afford an opportunity for the Fund to earn
a return on available cash at minimal market risk, although the Fund
may be subject to various delays and risks of loss if the seller is
unable to meet its obligation to repurchase.
[] Short-Term Trading
Although the Fund seeks long-term growth or return, the Fund may,
consistent with its investment objective, engage in portfolio
trading in anticipation of, or in response to, changing economic or
market conditions and trends. These policies may result in higher
turnover rates in the Fund's portfolio which may produce higher
transaction costs and a higher level of taxable capital gains.
Portfolio turnover considerations will not limit the investment
discretion of the Fund's subadviser in managing the Fund's assets.
[] Small Companies
The Fund, in the discretion of its subadviser, may invest without
limit in the securities of companies with smaller capitalization.
Investments in companies with relatively small capitalization may
involve greater risk than is usually associated with more
established companies. These companies often have sales and
earnings growth rates which exceed those of companies with larger
capitalization. Such growth rates may in turn be reflected in more
rapid share price appreciation. However, companies with smaller
capitalization often have limited product lines, markets or
financial resources and they may be dependent upon a relatively
small management group. The securities may have limited
marketability and may be subject to more abrupt or erratic movements
in price than securities of companies with larger capitalization or
the market averages in general. The net asset value of funds that
invest in companies with smaller capitalization therefore may
fluctuate more widely than market averages.
[] Lower Quality Fixed-Income Securities
Fixed-income securities rated BB or lower by S&P or Ba or lower by
Moody's (and comparable unrated securities) are of below "investment
grade " quality. Lower quality fixed-income securities generally
provide higher yields, but are subject to greater credit and market
risk, than higher quality fixed-income securities. Lower quality
fixed-income securities are considered predominantly speculative
with respect to the ability of the issuer to meet principal and
interest payments. Achievement of the investment objective of a
mutual fund investing in lower quality fixed-income securities may
be more dependent on the fund's adviser's or sub-adviser's own
credit analysis than for a fund investing in higher quality bonds.
The market for lower quality fixed-income securities may be more
severely affected than some other financial markets by economic
recession or substantial interest rate increases, by changing public
perceptions of this market or by legislation that limits the ability
of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid
for lower rated fixed-income securities. This lack of liquidity at
certain times may affect the valuation of these securities and may
make the valuation and sale of these securities more difficult.
Securities of below investment grade are commonly known as junk
bonds. For more information, see the Statement's Appendix A -
Description of Bond Ratings.
[] Foreign Securities
Investments in foreign securities present risks not typically
associated with investments in comparable securities of U.S.
issuers.
There may be less information publicly available about a foreign
corporate or government issuer than about a U.S. issuer, and foreign
corporate issuers are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those
in the United States. The securities of some foreign issuers are
less liquid and at times more volatile than securities of comparable
U.S. issuers. Foreign brokerage commissions and securities custody
costs are often higher than those in the United States, and
judgments against foreign entities may be more difficult to obtain
and enforce. With respect to certain foreign countries, there is a
possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic
developments that could affect the value of investments in those
countries. The receipt of interest on foreign government securities
may depend on the availability of tax or other revenues to satisfy
the issuer's obligations.
The Fund's investments in foreign securities may include investments
in countries whose economies or securities markets are not yet
highly developed. Special considerations associated with these
investments (in addition to the considerations regarding foreign
investments generally) may include, among others, greater political
uncertainties, an economy's dependence on revenues from particular
commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential
buyers for such securities and delays and disruptions in securities
settlement procedures.
Most foreign securities in the Fund's portfolio will be denominated
in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Similarly, any income
on such securities is generally paid to the Fund in foreign
currencies. The value of these foreign currencies relative to the
U.S. dollar varies continually, causing changes in the dollar value
of the Fund's portfolio investments (even if the local market price
of the investments is unchanged) and changes in the dollar value of
the Fund's income available for distribution to its shareholders.
The effect of changes in the dollar value of a foreign currency on
the dollar value of the Fund's assets and on the net investment
income available for distribution may be favorable or unfavorable.
The Fund may incur costs in connection with conversions between
various currencies. In addition, the Fund may be required to
liquidate portfolio assets, or may incur increased currency
conversion costs, to compensate for a decline in the dollar value of
a foreign currency occurring between the time when the Fund declares
and pays a dividend, or between the time when the Fund accrues and
pays an operating expense in U.S. dollars.
[] Zero Coupon Bonds and Strips
The Fund may invest in zero coupon bonds and "strips." Zero coupon
bonds do not make regular interest payments; rather, they are sold
at a discount from face value. Principal and accrued discount
(representing interest accrued but not paid) are paid at maturity.
"Strips" are debt securities that are stripped of their interest
after the securities are issued, but otherwise are comparable to
zero coupon bonds. The market values of "strips" and zero coupon
bonds generally fluctuate in response to changes in interest rates
to a greater degree than do interest paying securities of comparable
term and quality. Under many market conditions, investments in
stripped securities may be illiquid, making it difficult for the
Fund to dispose of them or determine their current value.
[] Miscellaneous
The Fund will not invest more than 15% of its assets in "illiquid
securities," that is, securities which are not readily resalable,
which include securities whose disposition is restricted by federal
securities laws. Investment in restricted or other illiquid
securities involves the risk that the Fund may be unable to sell
such a security at the desired time. Also, the Fund may incur
expenses, losses or delays in the process of registering restricted
securities prior to resale.
The Fund may purchase Rule 144A securities. These are privately
offered securities that can be resold only to certain qualified
institutional buyers. Rule 144A securities are treated as illiquid,
unless the Fund's subadviser has determined, under guidelines
established by the Trust's trustees, that the particular issue of
Rule 144A securities is liquid.
The Fund may purchase securities on a "when-issued" or "delayed-
delivery" basis. This means that the Fund enters into a commitment
to buy the security before the security has been issued, or, in the
case of a security that has already been issued, to accept delivery
of the security on a date beyond the usual settlement period. If
the value of a security purchased on a "when-issued" or "delayed-
delivery" basis falls or market rates of interest increase between
the time the Fund commits to buy the security and the delivery date,
the Fund may sustain a loss in value of or yield on the security.
For more information on "when-issued" and "delayed-delivery"
securities, see the Statement.
Although it is not possible to predict the portfolio turnover rate
with certainty, the Fund's subadviser does not expect the Fund's
portfolio turnover rate to exceed 100%.
Fund Management
New England Funds Management, L.P. ("NEFM"), 399 Boylston Street,
Boston, Massachusetts 02116, is the investment adviser of the Fund
but has delegated day-to-day portfolio management responsibility to
the Fund's subadviser, Loomis, Sayles & Company, L.P. ("Loomis
Sayles"). Founded in 1926, Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111, is one of the country's oldest and
largest investment counsel firms. Mauricio F. Cevallos, Vice
President and Manager of Loomis Sayles and Peter Ramsden, Vice
President of Loomis Sayles, have served as the Fund's portfolio
managers since the Fund's inception in November 1995. Mr. Cevallos
has been employed by Loomis Sayles for more than ten years. Mr.
Ramsden joined Loomis Sayles in 1991 and, prior to that time, was a
MBA candidate at the University of Michigan. NEFM oversees, evaluates
and monitors the investment advisory services provided to the Fund and
furnishes general business management and administration to the Fund.
The Fund pays NEFM a management fee at the annual rate of 0.70% of the
first $200 million of the Fund's average daily net assets, 0.65% of
the next $300 million of such assets and 0.60% of such assets in
excess of $500 million. NEFM pays Loomis Sayles for providing
subadvisory services to the Fund a subadvisory fee at the annual rate
of 0.40% of the first $200 million of the average daily net assets of
the Fund, 0.325% of the next $300 million of such assets and 0.275% of
such assets in excess of $500 million.
The general partners of each of Loomis Sayles, NEFM and the
Distributor are special purpose organizations that are indirect,
wholly-owned subsidiaries of New England Investment Companies, L.P.
("NEIC"). NEIC's sole general partner, New England Investment
Companies, Inc., is a wholly-owned subsidiary of New England Mutual
Life Insurance Company ("The New England").
In placing portfolio transactions for the Fund, Loomis Sayles seeks
the most favorable price and execution available.
In addition to selecting and reviewing the investments of the Fund,
Loomis Sayles provides executive and other personnel for the
management of the Trust. The Trust's Board of Trustees supervises the
affairs of the Trust.
Under an agreement between NEFM and the Distributor, NEFM pays the
Distributor to provide certain administrative services to the Fund.
In addition to the management fee paid to NEFM and the fees paid to
the Distributor, the Fund pays all expenses not borne by NEFM, Loomis
Sayles or the Distributor, including, but not limited to, the charges
and expenses of the Fund's custodian and transfer agent, independent
auditors and legal counsel, all brokerage commissions and transfer
taxes in connection with portfolio transactions, all taxes and filing
fees, the fees and expenses for registration or qualification of its
shares under the federal or state securities laws, all expenses of
shareholders' and trustees' meetings and of preparing, printing and
mailing prospectuses and reports to shareholders and the compensation
of trustees who are not directors, officers or employees of NEFM,
Loomis Sayles or their affiliates, other than affiliated registered
investment companies.
Buying Fund Shares
Minimum Investment
$2,500 is the minimum for an initial investment in the Fund and $50 is
the minimum for each subsequent investment. There are special initial
investment minimums for the following plans:
[] $25 (for initial and subsequent investments) for payroll deduction
investment programs for 401(k), SARSEP, 403(b) retirement plans and
certain other retirement plans.
[] $50 for automatic investing through the Investment Builder program.
[] $250 for retirement plans with tax benefits such as corporate pension
and profit sharing plans, IRAs and Keogh plans.
[] $1,000 for accounts registered under the Uniform Gifts to Minors Act
or the Uniform Transfers to Minors Act.
5 Ways to Buy Fund Shares
[ ] Through your investment dealer:
Many investment dealers have a sales agreement with the Distributor
and would be pleased to accept your order.
[ ] By mail:
For an initial investment, simply complete an application and return
it, with a check payable to New England Funds, P.O. Box 8551, Boston,
MA 02266-8551. Proceeds of redemptions of Fund shares purchased by
check may not be available for up to ten days after the purchase date.
For subsequent investments, please mail your check to New England
Funds, P.O. Box 8551, Boston, MA 02266-8551 along with a letter of
instruction or an additional deposit slip from your statements. To
make investing even easier, you can also order personalized investment
slips by calling 1-800-225-5478.
[ ] By wire transfer of Federal Funds:
For an initial investment, call us at 1-800-225-5478 between 8:00 a.m.
and 6:00 p.m. (Eastern time) to obtain an account number and wire
transfer instructions.
For subsequent investments, direct your bank to transfer funds to
State Street Bank and Trust Company, ABA #011000028, DDA #99011538,
Credit New England Equity Income Fund, Shareholder Name, Shareholder
Account Number. Funds may be transferred between 9:00 a.m. and 4:00
p.m. (Eastern time). Your bank may charge a fee for this service.
[ ] By Investment Builder:
Investment Builder is New England Funds' automatic investment plan.
You may authorize automatic monthly transfers of $50 or more from your
bank checking or savings account to purchase shares of one or more New
England Funds.
For an initial investment, please indicate that you would like to
begin an automatic investment plan through Investment Builder on the
enclosed application. Indicate the amount of the monthly investment
and enclose a voided check from your bank account.
To add Investment Builder to an existing account, please call us at 1-
800-225-5478 for a Service Options form.
[ ] By electronic purchase through ACH:
You may purchase additional shares electronically through the
Automated Clearing House ("ACH") system as long as your bank or credit
union is a member of the ACH system and you have a completed, approved
ACH application on file with the Fund.
To purchase through ACH, call us at 1-800-225-5478 between 8 a.m. and
6 p.m. (Eastern time) for instructions or call Tele#Facts at 1-800-346-
5984 twenty-four hours a day. If you purchase your shares through
ACH, you will receive the net asset value next determined after your
order is received. Proceeds of redemptions of Fund shares purchased
through ACH may not be available for up to ten days after the purchase
date.
General
All purchase orders are subject to acceptance by the Fund and will be
effected at the net asset value next determined after the order is
received in proper form by State Street Bank and Trust Company ("State
Street Bank") (except orders received by your investment dealer before
the close of trading on the New York Stock Exchange [the "Exchange"]
and transmitted to the Distributor by 5:00 p.m. [Eastern time] on the
same day, which will be effected at the net asset value determined on
that day). Although the Fund does not anticipate doing so, it
reserves the right to suspend or change the terms of sales of shares.
You will not receive any certificates for your shares unless you
request them in writing from New England Funds, L.P. The Fund's "open
account" system for recording your investment eliminates the problems
and expense of handling and safekeeping certificates. If you wish
transactions in your account to be effected by another person under a
power of attorney from you, special rules apply. Please contact your
investment dealer or the Distributor for details.
Sales Charges
Shares are offered at net asset value plus a sales charge which varies
depending on the size of your purchase. They are also subject to a
0.25% annual service fee. The current sales charges are:
Sales Charge as a % of
Dealer's
Concession
Public as % of
Value of Offering Amount Offering
Total Investment Price Invested Price
Less than $50,000 5.75% 6.10% 5.00%
$50,000 - $99,999 4.50% 4.71% 4.00%
$100,000 - $249,999 3.50% 3.63% 3.00%
$250,000 - $499,999 2.50% 2.56% 2.15%
$500,000 - $999,999 2.00% 2.04% 1.70%
$1,000,000 or more None None *
* The Distributor may, at its discretion, pay investment dealers
who initiate and are responsible for such purchases a commission of
up to the following amounts: 1% on the first $2 million invested;
.80% on the next $1 million; .20% on the next $2 million; and .08%
on the excess over $5 million. These commissions are not payable if
the purchase represents the reinvestment of a redemption made during
the previous 12 calendar months.
Contingent Deferred Sales Charge. For purchases of $1,000,000 or more
of the Fund, a contingent deferred sales charge ("CDSC"), at the rate
of 1% of the lesser of the purchase price or the net asset value at
the time of redemption, applies to redemptions of shares within one
year after purchase. If an exchange is made to Class A shares of any
of New England Cash Management Trust Money Market Series or U.S.
Government Series or New England Tax Exempt Money Market Trust (the
"Money Market Funds"), then the one-year holding period for purposes
of determining the expiration of the CDSC will stop and will resume
only when an exchange is made back into Class A shares of a series of
the Trust, New England Funds Trust I or New England Funds Trust II
(the "Trusts"). For purposes of the CDSC, it is assumed that the
shares held the longest are the first to be redeemed. No CDSC applies
to a redemption of shares followed by a reinvestment effected within
30 days after the date of the redemption.
No CDSC applies in connection with (1) redemptions by retirement plans
qualified under Internal Revenue Code Sections 401(a) or 403(b)(7)
when such redemptions are necessary to make distributions to plan
participants; (2) distributions from an IRA due to death, disability
or a tax-free return of an excess contribution; (3) distributions by
other employee benefit plans to pay benefits; and (4) distributions by
a Section 401(a) plan due to death. For Section 403(b)(7) and IRA
accounts established before January 3, 1995, the CDSC is waived for
redemptions made after attainment of age 591/2. The CDSC is waived
for redemptions made to make required minimum distributions after
attainment of age 701/2 for Section 403(b)(7) and IRA accounts
established on or after January 3, 1995. There is also no CDSC on
redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder if the
redemption is made within one year after the shareholder's death or
disability. Also, there is no CDSC on certain withdrawals pursuant to
a Systematic Withdrawal Plan. See "Systematic Withdrawal Plan" below.
The Fund receives the net asset value next determined after an order
is received. The sales charge is allocated between the investment
dealer and the Distributor. The Distributor receives the CDSC. For
purposes of the CDSC, an exchange from one series of the Trusts to
another series of the Trusts is not considered a redemption or a
purchase. For federal tax purposes, however, such an exchange is
considered a redemption and a purchase and, therefore, would be
considered a taxable event on which you may recognize a gain or a
loss.
The Distributor may, at its discretion, reallow the entire sales
charge imposed on the sale of shares to investment dealers from time
to time. The staff of the SEC is of the view that dealers receiving
all or substantially all of the sales charge may be deemed
underwriters of a fund's shares.
For new amounts invested, the Distributor may, at its expense, pay
investment dealers who sell shares of the Fund at net asset value to
an eligible governmental authority 0.025% of the average daily net
assets of an account at the end of each calendar quarter for up to one
year. These commissions are not payable if the purchase represents
the reinvestment of redemption proceeds from any series of the Trusts
or if the account is registered in street name.
The Distributor may, at its expense, provide additional promotional
incentives or payments to dealers who sell shares of the Fund. In
some instances these incentives are provided to certain dealers who
achieve sales goals or who have sold or may sell significant amounts
of shares. New England Funds, L.P., from time to time, may provide
financial assistance programs to dealers in connection with
conferences, sales or training programs, seminars, advertising and
sales campaigns and/or shareholder services arrangements. Certain
dealers who have sold or may sell significant amounts of shares also
may receive compensation in the form of payment for travel expenses,
including lodging, incurred in connection with trips taken by invited
registered representatives to locations, within or outside of the
U.S., for educational seminars or meetings of a business nature.
The Distributor may provide non-cash incentives for achievement of
specified sales levels by representatives of participating broker-
dealers and financial institutions. Such incentives include, but are
not limited to, merchandise from gift catalogues or other sources,
gift certificates or vouchers through membership in the New England
Funds Flagship Club. The participation of representatives in such
incentive programs is at the discretion of the broker-dealer or
financial institution with which the representative is associated.
Reduced Sales Charges
[] Letter of Intent - if aggregate purchases of all series and
classes of the Trusts over a 13-month period will reach a breakpoint
(a dollar amount at which a lower sales charge applies), smaller
individual amounts can be invested at the sales charge applicable to
that breakpoint.
[] Combining Accounts - purchases by all qualifying accounts of all
series and classes of the Trusts (which do not include the Money
Market Funds unless the shares were purchased through an exchange
from a series of the Trusts) may be combined with purchases of
qualifying accounts of a spouse, parents, children, siblings,
grandparents or grandchildren, individual fiduciary accounts, sole
proprietorships and/or single trust estates. The values of all
accounts are combined to determine the sales charge.
[] Unit holders of unit investment trusts - unit investment trust
distributions of less than $1 million may be invested in the Fund at
a reduced sales charge of 1.50% of the public offering price (or
1.52% of the net amount invested).
[] Eligible governmental authorities - no sales charge or CDSC applies
to investments by any state, county or city or any instrumentality,
department, authority or agency thereof that has determined that the
Fund is a legally permissible investment and that is prohibited by
applicable investment laws from paying a sales charge or commission
in connection with the purchase of shares of any registered
investment company.
[] Clients of an adviser or subadviser (affiliated with NEIC) - no
sales charge or CDSC applies to investments of $100,000 or more in
the Fund by (1) clients of an adviser or subadviser (affiliated with
NEIC) to any series of the Trusts; any director, officer or partner
of a client of an adviser or subadviser (affiliated with NEIC) to
any series of the Trusts; and the parents, spouses and children of
the foregoing; (2) any individual who is a participant in a Keogh or
IRA plan under a prototype plan document of an adviser or subadviser
(affiliated with NEIC) to any series of the Trusts if at least one
participant in the plan qualifies under category (1) above; and (3)
an individual who invests through an IRA and is a participant in an
employee benefit plan that is a client of an adviser or subadviser
(affiliated with NEIC) to any series of the Trusts. Any investor
eligible for these arrangements should so indicate in writing at the
time of the purchase.
[] Shares of the Fund may be purchased at net asset value with no sales
charge or CDSC by advisory accounts through investment advisers that
are registered under the Investment Advisers Act of 1940 and
affiliated with broker-dealers.
[] Shares of the Fund may be purchased at net asset value by affiliates
of NEFM.
[] There is no sales charge or CDSC related to investments by 401(a),
401(k), 457 or 403(b) plans that have total investment assets equal
to or in excess of $5 million.
[] There is no sales charge, CDSC or initial investment minimum related
to investments by certain current and retired employees of the
Trusts' investment advisers and subadvisers (affiliated with NEIC),
the Distributor or any other company affiliated with The New
England; current and former directors and trustees of the Trusts or
their predecessor companies; agents and general agents of The New
England and its insurance company subsidiaries; current and retired
employees of such agents and general agents; registered
representatives of broker-dealers that have selling arrangements
with the Distributor; the spouse, parents, children, siblings,
grandparents or grandchildren of the persons listed above; any
trust, pension, profit sharing or other benefit plan for any of the
foregoing persons; and any separate account of The New England or of
any insurance company affiliated with The New England.
The reduction or elimination of the sales charge in connection with
sales described above reflects the absence or reduction of sales
expenses associated with such sales.
Owning Fund Shares
Exchanging Among New England Funds
You may exchange Class A shares of the Fund for the Class A shares of
any other series of the Trusts (except New England Growth Fund, which
is subject to special eligibility restrictions) without paying a sales
charge. You may also exchange your shares for Class A shares of the
Money Market Funds. Class A shares of the Money Market Funds acquired
through exchanges from the Fund may be exchanged for Class A shares of
any other series of the Trusts (except New England Growth Fund)
without paying a sales charge.
To make an exchange, please call 1-800-225-5478 between 8 a.m. and 6
p.m. (Eastern time), call Tele#Facts at
1-800-346-5984 twenty-four hours a day or write to New England Funds.
The exchange must be for a minimum of $500 (or the total net asset
value of your account, whichever is less), except that under the
Automatic Exchange Plan the minimum is $50. All exchanges are subject
to the minimum investment and eligibility requirements of the series
into which you are exchanging. In connection with any exchange, you
must receive a current prospectus of the series into which you are
exchanging. The exchange privilege may be exercised only in those
states where shares of such other series may be legally sold.
You have the automatic privilege to exchange your Fund shares by
telephone. New England Funds, L.P. will employ reasonable procedures
to confirm that your telephone instructions are genuine, and, if it
does not, it may be liable for any losses due to unauthorized or
fraudulent instructions. New England Funds, L.P. will require a form
of personal identification prior to acting upon your telephone
instructions, will provide you with written confirmations of such
transactions and will record your instructions.
Except as otherwise permitted by SEC rule, shareholders will receive
at least 60 days' advance notice of any material change to the
exchange privilege.
Fund Dividend Payments
The Fund pays dividends at least annually. The Fund pays as dividends
substantially all net investment income and distributes net realized
long-term capital gains (after applying any available capital loss
carryovers). The trustees of the Trust may adopt a different schedule
as long as payments are made at least annually. If you intend to
purchase shares of the Fund shortly before it declares a dividend, you
should be aware that a portion of the purchase price may in effect be
returned to you as a taxable dividend.
You have the option to reinvest all distributions in additional Class
A shares of the Fund or in Class A shares of other series of the
Trusts, to receive distributions from dividends and interest in cash
while reinvesting distributions from capital gains in additional Class
A shares of the Fund or of other series of the Trusts, or to receive
all distributions in cash. Income distributions and capital gains
distributions will be reinvested in Class A shares of the Fund at net
asset value (without a sales charge) unless you select another option.
You may change your distribution option by notifying New England Funds
in writing or by calling 1-800-225-5478. If you elect to receive your
dividends in cash and the dividend checks sent to you are returned
"undeliverable" to the Fund or remain uncashed for six months, your
cash election will automatically be changed and your future dividends
will be reinvested.
DIVIDEND DIVERSIFICATION PROGRAM
You may also establish a dividend diversification program that allows
you to have all dividends and any other distributions automatically
invested in Class A shares of another New England Fund, subject to the
investor eligibility requirements of that other fund and to state
securities law requirements. Investments will be made at the
appropriate offering price, which may include a sales charge.
Dividends will be invested in the selected fund's shares on the
dividend record date. A dividend diversification account must be in
the same registration (shareholder name) as the distributing fund
account and, if a new account in the purchased fund is being
established, the purchased fund's minimum investment requirements must
be met. Before establishing a dividend diversification program into
any other New England Fund, you must obtain a copy of that fund's
prospectus.
Selling Fund Shares
4 Ways to Sell Fund Shares
[ ] Through your investment dealer:
Call your authorized investment dealer for information.
[ ] By telephone:
You or your investment dealer may redeem (sell) shares by telephone
using any of the three methods described below:
Wired to Your Bank Account - If you have previously selected the
telephone redemption privilege on your account, shares may be redeemed
by calling 1-800-225-5478 between 8 a.m. and 6 p.m. (Eastern time).
Shares may also be redeemed by calling Tele#Facts at 1-800-346-5984
twenty-four hours a day. Redemption requests accepted after the
Exchange has closed (4:00 p.m. Eastern time) will be processed at the
next-determined net asset value. The proceeds (less any applicable
CDSC) generally will be wired on the next business day to the bank
account previously chosen by you on your application. A wire fee
(currently $5.00) will be deducted from the proceeds.
Your bank must be a member of the Federal Reserve System or have a
correspondent bank that is a member. If your account is with a
savings bank, it must have only one correspondent bank that is a
member of the System.
Mailed to Your Address of Record - Shares may be redeemed by calling
1-800-225-5478 and requesting that a check for the proceeds (less any
applicable CDSC) be mailed to the address on your account, provided
that the address has not changed during the previous month and that
the proceeds are for $100,000 or less. Generally, the check will be
mailed to you on the business day after your redemption request is
received.
Through ACH - Shares may be redeemed electronically through the ACH
system, provided that you have an approved ACH application on file
with the Fund. To redeem through ACH, call 1-800-225-5478 prior to
3:00 p.m. (Eastern time) on a day when the Fund is open for business
or call Tele#Facts at 1-800-346-5984 twenty-four hours a day. If your
telephone call is made to Tele#Facts before 4:00 p.m., the redemption
will be processed the day the call is made, unless it is a day when
the Exchange closes before 4:00 p.m. and your call is made after the
Exchange closes. The proceeds (less any applicable CDSC) generally
will arrive at your bank within three business days; their
availability will depend on your bank's particular rule. If you have
recently purchased your shares through the ACH system, the Fund may
withhold redemption proceeds until the funds have cleared, which may
take up to ten days.
[ ] By mail:
You may redeem your shares at their net asset value (less any
applicable CDSC) next determined after receipt of your request in good
order by sending a written request (including any necessary special
documentation) to New England Funds, P.O. Box 8551, Boston, MA 02266-
8551.
The request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, the number of
shares or the dollar amount to be redeemed and whether you wish the
proceeds mailed to your address of record, wired to your bank account
or transmitted through ACH. All owners of the shares must sign the
request in the exact names in which the shares are registered (this
appears on your confirmation statement) and indicate any special
capacity in which you are signing (such as trustee, custodian, under
power of attorney or on behalf of a partnership, corporation or other
entity).
If you are redeeming shares worth less than $100,000 and the proceeds
check is made payable to the registered owner(s) and mailed to the
record address, no signature guarantee is required. Otherwise, you
generally must have your signature guaranteed by an eligible guarantor
institution in accordance with procedures established by New England
Funds, L.P. Signature guarantees by notaries public are not
acceptable.
Additional written information may be required for redemptions by
certain benefit plans and IRAs. Contact the Distributor or your
investment dealer for details.
If you hold certificates for your shares, you must enclose them with
your redemption request or your request will not be honored. The Fund
recommends that certificates be sent by registered mail.
[ ] By Systematic Withdrawal Plan:
You may establish a Systematic Withdrawal Plan that allows you to
redeem shares and receive payments on a regular schedule. In the case
of shares subject to a CDSC, the amount or percentage you specify may
not exceed, on an annualized basis, 10% of the value of your Fund
account. Redemption of shares pursuant to the Plan will not be
subject to a CDSC. For information, contact the Distributor or your
investment dealer. Since withdrawal payments may have tax
consequences, you should consult your tax adviser before establishing
such a plan.
General. Redemption requests will be effected at the net asset value
next determined after your redemption request is received in proper
form by State Street Bank or your investment dealer (except that
orders received by your investment dealer before the close of regular
trading on the Exchange and transmitted to the Distributor by 5:00
p.m. Eastern time on the same day will receive that day's net asset
value). Redemption proceeds (less any applicable CDSC) will normally
be mailed to you within seven days after State Street Bank or the
Distributor receives your request in good order.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If you are unable to
contact the Distributor by telephone, shares may be redeemed by
delivering the redemption request in person to the Distributor or by
mail as described above. Requests are processed at the net asset
value next determined after the request is received.
Special rules apply with respect to redemptions under powers of
attorney. Please call your investment dealer or the Distributor for
more information.
Telephone redemptions are not available for tax qualified retirement
plans or for Fund shares held in certificate form. If certificates
have been issued for your investment, you must send them to New
England Funds along with your request before a redemption request can
be honored. See the instructions for redemption by mail above.
The Fund may suspend the right of redemption and may postpone payment
for more than seven days when the Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the SEC when
trading on the Exchange is restricted or during an emergency which
makes it impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by the SEC for the protection of investors.
Repurchase Option
You may apply your redemption proceeds (without a sales charge) to the
repurchase of Class A shares of any series of the Trusts. To qualify,
you must reinvest some or all of the proceeds within 120 days after
your redemption and notify New England Funds or your investment dealer
at the time of reinvestment that you are taking advantage of this
privilege. You may reinvest the proceeds either by returning the
redemption check or by sending your check for some or all of the
redemption amount. Please note: For federal income tax purposes, a
redemption is a sale that involves tax consequences (even if the
proceeds are later reinvested). Please consult your tax adviser.
Fund Details
How Fund Share Price Is Determined
The Fund's holdings of equity securities are valued at the most recent
sales prices on an applicable exchange or NASDAQ, or, in the case of
unlisted securities (or listed securities which were not traded during
the day), at the last quoted bid prices. Price information on listed
securities is generally taken from the closing price on the exchange
where the security is primarily traded. Short-term notes are valued
at cost, or, where applicable, amortized cost, which method is
intended to approximate market value. All other securities and assets
of the Fund are valued at their fair market value as determined in
good faith by the subadviser (or a pricing service selected by the
subadviser) under the supervision of the Trust's Board of Trustees.
The net asset value of the Fund's shares is determined as of the close
of regular trading (normally 4:00 p.m. Eastern time) on the Exchange
each day it is open for trading.
The net asset value per share is determined by dividing the value of
the Fund's assets (the current U.S. dollar value, in the case of
securities principally traded outside the United States) plus any cash
and other assets (including dividends and interest receivable but not
collected) less all liabilities (including accrued expenses), by the
number of shares of the Fund outstanding. The public offering price
of shares is determined by adding the applicable sales charge to the
net asset value. See "Buying Fund Shares - Sales Charges" above.
The price you pay for a share will be determined using the next set of
calculations made after your order is accepted by New England Funds,
L.P. In other words, if, on a Tuesday morning, your properly
completed application is received, your wire is received or your
dealer places your trade for you, the price you pay will be determined
by the calculations made as of the close of regular trading on the
Exchange on Tuesday. If you buy shares through your investment
dealer, the dealer must receive your order by the close of regular
trading on the Exchange and transmit it to the Distributor by 5:00
p.m. (Eastern time) to receive that day's public offering price.
Income Tax Considerations
The Fund intends to meet all requirements of the Internal Revenue Code
of 1986, as amended, necessary to qualify as a "regulated investment
company" and thus does not expect to pay any federal income tax on
investment income and capital gains distributed to shareholders in
cash or in additional shares. Unless you are a tax-exempt entity,
your distributions derived from the Fund's short-term capital gains
and ordinary income are taxable to you as ordinary income. (A portion
of these distributions may qualify for the dividends-received
deduction for corporations.) Distributions derived from the Fund's
long-term capital gains ("capital gains distributions"), if designated
as such by the Fund, are taxable to you as long-term capital gains,
regardless of how long you have owned shares in the Fund. Both income
distributions and capital gains distributions are taxable whether you
elect to receive them in cash or additional shares.
To avoid an excise tax, the Fund intends to distribute prior to
calendar year end virtually all the Fund's ordinary income and net
capital gains earned during that calendar year. If declared in
December to shareholders of record in that month, and paid the
following January, these distributions will be considered for federal
income tax purposes to have been received by shareholders on December
31.
The Fund is required to withhold 31% of all income dividends and
capital gains distributions it pays to you if you do not provide a
correct, certified taxpayer identification number, if the Fund is
notified that you have underreported income in the past, or if you
fail to certify to the Fund that you are not subject to such
withholding. In addition, the Fund will be required to withhold 31%
of the gross proceeds of Fund shares you redeem if you have not
provided a correct, certified taxpayer identification number. If you
are a tax-exempt shareholder, however, these back-up withholding rules
will not apply so long as you furnish the Fund with an appropriate
certification.
Annually, if you earn more than $10 in taxable income from the Fund,
you will receive a Form 1099 to assist you in reporting the prior
calendar year's distributions on your federal income tax return. You
should consult your tax adviser about any state or local taxes that
may apply to such distributions. Be sure to keep the Form 1099 as a
permanent record. A fee may be charged for any duplicate information
requested.
The foregoing is a summary of certain federal income tax consequences
of an investment in the Fund for shareholders who are U.S. citizens or
corporations. Shareholders should consult a competent tax adviser as
to the effect of an investment in the Fund on their particular
federal, state and local tax situations.
The Fund's Expenses
Under a Service Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor a
monthly service fee at an annual rate not to exceed 0.25% of the
Fund's average daily net assets. The Distributor may pay up to the
entire amount of this fee to securities dealers who are dealers of
record with respect to the Fund's shares, for providing personal
services to investors in shares of the Fund and/or the maintenance of
shareholder accounts. The service fee is payable only to reimburse
the Distributor for amounts it pays or expends in connection with the
provision of personal services to investors and/or the maintenance of
shareholder accounts. To the extent that the Distributor's
reimbursable expenses in any year exceed the maximum amount payable
under the Service Plan for that year, such expenses may be carried
forward for reimbursement in future years in which the Plan remains in
effect.
Performance Criteria
The Fund may include total return information in advertisements or
other written sales material. The Fund will show average annual total
return for the one-, five- and ten-year periods (or the life of the
Fund, if shorter) through the end of the most recent calendar quarter.
Total return is measured by comparing the value of a hypothetical
$1,000 investment in a Fund at the beginning of the relevant period to
the value of the investment at the end of the period (assuming
deduction of the current maximum sales charge and automatic
reinvestment of all dividends and capital gains distributions). Total
return may be quoted with or without giving effect to any voluntary
expense limitations in effect during the relevant period. The Fund
may also show total return over other periods, on an aggregate basis
for the period presented, or without deduction of a sales charge. If
a sales charge is not deducted in calculating total return, the Fund's
total return is higher.
All performance information is based on past results and is not an
indication of likely future performance.
Additional Facts About the Fund
New England Funds Trust III was organized in 1995 as a Massachusetts
business trust and is authorized to issue an unlimited number of
full and fractional shares in multiple series.
When you invest in the Fund, you acquire freely transferable shares
of beneficial interest that entitle you to receive dividends as
determined by the Trust's trustees and to cast a vote for each share
you own at shareholder meetings. Shares of the Fund vote separately
from shares of other series of the Trust, except as otherwise
required by law.
Except for matters that are explicitly identified as "fundamental" in
this prospectus or Part I of the Statement, the investment policies
of the Fund may be changed without shareholder approval or, in most
cases, prior notice. The investment objective of the Fund is not
fundamental. If there is a change in the Fund's objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their current financial position and needs.
The Trust does not generally hold regular shareholder meetings and
will do so only when required by law. Shareholders of the Trust may
remove the trustees of the Trust from office by votes cast at a
shareholder meeting or by written consent.
The transfer and dividend paying agent for the Fund is New England
Funds, L.P., 399 Boylston Street, Boston, MA 02116. New England
Funds, L.P. has subcontracted certain of its obligations as such to
State Street Bank, 225 Franklin Street, Boston, MA 02110.
If the balance in your account with the Fund is less than a minimum
amount set by the trustees of the Trust from time to time (currently
$500 for all accounts except as indicated below and except for
Individual Retirement Accounts, which have a $25 minimum), the Fund
may close your account and send the proceeds to you. Shareholders
who are affected by this policy will be notified of the Fund's
intention to close the account and will have 60 days immediately
following the notice to bring the account up to the minimum. The
minimum does not apply to Keoghs and pension and profit sharing
plans, automatic investment plans or accounts that have fallen below
the minimum solely because of fluctuations in the Fund's net asset
value per share.
The Fund's annual report will contain additional performance
information and will be made available upon request and without
charge.
Glossary of Terms
Capital gain distributions - Payments to shareholders of net profits
earned from selling securities in a fund's portfolio. Capital gain
distributions are usually paid once a year.
Contingent Deferred Sales Charge (CDSC) - A fee that may be charged
when a shareholder sells fund shares.
Distribution fee - An annual asset-based sales charge that is used to
pay for sales-related expenses.
Income Distributions - Payments to shareholders resulting from
interest or dividend income earned by a fund's portfolio.
Mutual fund - The pooled assets of a group of investors,
professionally managed in pursuit of a specific objective.
Net asset value (NAV) - The market value of one share of a mutual fund
on any given day without sales charge or CDSC. Determined by dividing
the fund's total net assets by the number of fund shares outstanding.
New England Funds, L.P. - The distributor and transfer agent of the
New England Funds.
Open end management investment company - A mutual fund that allows
investors to redeem fund shares directly from the fund company on any
business day.
Public offering price (POP) - The price of one share of a mutual fund,
including its initial sales charge, if there is one.
Record date - The date on which mutual fund investors must own a
fund's shares to be eligible to receive specific income or capital
gain distributions.
Service fee - Payments by a fund for personal service to investors
and/or for maintenance of shareholder accounts by a fund's distributor
or a financial representative.
Total return - The change in value of an investment in a fund over a
specific time period, assuming all earnings are reinvested in
additional shares of the fund. Expressed as a percentage.
Yield - The rate at which a fund earns net investment income,
expressed as a percentage. Yield calculations are standardized among
mutual funds, based on a formula developed by the Securities and
Exchange Commission.
12b-1 fees - Fees paid by a mutual fund under a plan adopted under SEC
Rule 12b-1. Can include both distribution fees and service fees.
<PAGE>
NEW ENGLAND FUNDS
New England Equity Income Fund
STATEMENT OF ADDITIONAL INFORMATION
November __, 1995
This Statement of Additional Information (the "Statement")
contains information which may be useful to investors but which is not
included in the prospectus of New England Equity Income Fund (the
"Fund"). This Statement is not a prospectus and is only authorized
for distribution when accompanied or preceded by the Fund's prospectus
dated November __, 1995 (the "Prospectus"). The Statement should be
read together with the prospectus. Investors may obtain a free copy
of the prospectus from New England Funds, L.P., Prospectus Fulfillment
Desk, 399 Boylston Street, Boston, Massachusetts 02116.
T a b l e o f C o n t e n t s
Page
Investment Restrictions
Fund Charges and Expenses
Miscellaneous Investment Practices
Management of the Trust
Portfolio Transactions and Brokerage
Description of the Trust and Ownership of
Shares
How to Buy Shares
Net Asset Value and Public Offering Price
Reduced Sales Charges
Shareholder Services
Redemptions
Standard Performance Measures
Income Dividends, Capital Gain Distributions
and Tax Status
Appendix A - Description of Bond Ratings
Appendix B - Publications That May Be Referred to
in Trust Advertisements and Sales Literature
______________________________________________________________________
INVESTMENT RESTRICTIONS
______________________________________________________________________
The following is a description of restrictions on the investments
to be made by the Fund. Restrictions marked with an asterisk may not
be changed without the approval of a majority of the outstanding
voting securities of the Fund. The percentages set forth below and
the percentage limitations set forth in the Prospectus will apply at
the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs or exists immediately
after and as a result of the purchase of such security.
The Fund will not:
*(1) Purchase any security (other than U.S. Government Securities)
if, as a result, more than 25% of the Fund's total assets (taken
at current value) would be invested in any one industry (in the
utilities category, gas, electric, water and telephone companies
will be considered as being in separate industries, and each
foreign country's government (together with subdivisions thereof)
will be considered to be a separate industry);
(2) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and
sales of securities), or make short sales except where, by virtue
of ownership of other securities, it has the right to obtain,
without payment of further consideration, securities equivalent in
kind and amount to those sold, and the Fund will not deposit or
pledge more than 10% of its total assets (taken at current value)
as collateral for such sales. (For this purpose, the deposit or
payment by the Fund of initial or variation margin in connection
with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(3) Acquire more than 10% of any class of securities of an issuer
(taking all preferred stock issues of an issuer as a single class
and all debt issues of an issuer as a single class) or acquire
more than 10% of the outstanding voting securities of an issuer;
*(4) Borrow money in excess of 25% of its total assets, and then
only as a temporary measure for extraordinary or emergency
purposes;
(5) Pledge more than 25% of its total assets (taken at cost). (For
the purpose of this restriction, collateral arrangements with
respect to options, futures contracts, options on futures
contracts and swap contracts and with respect to initial and
variation margin are not deemed to be a pledge of assets);
(6) Invest more than 5% of its total assets (taken at current value)
in securities of businesses (including predecessors) less than
three years old;
(7) Purchase or retain securities of any issuer if officers and
trustees of New England Funds Trust III (the "Trust") or of the
investment adviser or subadviser of the Fund who individually own
more than 1/2 of 1% of the shares or securities of that issuer,
together own more than 5%;
*(8) Make loans, except by entering into repurchase agreements or
by purchase of bonds, debentures, commercial paper, corporate
notes and similar evidences of indebtedness, which are a part of
an issue to the public or to financial institutions, or through
the lending of the Fund's portfolio securities;
*(9) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, real estate or commodities or commodity
contracts, except that the Fund may buy and sell futures
contracts, swap contracts and related options. (This restriction
does not prevent the Fund from purchasing securities of companies
investing in the foregoing);
*(10) Act as underwriter, except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed to
be an underwriter under certain federal securities laws;
(11) Make investments for the purpose of exercising control or
management;
(12) Participate on a joint or joint and several basis in any
trading account in securities. (The "bunching" of orders for the
purchase or sale of portfolio securities with any investment
adviser or subadviser of the Fund or accounts under any such
investment adviser's or subadviser's management to reduce
brokerage commissions, to average prices among them or to
facilitate such transactions is not considered a trading account
in securities for purposes of this restriction.);
(13) Write, purchase or sell options or warrants, except that the
Fund may (a) acquire warrants or rights to subscribe to securities
of companies issuing such warrants or rights, or of parents or
subsidiaries of such companies, (b) write, purchase and sell put
and call options on securities, securities indexes or futures
contracts and (c) enter into currency forward contracts;
(14) Purchase any illiquid security if, as a result, more than 15%
of its net assets (taken at current value) would be invested in
such securities;
(15) Invest in the securities of other investment companies,
except by purchases in the open market involving only customary
brokers' commissions. Under the Investment Company Act of 1940
(the "1940 Act"), the Fund may not (a) invest more than 10% of its
total assets (taken at current value) in such securities, (b) own
securities of any one investment company having value in excess of
5% of the total assets of the Fund (taken at current value), or
(c) own more than 3% of the outstanding voting stock of any one
investment company; or
*(16) Issue senior securities. (For the purpose of this
restriction none of the following is deemed to be a senior
security: any pledge or other encumbrance of assets permitted by
restrictions (2) or (5) above; any borrowing permitted by
restriction (4) above; any collateral arrangements with respect to
forward contracts, options, futures contracts, swap contracts and
options on futures contracts or swap contracts and with respect to
initial and variation margin; the purchase or sale of options,
forward contracts, futures contracts, swap contracts or options on
futures contracts or swap contracts; and the issuance of shares of
beneficial interest permitted from time to time by the provisions
of the Trust's Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom.)
______________________________________________________________________
FUND CHARGES AND EXPENSES
______________________________________________________________________
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEES
Pursuant to an advisory agreement dated _______, 1995, New
England Funds Management, L.P. ("NEFM") has agreed, subject to the
supervision of the board of trustees of the Trust, to manage the
investment and reinvestment of the assets of the Fund and to provide a
range of administrative services to the Fund. For the services
described in the advisory agreement, NEFM is paid a fee at the annual
rate of 0.70% of the first $200 million of the Fund's average net
assets, 0.65% of the next $300 million of such assets and 0.60% of
such assets in excess of $500 million.
The advisory agreement for Fund provides that NEFM may delegate
its responsibilities thereunder to other parties. As explained in the
Prospectus, NEFM has delegated responsibility for the investment and
reinvestment of the Fund's assets to Loomis, Sayles & Company, L.P.
("Loomis Sayles"), as subadviser. NEFM pays Loomis Sayles for
providing subadvisory services at the annual rate of 0.40% of the
first $200 million of the Fund's average net assets, 0.325% of the
next $300 million of such assets and 0.275% of such assets in excess
of $500 million.
Pursuant to a voluntary agreement that may be terminated at any
time, NEFM and Loomis Sayles bear all expenses (other than any
brokerage costs, interest, taxes or extraordinary expenses) of the
Fund in excess of 1.00% annually of the Fund's average daily net
assets.
______________________________________________________________________
MISCELLANEOUS INVESTMENT PRACTICES
______________________________________________________________________
The following information relates to certain investment
practices in which the Fund may engage.
Loans of Portfolio Securities. The Fund may lend its portfolio
securities to broker-dealers under contracts calling for cash
collateral equal to at least the market value of the securities
loaned, marked to the market on a daily basis. (The Fund at the
present time has no intention to engage in the lending of portfolio
securities.) The Fund will continue to benefit from interest or
dividends on the securities loaned and will also receive interest
through investment of the cash collateral in short-term liquid
investments, which may include shares of money market funds subject
to any investment restriction listed in above. No loans will be made
if, as a result, the aggregate amount of such loans outstanding at
any one time would exceed 15% of the Fund's total assets (taken at
current value). Any voting rights, or rights to consent, relating to
securities loaned pass to the borrower. However, if a material event
affecting the investment occurs, such loans will be called so that
the securities may be voted by the Fund. The Fund pays various fees
in connection with such loans, including shipping fees and reasonable
custodian and placement fees approved by the board of trustees of the
Trust or persons acting pursuant to the direction of the board.
These transactions must by fully collateralized at all times,
but involve some credit risk to the Fund if the other party should
default on its obligation and the Fund is delayed in or prevented
from recovering the collateral.
U.S. Government Securities. The Fund may invest in some or all of
the following U.S. Government Securities:
. U.S. Treasury Bills - Direct obligations of the United States
Treasury which are issued in maturities of one year or less. No
interest is paid on Treasury bills; instead, they are issued at a
discount and repaid at full face value when they mature. They are
backed by the full faith and credit of the United States Government.
. U.S. Treasury Notes and Bonds - Direct obligations of the United
States Treasury issued in maturities that vary between one and 40
years, with interest normally payable every six months. These
obligations are backed by the full faith and credit of the United
States Government.
. "Ginnie Maes" - Debt securities issued by a mortgage banker or
other mortgagee which represent an interest in a pool of mortgages
insured by the Federal Housing Administration or the Farmer's Home
Administration or guaranteed by the Veterans Administration. The
Government National Mortgage Association ("GNMA") guarantees the
timely payment of principal and interest when such payments are due,
whether or not these amounts are collected by the issuer of these
certificates on the underlying mortgages. An assistant attorney
general of the United States has rendered an opinion that the
guarantee by GNMA is a general obligation of the United States backed
by its full faith and credit. Mortgages included in single family or
multi-family residential mortgage pools backing an issue of Ginnie
Maes have a maximum maturity of up to 30 years. Scheduled payments
of principal and interest are made to the registered holders of
Ginnie Maes (such as the Fund) each month. Unscheduled prepayments
may be made by homeowners, or as a result of a default. Prepayments
are passed through to the registered holder (such as the Fund, which
reinvests any prepayments) of Ginnie Maes along with regular monthly
payments of principal and interest.
. "Fannie Maes" - The Federal National Mortgage Association
("FNMA") is a government-sponsored corporation owned entirely by
private stockholders that purchases residential mortgages from a list
of approved seller/servicers. Fannie Maes are pass-through
securities issued by FNMA that are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith
and credit of the United States Government.
. "Freddie Macs" - The Federal Home Loan Mortgage Corporation
("FHLMC") is a corporate instrumentality of the United States
Government. Freddie Macs are participation certificates issued by
FHLMC that represent an interest in residential mortgages from
FHLMC's National Portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but Freddie Macs are
not backed by the full faith and credit of the United States
Government.
As described in the Prospectus, U.S. Government Securities do
not involve the credit risks associated with investments in other
types of fixed-income securities, although, as a result, the yields
available from U.S. Government Securities are generally lower than
the yields available from corporate fixed-income securities. Like
other fixed-income securities, however, the values of U.S. Government
Securities change as interest rates fluctuate. Fluctuations in the
value of portfolio securities will not affect interest income on
existing portfolio securities but will be reflected in the Fund's net
asset value. Since the magnitude of these fluctuations will
generally be greater at times when the Fund's average maturity is
longer, under certain market conditions the Fund may, for temporary
defensive purposes, accept lower current income from short-term
investments rather than investing in higher yielding long-term
securities.
When-Issued Securities. The Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an
agreed-upon price on a specified future date. Such agreements might
be entered into, for example, when the Fund anticipates a decline in
interest rates and is able to obtain a more advantageous yield by
committing currently to purchase securities to be issued later. When
the Fund purchases securities in this manner (i.e., on a when-issued
or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account
cash or U.S. Government Securities in an amount equal to or greater
than, on a daily basis, the amount of the Fund's when-issued or
delayed-delivery commitments. The Fund will make commitments to
purchase on a when-issued or delayed-delivery basis only securities
meeting the Fund's investment criteria. The Fund may take delivery
of these securities or, if it is deemed advisable as a matter of
investment strategy, the Fund may sell these securities before the
settlement date. When the time comes to pay for when-issued or
delayed-delivery securities, the Fund will meet its obligations from
the then available cash flow or the sale of securities, or from the
sale of the when-issued or delayed- delivery securities themselves
(which may have a value greater or less than the Fund's payment
obligation).
Repurchase Agreements. The Fund may enter into repurchase agreements
by which the Fund purchases a security and obtains a simultaneous
commitment from the seller to repurchase the security at an agreed-
upon price and date. The resale price is in excess of the purchase
price and reflects an agreed-upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund
the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill,
certificate of indebtedness, note or bond issued by an agency,
authority or instrumentality of the United States Government, the
obligation of the seller is not guaranteed by the United States
Government and there is a risk that the seller may fail to repurchase
the underlying security. In such event, the Fund would attempt to
exercise rights with respect to the underlying security, including
possible disposition in the market. However, the Fund may be subject
to various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while the
Fund seeks to enforce its rights thereto, (b) possible reduced levels
of income and lack of access to income during this period and (c)
inability to enforce rights and the expenses involved in the
attempted enforcement.
Zero Coupon Securities. Zero coupon securities are debt obligations
that do not entitle the holder to any periodic payments of interest
either for the entire life of the obligation or for an initial period
after the issuance of the obligations. Such securities are issued
and traded at a discount from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until
maturity of the securities, prevailing interest rates, the liquidity
of the security and the perceived credit quality of the issuer. The
market prices of zero coupon securities generally are more volatile
than the market prices of securities that pay interest periodically
and are likely to respond to changes in interest rates to a greater
degree than do non-zero coupon securities having similar maturities
and credit quality. In order to satisfy a requirement for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), the Fund must
distribute each year at least 90% of its net investment income,
including the original issue discount accrued on zero coupon
securities. Because the Fund will not on a current basis receive
cash payments from the issuer of a zero coupon security in respect of
accrued original issue discount, in some years the Fund may have to
distribute cash obtained from other sources in order to satisfy the
90% distribution requirement under the Code. Such cash might be
obtained from selling other portfolio holdings of the Fund. In some
circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might
otherwise make it undesirable for the Trust to sell such securities
at such time.
Convertible Securities. The Fund may invest in convertible
securities including corporate bonds, notes or preferred stocks of
U.S. or foreign issuers that can be converted into (that is,
exchanged for) common stocks or other equity securities. Convertible
securities also include other securities, such as warrants, that
provide an opportunity for equity participation. Because convertible
securities can be converted into equity securities, their values will
normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield
than the underlying equity, however, so that the price decline of a
convertible security may sometimes be less substantial than that of
the underlying equity security.
Options and Futures
. Futures Contracts - A futures contract is an agreement between
two parties to buy and sell a particular commodity (e.g., an interest-
bearing security) for a specified price on a specified future date.
In the case of futures on an index, the seller and buyer agree to
settle in cash, at a future date, based on the difference in value of
the contract between the date it is opened and the settlement date.
The value of each contract is equal to the value of the index from
time to time multiplied by a specified dollar amount.
When a trader, such as the Fund, enters into a futures contract,
it is required to deposit with (or for the benefit of) its broker as
"initial margin" an amount of cash or short-term high-quality
securities (such as U.S. Treasury Bills or high-quality tax exempt
bonds acceptable to the broker) equal to approximately 2% to 5% of
the delivery or settlement price of the contract (depending on
applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of
the contract changes, the value of futures contract positions
increases or declines. At the end of each trading day, the amount of
such increase and decline is received and paid respectively by and to
the holders of these positions. The amount received or paid is known
as "variation margin." If the Fund has a long position in a futures
contract, it will establish a segregated account with the Fund's
custodian containing cash or certain illiquid assets equal to the
purchase price of the contract (less any margin on deposit). For
short positions in futures contracts, the Fund will establish a
segregated account with the Fund's custodian with cash or high grade
liquid debt assets that, when added to the amounts deposited as
margin, equal the market value of the instruments or currency
underlying the futures contracts.
Although futures contracts by their terms require actual
delivery and acceptance of securities (or cash in the case of index
futures), in most cases the contracts are closed out before
settlement. A futures sale is closed by purchasing a futures
contract for the same aggregate amount of the specific type of
financial instrument or commodity and with the same delivery date.
Similarly, the closing out of a futures purchase is closed by the
purchaser selling an offsetting futures contract.
Gain or loss on a futures position is equal to the net variation
margin received or paid over the time the position is held, plus or
minus the amount received or paid when the position is closed, minus
brokerage commissions.
. Options - An option on a futures contract obligates the writer,
in return for the premium received, to assume a position in a futures
contract (a short position if the option is a call and a long
position if the option is a put), at a specified exercise price at
any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the
option to the holder of the option generally will be accompanied by
delivery of the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option.
The premium paid by the purchaser of an option will reflect, among
other things, the relationship of the exercise price to the market
price and volatility of the underlying contract, the remaining term
of the option, supply and demand and interest rates. Options on
futures contracts traded in the United States may only be traded on a
United States board of trade licensed by the Commodity Futures
Trading Commission.
An option on a security entitles the holder to receive (in the
case of a call option) or to sell (in the case of a put option) a
particular security at a specified exercise price. An "American
style" option allows exercise of the option at any time during the
term of the option. A "European style" option allows an option to be
exercised only at the end of its term. Options on securities may be
traded on or off a national securities exchange.
A call option on a futures contract written by the Fund is
considered by the Fund to be covered if the Fund owns the security
subject to the underlying futures contract or other securities whose
values are expected to move in tandem with the values of the
securities subject to such futures contract, based on historical
price movement volatility relationships. A call option on a security
written by the Fund is considered to be covered if the Fund owns a
security deliverable under the option. A written call option is also
covered if the Fund holds a call on the same futures contract or
security as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, Treasury bills
or other high grade liquid obligations in a segregated account with
its custodian.
A put option on a futures contract written by the Fund, or a put
option on a security written by the Fund, is covered if the Fund
maintains cash, U.S. Treasury bills or other high-grade liquid debt
obligations with a value equal to the exercise price in a segregated
account with the Fund's custodian, or else holds a put on the same
futures contract (or security, as the case may be) as the put written
where the exercise price of the put held is equal to or greater than
the exercise price of the put written.
If the writer of an option wishes to terminate its position, it
may effect a closing purchase transaction by buying an option
identical to the option previously written. The effect of the
purchase is that the writer's position will be cancelled. Likewise,
the holder of an option may liquidate its position by selling an
option identical to the option previously purchased.
Closing a written call option will permit the Fund to write
another call option on the portfolio securities used to cover the
closed call option. Closing a written put option will permit the
Fund to write another put option secured by the segregated cash, U.S.
Treasury bills or other high-grade liquid obligations used to secure
the closed put option. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any futures
contract or securities subject to the option to be used for other
Fund investments. If the Fund desires to sell particular securities
covering a written call option position, it will close out its
position or will designate from its portfolio comparable securities
to cover the option prior to or concurrent with the sale of the
covering securities.
The Fund will realize a profit from closing out an option if the
price of the offsetting position is less than the premium received
from writing the option or is more than the premium paid to purchase
the option; the Fund will realize a loss from closing out an option
if the price of the offsetting option position is more than the
premium received from writing the option or is less than the premium
paid to purchase the option. Because increases in the market price
of a call option will generally reflect increases in the market price
of the covering securities, any loss resulting from the closing of a
written call option position is expected to be offset in whole or in
part by appreciation of such covering securities.
Since premiums on options having an exercise price close to the
value of the underlying securities or futures contracts usually have
a time value component (i.e., a value that diminishes as the time
within which the option can be exercised grows shorter), an option
writer may profit from the lapse of time even though the value of the
futures contract (or security in some cases) underlying the option
(and of the security deliverable under the futures contract) has not
changed. Consequently, profit from option writing may or may not be
offset by a decline in the value of securities covering the option.
If the profit is not entirely offset, the Fund will have a net gain
from the options transaction, and the Fund's total return will be
enhanced. Likewise, the profit or loss from writing put options may
or may not be offset in whole or in part by changes in the market
value of securities acquired by the Fund when the put options are
closed.
. Risks - The use of futures contracts and options involves risks.
One risk arises because of the imperfect correlation between
movements in the price of futures contracts and movements in the
price of the securities that are the subject of the hedge. The
Fund's hedging strategies will not be fully effective unless the Fund
can compensate for such imperfect correlation. There is no assurance
that the Fund will be able to effect such compensation.
The correlation between the price movement of the futures
contract and the hedged security may be distorted due to differences
in the nature of the markets. If the price of the futures contract
moves more than the price of the hedged security, the Fund would
experience either a loss or a gain on the future that is not
completely offset by movements in the price of the hedged securities.
In an attempt to compensate for imperfect price movement
correlations, the Fund may purchase or sell futures contracts in a
greater dollar amount than the hedged securities if the price
movement volatility of the hedged securities is historically greater
than the volatility of the futures contract. Conversely, the Fund
may purchase or sell fewer contracts if the volatility of the price
of hedged securities is historically less than that of the futures
contracts.
The price of index futures may not correlate perfectly with
movement in the relevant index due to certain market distortions.
First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal
relationship between the index and futures markets. Secondly, the
deposit requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the
futures market may attract more speculators than does the securities
market. In addition, trading hours for foreign stock index futures
may not correspond perfectly to hours of trading on the foreign
exchange to which a particular foreign stock index future relates.
This may result in a disparity between the price of index futures and
the value of the relevant index due to the lack of continuous
arbitrage between the index futures price and the value of the
underlying index. Finally, hedging transactions using stock indices
involve the risk that movements in the price of the index may not
correlate with price movements of the particular portfolio securities
being hedged.
Price movement correlation also may be distorted by the
illiquidity of the futures and options markets and the participation
of speculators in such markets. If an insufficient number of
contracts are traded, commercial users may not deal in futures
contracts or options because they do not want to assume the risk that
they may not be able to close out their positions within a reasonable
amount of time. In such instances, futures and options market prices
may be driven by different forces than those driving the market in
the underlying securities, and price spreads between these markets
may widen. The participation of speculators in the market enhances
its liquidity. Nonetheless, speculators trading spreads between
futures markets may create temporary price distortions unrelated to
the market in the underlying securities.
Positions in futures contracts and options on futures contracts
may be established or closed out only on an exchange or board of
trade. There is no assurance that a liquid market on an exchange or
board of trade will exist for any particular contract or at any
particular time. The liquidity of markets in futures contracts and
options on futures contracts may be adversely affected by "daily
price fluctuation limits" established by commodity exchanges which
limit the amount of fluctuation in a futures or options price during
a single trading day. Once the daily limit has been reached in a
contract, no trades may be entered into at a price beyond the limit,
which may prevent the liquidation of open futures or options
positions. Prices have in the past exceeded the daily limit on a
number of consecutive trading days. If there is not a liquid market
at a particular time, it may not be possible to close a futures or
options position at such time, and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, if futures or options are
used to hedge portfolio securities, an increase in the price of the
securities, if any, may partially or completely offset losses on the
futures contract.
An exchange-traded option may be closed out only on a national
securities or commodities exchange which generally provides a liquid
secondary market for an option of the same series. If a liquid
secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to
a particular option with the result that the Fund would have to
exercise the option in order to realize any profit. If the Fund is
unable to effect a closing purchase transaction in a secondary
market, it will be not be able to sell the underlying security until
the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient
trading interest in certain options; (ii) restrictions may be imposed
by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or
underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an
exchange or the Options Clearing Corporation or other clearing
organization may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although
outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
The successful use of transactions in futures and options
depends in part on the ability of the Fund's subadviser to forecast
correctly the direction and extent of interest rate movements within
a given time frame. To the extent interest rates move in a direction
opposite to that anticipated, the Fund may realize a loss on the
hedging transaction that is not fully or partially offset by an
increase in the value of portfolio securities. In addition, whether
or not interest rates move during the period that the Fund holds
futures or options positions, the Fund will pay the cost of taking
those positions (i.e., brokerage costs). As a result of these
factors, the Fund's total return for such period may be less than if
it had not engaged in the hedging transaction.
Options trading involves price movement correlation risks
similar to those inherent in futures trading. Additionally, price
movements in options on futures may not correlate with price
movements in the futures underlying the options. Like futures,
options positions may become less liquid because of adverse economic
circumstances. The securities covering written option positions are
expected to offset adverse price movements if those options positions
cannot be closed out in a timely manner, but there is no assurance
that such offset will occur. Also, an option writer may not effect a
closing purchase transaction after it has been notified of the
exercise of an option.
. Over-the-Counter Options - An over-the-counter option (an option
not traded on a national securities exchange) may be closed out only
with the other party to the original option transaction. While the
Fund will seek to enter into over-the-counter options only with
dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that
the Fund will be able to liquidate an over-the-counter option at a
favorable price at any time prior to its expiration. Accordingly,
the Fund might have to exercise an over-the-counter option it holds
in order to realize any profit thereon and thereby would incur
transactions costs on the purchase or sale of the underlying assets.
If the Fund cannot close out a covered call option written by it, it
will not be able to sell the underlying security until the option
expires or is exercised. Furthermore, over-the-counter options are
not subject to the protections afforded purchasers of listed options
by the Options Clearing Corporation or other clearing organization.
. Economic Effects and Limitations - Income earned by the Fund
from its hedging activities will be treated as capital gain and, if
not offset by net recognized capital losses incurred by the Fund,
will be distributed to shareholders in taxable distributions.
Although gain from futures and options transactions may hedge against
a decline in the value of the Fund's portfolio securities, that gain,
to the extent not offset by losses, will be distributed in light of
certain tax considerations and will constitute a distribution of that
portion of the value preserved against decline.
The Fund will not "over hedge," that is, maintain open short
positions in futures or options contracts if, in the aggregate, the
market value of its open positions exceeds the current market value
of its securities portfolio plus or minus the unrealized gain or loss
on such open positions, adjusted for the historical price volatility
relationship between the portfolio and futures and options contracts.
. Future Developments - The above discussion relates to the Fund's
proposed use of futures contracts, options and options on futures
contracts currently available. The relevant markets and related
regulations are still in the developing stage. In the event of
future regulatory or market developments, the Fund may also use
additional types of futures contracts or options and other investment
techniques for the purposes set forth above.
______________________________________________________________________
MANAGEMENT OF THE TRUST
______________________________________________________________________
The Trustee of the Trust and its principal occupations during the past
five years are as follows:
HENRY L. P. SCHMELZER* -- Initial Trustee and President (52);
President and Chief Executive Officer, New England Funds, L.P.;
President and Chief Executive Officer, NEF Corporation, President
and Chief Executive Officer, New England Funds Management, L.P.
("NEFM"); Director, Back Bay Advisors(R), Inc.
* Trustee deemed an "interested person" of the Trust, as defined in
the 1940 Act.
Officers of the Trust and their principal occupations during the past
five years are as follows:
FRANK NESVET -- Treasurer; Senior Vice President and Chief Financial
Officer, NEF Corporation, Senior Vice President and Chief
Financial Officer, New England Funds, L.P.; Senior Vice
President, Chief Financial Officer and Treasurer, NEFM.
MAURICIO CEVALLOS -- Vice President; Vice President, Loomis Sayles &
Company ("Loomis Sayles").
PETER RAMSDEN -- Vice President; Vice President, Loomis Sayles; MBA
candidate at University of Michigan.
ROBERT P. CONNOLLY -- Secretary and Clerk; Senior Vice President and
General Counsel, NEF Corporation; Senior Vice President and
General Counsel, New England Funds, L.P.; Senior Vice President
and General Counsel, NEFM; formerly, Managing Director and
General Counsel, Kroll Associates, Inc. (business consulting
company); formerly Managing Director and General Counsel,
Equitable Capital Management Corporation (investment management
company).
Except as indicated above, the address of each officer affiliated
with New England Funds, L.P. is 399 Boylston Street, Boston,
Massachusetts 02116. The address of Mr. Cevallos is 101 East 52nd
Street, New York, NY 10022 and the address of Mr. Ramsden is One
Financial Center, Boston, MA 02111.
Trustees Fees
For the initial period of its operations, the Fund will pay no
compensation to Trustees.
During the year ended December 31, 1994, the Trustees of the
Trust received the amounts set forth below for serving on the
governing boards of ________ other mutual fund portfolios that have
NEFM or an affiliate thereof as investment adviser or principal
underwriter (the "Other Funds").
Aggregate Total Compensation
Compensation from from
Name of Trustee the Trust in the Other Funds in
1994 1994
The Trust provides no pension or retirement benefits to Trustees,
but has adopted a deferred payment arrangement under which each
Trustee may elect not to receive fees from the Trust on a current
basis but to receive in a subsequent period an amount equal to the
value that such fees would have if they had been invested in series of
the Trust on the normal payment date for such fees. As a result of
this method of calculating the deferred payments, each series, upon
making the deferred payments, will be in the same financial position
as if the fees had been paid on the normal payment dates.
At _______, 1995, the officers and trustees of the Trust as a
group owned less than 1% of the outstanding shares of the Trust.
Advisory Agreements
The Fund pays all expenses not borne by its adviser or
subadviser including, but not limited to, the charges and expenses of
the Fund's custodian and transfer agent, independent auditors and
legal counsel, all brokerage commissions and transfer taxes in
connection with portfolio transactions, all taxes and filing fees,
the fees and expenses for registration or qualification of its shares
under the federal or state securities laws, all expenses of
shareholders' and trustees' meetings and of preparing, printing and
mailing reports to shareholders and any compensation of Trustees who
are not directors, officers or employees of the Fund's adviser,
subadviser or their affiliates, other than affiliated registered
investment companies. The Fund also pays the Distributor for certain
legal and accounting services provided to the Fund by the
Distributor.
Under the advisory agreement, if the total ordinary business
expenses of the Fund or the Trust as a whole for any fiscal year
exceed the lowest applicable limitation (based on percentage of
average net assets or income) prescribed by any state in which the
shares of the Fund or Trust are qualified for sale, the Fund's
adviser shall pay such excess. At present, the most restrictive
state annual expense limitation is 2-1/2% of the average annual net
assets up to $30,000,000, 2% of the next $70,000,000 and 1-1/2% of
such assets in excess of $100,000,000. The adviser will not be
required to reduce its fee or pay such expenses to an extent or under
circumstances which might result in the Fund's inability to qualify
as a regulated investment company under the Code. The term
"expenses" is defined in the advisory agreement and excludes
brokerage commissions, taxes, interest, distribution-related expenses
and extraordinary expenses. This means that the distribution fees
payable to New England Funds, L.P. under the Fund's Distribution
Agreement and the Distribution Plan would be excluded from
"expenses."
The advisory agreement between NEFM and the Fund and the
subadvisory agreement between NEFM and Loomis Sayles each 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
by vote of a majority of the outstanding voting securities of the
Fund and (ii) by vote of a majority of the trustees who are not
"interested persons" of the Trust, as that term is defined in the
1940 Act, cast in person at a meeting called for the purpose of
voting on such approval. Any amendment to an advisory agreement must
be approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the trustees of
the Trust who are not such interested persons, cast in person at a
meeting called for the purpose of voting on such approval. Each
agreement may be terminated without penalty by vote of the board of
trustees or by vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' written notice, or by the
Fund's adviser upon 90 days' written notice, and each terminates
automatically in the event of its assignment. The subadvisory
agreement also may be terminated by the subadviser upon 90 days'
notice and automatically terminated upon termination of the related
advisory agreement. In addition, the advisory agreement will
automatically terminate if the Trust or the Fund shall at any time be
required by the Distributor to eliminate all reference to the words
"New England" or the letters "TNE" in the name of the Trust or the
Fund, unless the continuance of the agreement after such change of
name is approved by a majority of the outstanding voting securities
of the Fund and by a majority of the Trustees who are not interested
persons of the Trust or the Fund's adviser.
The advisory agreement and the subadvisory agreement provide
that the adviser and subadviser shall not be subject to any liability
in connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
NEFM is an independently operated subsidiary of NEIC.
Loomis Sayles was organized in 1926 and is one of the oldest and
largest investment counsel firms in the country. An important
feature of the Loomis Sayles investment approach is its emphasis on
investment research. Recommendations and reports of the Loomis
Sayles research department are circulated throughout the Loomis
Sayles organization and are available to the individuals in the
Loomis Sayles organization who have been assigned the responsibility
for making investment decisions for the Fund's portfolio. Loomis
Sayles provides investment advice to numerous other institutional and
individual clients. These clients include some accounts of The New
England and its affiliates ("New England Accounts"). Loomis Sayles
is a subsidiary of NEIC.
Certain officers of Loomis Sayles who are also officers of the
Trust have responsibility for the management of other client
portfolios. The other investment companies and clients served by
Loomis Sayles sometimes invest in securities in which the Fund also
invests. If the Fund and such other investment companies and clients
advised by Loomis Sayles desire to buy or sell the same portfolio
securities at about the same time, purchases and sales will be
allocated, to the extent practicable, on a pro rata basis in
proportion to the amounts desired to be purchased or sold for each.
It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of
the securities which the Fund purchases or sells. In other cases,
however, it is believed that these practices may benefit the Fund.
It is the opinion of the trustees that the desirability of retaining
Loomis Sayles as subadviser for the Fund outweighs the disadvantages,
if any, which might result from these practices.
Distribution Agreement and Rule 12b-1 Plan. New England Funds,
L.P. serves as the general distributor of the Fund. Under the
agreement, New England Funds, L.P. is not obligated to sell a
specific number of shares. New England Funds, L.P. bears the cost of
making information about the Fund available through advertising and
other means and the cost of printing and mailing prospectuses to
persons other than shareholders. The Fund pays the cost of
registering and qualifying its shares under state and federal
securities laws and the distribution of prospectuses to existing
shareholders.
New England Funds, L.P. is compensated under each agreement
through receipt of the sales charges on Class A shares described
below under "Net Asset Value and Public Offering Price" and is paid
by the Fund the service fee described in the Prospectus.
As described in the Prospectus, the Fund has adopted a Service
Plan under Rule 12b-1 plan (the "Plan") which, among other things,
permit it to pay the Fund's distributor (currently New England Funds,
L.P.) monthly fees out of its net assets. Pursuant to Rule 12b-1
under the Investment Act of 1940 (the "1940 Act"), the Plan was
approved by the shareholders of the Fund, and (together with the
related Distribution Agreement) by the Trust's board of trustees,
including a majority of the trustees who are not interested persons
of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or the
Distribution Agreement (the "Independent Trustees").
The Plan may be terminated by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding
voting securities of the Fund. The Plan may be amended by vote of
the trustees, including a majority of the Independent Trustees, cast
in person at a meeting called for that purpose. Any change in the
Plan that would materially increase the fees payable thereunder by
the Fund requires approval of the holders of such shares. The
Trust's trustees review quarterly a written report of such amounts
expended under the Plan and the purposes for which such expenses have
been incurred. For so long as the Plan is in effect, selection and
nomination of those trustees who are not interested persons of the
Trust shall be committed to the discretion of such disinterested
persons.
The Distributor may enter into selling agreements with
investment dealers, including New England Securities Corporation
("New England Securities"), an affiliate of the Distributor, for the
sale of the Fund's shares. New England Securities is registered as a
broker-dealer under the Securities Exchange Act of 1934.
The Distribution Agreement for the Fund may be terminated at any
time on 60 days' written notice without payment of any penalty by New
England Funds, L.P. or by vote of a majority of the outstanding
voting securities of the Fund or by vote of a majority of the
Independent Trustees.
The Distribution Agreement and the Plan will continue in effect
for successive one-year periods, provided that each such continuance
is specifically approved (i) by the vote of a majority of the
Independent Trustees and (ii) by the vote of a majority of the entire
board of trustees cast in person at a meeting called for that purpose
or by a vote of a majority of the outstanding securities of the Fund.
With the exception of New England Funds, L.P., New England
Securities and their direct and indirect corporate parents (NEIC and
The New England), no interested person of the Trust nor any trustee
of the Trust had any direct or indirect financial interest in the
operation of the Plan or any related agreement.
Benefits to the Trust and its shareholders resulting from the
Plan are believed to include (1) enhanced shareholder service, (2)
asset retention, (3) enhanced bargaining position with third party
service providers and economies of scale arising from having higher
asset levels and (4) portfolio management opportunities arising from
having an enhanced positive cash flow.
New England Funds, L.P. controls the words "New England" in the
name of New England Funds Trust III and the Fund and if it should
cease to be the Fund's principal underwriter, the Trust or the Fund
may be required to change their names and delete these words. New
England Funds, L.P. also acts as principal underwriter for New
England Funds Trusts I and II, New England Cash Management Trust and
New England Tax Exempt Money Market Trust.
Custodial Arrangements. State Street Bank and Trust Company
("State Street Bank"), Boston, Massachusetts 02102, is the Trust's
custodian. As such, State Street Bank holds in safekeeping
certificated securities and cash belonging to the Fund and, in such
capacity, is the registered owner of securities in book-entry form
belonging to the Fund. Upon instruction, State Street Bank receives
and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made
with respect to Fund portfolio securities. State Street Bank also
maintains certain accounts and records of the Trust and calculates
the total net asset value, total net income and net asset value per
share of the Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are
_______________, ________________, Boston, MA _____. The independent
accountants of the Fund conduct an annual audit of the Fund's
financial statements, assist in the preparation of federal and state
income tax returns and consult with the Fund as to matters of
accounting and federal and state income taxation. The statement of
assets and liabilities of the Fund included herein has been so
included in reliance on the report of such firm as experts in
auditing and accounting.
Other Arrangements
Pursuant to a contract between the Fund and New England Funds,
L.P., New England Funds, L.P. acts as shareholder servicing and
transfer agent for the Fund and is responsible for services in
connection with the establishment, maintenance and recording of
shareholder accounts, including all related tax and other reporting
requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Fund's
shares. The Fund pays per account fees to New England Funds, L.P.
for these services in the amount of [$17.25]. New England Funds,
L.P. has subcontracted with State Street Bank for it to provide,
through its subsidiary, Boston Financial Data Services, Inc.
("BFDS"), transaction processing, mail and other services. For these
services, New England Funds, L.P. pays BFDS a per account fee of
[$_____].
______________________________________________________________________
PORTFOLIO TRANSACTIONS AND BROKERAGE
_____________________________________________________________________
In placing orders for the purchase and sale of portfolio
securities for the Fund, Loomis Sayles always seek the best price and
execution. Some of the Fund's portfolio transactions are placed with
brokers and dealers who provide Loomis Sayles with supplementary
investment and statistical information or furnish market quotations
to the Fund, or other investment companies advised by Loomis Sayles.
The business would not be so placed if the Fund would not thereby
obtain the best price and execution. Although it is not possible to
assign an exact dollar value to these services, they may, to the
extent used, tend to reduce the expenses of Loomis Sayles. The
services may also be used by Loomis Sayles in connection with their
other advisory accounts and in some cases may not be used with
respect to the Fund.
In placing orders for the purchase and sale of equity
securities, Loomis Sayles selects only brokers which it believes are
financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge
commission rates that, when combined with the quality of the
foregoing services, will produce best price and execution for the
transaction. This does not necessarily mean that the lowest
available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing
rates. Loomis Sayles will use its best efforts to obtain information
as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount
of the capital commitment by the broker in connection with the order,
are taken into account. The Fund will not pay a broker a commission
at a higher rate than otherwise available for the same transaction in
recognition of the value of research services provided by the broker
or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
General
Portfolio turnover is not a limiting factor with respect to
investment decisions. The Fund anticipates that its portfolio
turnover rate will vary significantly from time to time depending on
the volatility of economic and market conditions.
Subject to procedures adopted by the Board of Trustees of the
Trust, the Fund's brokerage transactions may be executed by brokers
that are affiliated with the Distributor, or the adviser or
subadviser. Any such transactions will comply with Rule 17e-1 under
the 1940 Act.
Under the 1940 Act, persons affiliated with the Trust are
prohibited from dealing with the Fund as a principal in the purchase
and sale of securities. Since transactions in the over-the-counter
market usually involve transactions with dealers acting as principals
for their own accounts, affiliated persons of the Trust, such as New
England Securities, may not serve as the Trust's dealer in connection
with such transactions.
It is expected that the portfolio transactions in fixed-income
securities will generally be with issuers or dealers on a net basis
without a stated commission. Securities firms may receive brokerage
commissions on transactions involving options, futures and options on
futures and the purchase and sale of underlying securities upon
exercise of options. The brokerage commissions associated with
buying and selling options may be proportionately higher than those
associated with general securities transactions.
_____________________________________________________________________
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
______________________________________________________________________
The Trust is a newly organized Massachusetts business trust.
The Fund, organized in 1995, is expected to commence operations on
__________, 1995. The Fund currently has one class of shares.
The Declaration of Trust currently permits trustees to issue an
unlimited number of full and fractional shares of the Fund. The Fund
is represented by a particular series of shares. The Declaration of
Trust further permits the Trust's trustees to divide the shares of
each series into any number of separate classes, each having such
rights and preferences relative to other classes of the same series
as the trustees may determine. The shares of the Fund do not have
any preemptive rights. Upon termination of the Fund, whether
pursuant to liquidation of the Trust or otherwise, shareholders the
Fund are entitled to share pro rata in the net assets attributable to
the Fund available for distribution to shareholders. The Declaration
of Trust also permits the trustees to charge shareholders directly
for custodial, transfer agency and servicing expenses.
The assets received by the Fund for the issue or sale of its
shares and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of the creditors, are allocated
to, and constitute the underlying assets of the Fund. The underlying
assets of the Fund are segregated and are charged with the expenses
with respect to the Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily
identifiable as belonging to the Fund are allocated by or under the
direction of the trustees in such manner as the trustees determine to
be fair and equitable. While the expenses of the Trust are allocated
to the separate books of account of the Trust's series, certain
expenses may be legally chargeable against the assets of all classes
of the Trust's series.
The Declaration of Trust also permits the Trust's trustees,
without shareholder approval, to subdivide any series or class of
shares or Fund into various sub-series or sub-classes with such
dividend preferences and other rights as the trustees may designate.
While the trustees have no current intention to exercise this power,
it is intended to allow them to provide for an equitable allocation
of the impact of any future regulatory requirements which might
affect various classes of shareholders differently. The trustees may
also, without shareholder approval, establish one or more additional
series or classes or merge two or more existing series or classes.
The Declaration of Trust provides for the perpetual existence of
the Trust. The Trust may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Trust. Similarly,
the Fund may be terminated by a vote of at least two-thirds of its
outstanding shares. The Declaration of Trust further provides that
the Trust's board of trustees may terminate the Trust or the Fund
without shareholder vote upon written notice to its shareholders.
Voting Rights
As summarized in the Prospectus, shareholders are entitled to
one vote for each full share held (with fractional votes for each
fractional share held) and may vote (to the extent provided therein)
in the election of trustees and the termination of the Trust and on
other matters submitted to the vote of shareholders.
The Declaration of Trust provides that on any matter submitted
to a vote of all shareholders of a Trust, all Trust shares entitled
to vote shall be voted together irrespective of series or class
unless the rights of a particular series or class would be adversely
affected by the vote, in which case a separate vote of that series or
class shall also be required to decide the question. Also, a
separate vote shall be held whenever required by the 1940 Act or any
rule thereunder. Rule 18f-2 under 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it
is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any
interest of such series or class. On matters affecting an individual
series or class, only shareholders of that series or class are
entitled to vote. Consistent with the current position of the
Securities and Exchange Commission (the "SEC"), shareholders of all
series and classes vote together, irrespective of series or class, on
the election of trustees and the selection of the Trust's independent
accountants, but shareholders of each series vote separately on other
matters requiring shareholder approval, such as certain changes in
investment policies of that series or the approval of the investment
advisory agreement relating to that series, and shareholders of each
class within a series vote separately as to the Rule 12b-1 plan (if
any) relating to that class.
There will normally be no meetings of shareholders for the
purpose of electing trustees except that, in accordance with the 1940
Act, (i) the Trust will hold a shareholders' meeting for the election
of trustees at such time as less than a majority of the trustees
holding office have been elected by shareholders, and (ii) if, as a
result of a vacancy on the board of trustees, less than two-thirds of
the trustees holding office have been elected by the shareholders,
that vacancy may only be filled by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent
signed by the holders of two-thirds of the outstanding shares and
filed with a Trust's custodian or by a vote of the holders of two-
thirds of the outstanding shares at a meeting duly called for that
purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset
value of at least $25,000 or at least 1% of the outstanding shares
stating that such shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a trustee, the Trust has
undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting
shareholders).
Except as set forth above, the trustees shall continue to hold
office and may appoint successor trustees. Voting rights are not
cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust
except (i) to change the Trust's or a series' name or to cure
technical problems in a Declaration of Trust, (ii) to establish and
designate new series or classes of Trust shares or (iii) to
establish, designate or modify new and existing series or classes of
Trust shares or other provisions relating to Trust shares in response
to applicable laws or regulations.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the
Trust. However, the Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the trustees.
The Declaration of Trust provides for indemnification out of the
Fund's property for all loss and expense of any shareholder held
personally liable for the obligations of the Fund by reason of owning
shares of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which the disclaimer
is inoperative and the Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the board of
trustees will not be liable for errors of judgment or mistakes of
fact or law. However, nothing in the Declaration of Trust protects a
trustee against any liability to which the trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or
her office. The By-Laws of the Trust provide for indemnification by
the Trust of trustees and officers of the Trust, except with respect
to any matter as to which any such person did not act in good faith
in the reasonable belief that his or her action was in or not opposed
to the best interests of the Trust. Such persons may not be
indemnified against any liability to the Trust or the Trust's
shareholders to which he or she would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
______________________________________________________________________
HOW TO BUY SHARES
______________________________________________________________________
The procedures for purchasing shares of the Fund are summarized
in the Prospectus. Banks may charge a fee for transmitting funds by
wire. With respect to shares purchased by federal funds,
shareholders should bear in mind that wire transfers may take two or
more hours to complete.
For purchase of Fund shares by mail, the settlement date is the
first business day after receipt of the check by the transfer agent
so long as it is received by the close of regular trading of the New
York Stock Exchange (the "Exchange") on a day when the Exchange is
open; otherwise the settlement date is the following business day.
For telephone orders, the settlement date is the third business day
after the order is made.
Shares may also be purchased either in writing, by phone or by
electronic funds transfer using Automated Clearing House ("ACH"), or
by exchange as described in the Prospectus through firms that are
members of the National Association of Securities Dealers, Inc. and
that have selling agreements with New England Funds, L.P.
New England Funds, L.P. may at its discretion accept a telephone
order for the purchase of $5,000 or more of the Fund's shares.
Payment must be received by New England Funds, L.P. within three
business days following the transaction date or the order will be
subject to cancellation. Telephone orders must be placed through New
England Funds, L.P. or your investment dealer.
______________________________________________________________________
NET ASSET VALUE AND PUBLIC OFFERING PRICE
______________________________________________________________________
The method for determining the public offering price and net
asset value per share is summarized in the Prospectus.
The total net asset value of the shares of the Fund (the excess
of the assets of the Fund over its liabilities) is determined as of
the close of regular trading (normally 4:00 p.m. Eastern time) on
each day that the Exchange is open for trading. The weekdays that
the Exchange is expected to be closed are New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Securities listed on a national
securities exchange or on the NASDAQ national market system are
valued at their last sale price, or, if there is no reported sale
during the day, the last reported bid price estimated by a broker.
Unlisted securities traded in the over-the-counter market are valued
at the last reported bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make a market in the securities. U.S. Government Securities are
traded in the over-the-counter market. Options, interest rate
futures and options thereon that are traded on exchanges are valued
at their last sale price as of the close of such exchanges.
Securities for which current market quotations are not readily
available and all other assets are taken at fair value as determined
in good faith by the board of trustees, although the actual
calculations may be made by persons acting pursuant to the direction
of the board.
Generally, trading in fixed-income securities, as well as
trading in equity securities in markets outside the United States, is
substantially completed each day at various times prior to the close
of the Exchange. The value of equity securities of non-U.S. issuers
not traded on a U.S. exchange will be valued at their last sale
price, if any, on the exchange on which they principally trade.
Occasionally, events affecting the value of fixed-income securities
and of equity securities of non-U.S. issuers not traded on a U.S.
exchange may occur between the completion of substantial trading of
such securities for the day and the close of the Exchange, which
events will not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of the Fund's
securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or in
accordance with procedures approved by the trustees.
The per share net asset value of the Fund's shares is computed
by dividing the number of shares outstanding into the total net asset
value. The public offering price of a share of the Fund is the net
asset value per share next determined after a properly completed
purchase order is accepted by New England Funds, L.P. or State Street
Bank, plus a sales charge as set forth in the Fund's prospectus.
REDUCED SALES CHARGES
Special purchase plans are enumerated in the text of the
Prospectus.
Cumulative Purchase Discount. A shareholder making an
additional purchase of Fund shares may be entitled to a discount on
the sales charge payable on that purchase. This discount will be
available if the shareholder's "total investment" in the Fund reaches
the breakpoint for a reduced sales charge in the table under "Net
Asset Value and Public Offering Price," in the Prospectus. The total
investment is determined by adding the amount of the additional
purchase, including sales charge, to the current public offering
price of all series and classes of shares of the Trust, New England
Funds Trust I and New England Funds Trust II (the "Trusts") held by
the shareholder in one or more accounts. If the total investment
exceeds the breakpoint, the lower sales charge applies to the entire
additional investment even though some portion of that additional
investment is below the breakpoint to which a reduced sales charge
applies. For example, if a shareholder who already owns shares of
one or more series of the Trusts with a value at the current public
offering price of $30,000 makes an additional purchase of $20,000 of
Class A shares of the Fund, the reduced sales charge of 4.5% of the
public offering price will apply to the entire amount of the
additional investment.
Letter of Intent. A Letter of Intent (a "Letter"), which can be
effected at any time, is a privilege available to investors which
reduces the sales charge on investments in Class A shares.
Ordinarily, reduced sales charges are available for single purchases
of Class A shares only when they reach certain breakpoints (e.g.,
$50,000, $100,000, etc.). By signing a Letter, a shareholder
indicates an intention to invest enough money in Class A shares
within 13 months to reach a breakpoint. If the shareholder's
intended aggregate purchases of all series and classes of the Trusts
over a defined 13-month period will be large enough to qualify for a
reduced sales charge, the shareholder may invest the smaller
individual amounts at the public offering price calculated using the
sales load applicable to the 13-month aggregate investment.
A Letter is a non-binding commitment, the amount of which may be
increased, decreased or canceled at any time. The effective date of
a Letter is the date it is received in good order at New England
Funds, L.P., or, if communicated by a telephone exchange or order, at
the date of telephoning provided a signed Letter, in good order,
reaches New England Funds, L.P. within five business days.
A reduced sales charge is available for aggregate purchases of
all series and classes of shares of the Trusts pursuant to a written
Letter effected within 90 days after any purchase. In the event the
account was established prior to 90 days before the Letter effective
date, the account will be credited with Rights of Accumulation
("ROA") towards the breakpoint level that will be reached upon the
completion of the 13 months' purchases. The ROA credit is the value
of all shares held as of the effective date of the Letter based on
the "public offering price computed on such date."
The cumulative purchase discount, described above, permits the
aggregate value at the current public offering price of Class A
shares of any accounts with the Trusts held by a shareholder to be
added to the dollar amount of the intended investment under a Letter,
provided the shareholder lists them on the account application.
State Street Bank will hold in escrow shares with a value at the
current public offering price of 5% of the aggregate amount of the
intended investment. The amount in escrow will be released when the
Letter is completed. If the shareholder does not purchase shares in
the amount indicated in the Letter, the shareholder agrees to remit
to State Street Bank the difference between the sales charge actually
paid and that which would have been paid had the Letter not been in
effect, and authorizes State Street Bank to redeem escrowed shares in
the amount necessary to make up the difference in sales charges.
Reinvested dividends and distributions are not included in
determining whether the Letter has been completed.
Combining Purchases. Purchases of all series and classes of the
Trusts by or for an investor, the investor's spouse, parents,
children, siblings, grandparents or grandchildren and any other
account of the investor, including sole proprietorships, in the
Trusts may be treated as purchases by a single individual for
purposes of determining the availability of a reduced sales charge.
Purchases for a single trust estate or a single fiduciary account may
also be treated as purchases by a single individual for this purpose,
as may purchases on behalf of a participant in a tax-qualified
retirement plan and other employee benefit plans, provided that the
investor is the sole participant in the plan.
Combining with Other Series and Classes of the Trusts. A
shareholder's total investment for purposes of the cumulative
purchase discount and purchases under a Letter of Intent includes the
value at the current public offering price of any shares of series
and classes of the Trusts that the shareholder owns (which do not
include shares of New England Cash Management Trust and New England
Tax Exempt Money Market Trust ("New England Money Market Funds")
unless such shares were purchased by exchanging shares of the
Trusts). Shares owned by persons described in the preceding
paragraph may also be included.
Sponsored Arrangements. Class A shares may be purchased at a
reduced sales charge pursuant to "sponsored arrangements," which
include programs under which an association makes recommendations to,
or permits group solicitation of, its members in connection with the
purchase of shares of the series of the Trusts on an individual
basis. The amount of the sales charge reduction will reflect the
anticipated reduction in sales expenses associated with sponsored
arrangements. The reduction in sales expenses, and therefore the
reduction in sales charge, will vary depending on factors such as the
size and stability of the association's membership, the term of the
association's existence and certain characteristics of its members.
Unit Holders of Unit Investment Trusts. Unit investment trust
distributions may be invested in the Fund at a reduced sales charge
of 1.50% of the public offering price (or 1.52% of the net amount
invested); for large purchases on which a sales charge of less than
1.50% would ordinarily apply, such lower charge also applies to
investments of unit investment trust distributions.
Clients of Advisers or Subadvisers (Affiliated with NEIC). No
sales charge or contingent deferred sales charge ("CDSC") applies to
investments of $100,000 or more in Class A shares of series of the
Trusts by (1) clients of an adviser or subadviser (affiliated with
NEIC) to series of the Trusts; any director, officer or partner of a
client of an adviser or subadviser (affiliated with NEIC) to series
of the Trusts; and the spouse, parents, children, siblings,
grandparents or grandchildren of the foregoing; (2) any individual
who is a participant in a Keogh or IRA Plan under a prototype of an
adviser or subadviser (affiliated with NEIC) to a series of the
Trusts if at least one participant in the plan qualifies under
category (1) above; and (3) an individual who invests through an IRA
and is a participant in an employee benefit plan that is a client of
an adviser or subadviser (affiliated with NEIC) to series of the
Trusts. Any investor eligible for this arrangement should so
indicate in writing at the time of the purchase.
Offering to Employees of The New England and Associated
Entities. There is no sales charge, CDSC or initial investment
minimum related to investments in Class A shares of any series of the
Trusts by any of the Trusts' investment advisers or subadvisers
(affiliated with NEIC), New England Funds, L.P. or any other company
affiliated with The New England; current and former directors and
trustees of the Trusts; agents and general agents of The New England
and its insurance company subsidiaries; current and retired employees
of such agents and general agents; registered representatives of
broker dealers that have selling arrangements with New England Funds,
L.P.; the spouse, parents, children, siblings, grandparents or
grandchildren of the persons listed above and any trust, pension,
profit sharing or other benefit plans for any of the foregoing
persons and any separate account of The New England or any other
company affiliated with The New England.
Eligible Governmental Authorities. There is no sales charge or
CDSC related to investments in Class A shares of any series of the
Trusts (except the Star Advisers Fund) by any of the state, county or
city or any instrumentality, department, authority or agency thereof
that has determined that a series of the Trusts is a legally
permissible investment and that is prohibited by applicable
investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered investment
company.
Investment Advisory Accounts. There is no sales charge or CDSC
to investments in Class A shares of any series of the Trusts by any
of the advisory accounts through investment advisers registered under
the Investment Advisers Act of 1940 and affiliated with broker-
dealers.
Affiliates of NEFM. Shares of the Fund may be purchased at net
asset value by affiliates of NEFM.
The reduction or elimination of the sales charge in connection
with sales described above reflects the absence or reduction of sales
expenses associated with such sales.
______________________________________________________________________
SHAREHOLDER SERVICES
______________________________________________________________________
Open Accounts
A shareholder's investment is automatically credited to an open
account maintained for the shareholder by State Street Bank.
Following each transaction in the account, a shareholder will receive
a confirmation statement disclosing the current balance of shares
owned and the details of recent transactions in the account. After
the close of each calendar year, State Street Bank will send each
shareholder a statement providing federal tax information on
dividends and distributions paid to the shareholder during the year.
This statement should be retained as a permanent record. New England
Funds, L.P. may charge a fee for providing duplicate information.
The open account system provides for full and fractional shares
expressed to three decimal places and, by making the issuance and
delivery of stock certificates unnecessary, eliminates problems of
handling and safekeeping, and the cost and inconvenience of replacing
lost, stolen, mutilated or destroyed certificates.
The costs of maintaining the open account system are paid by the
Trust and no direct charges are made to shareholders. Although the
Trust has no present intention of making such direct charges to
shareholders, it reserves the right to do so. Shareholders will
receive prior notice before any such charges are made.
Automatic Investment Plans
Subject to the Fund's investor eligibility requirements,
investors may automatically invest in additional shares of the Fund
on a monthly basis by authorizing New England Funds, L.P. to draw
checks on an investor's bank account. The checks are drawn under the
Investment Builder Program, a program designed to facilitate such
periodic payments, and are forwarded to New England Funds, L.P. for
investment in the Fund. A plan may be opened with an initial
investment of $50 or more and thereafter regular monthly checks of
$50 or more will be drawn on the investor's account. The reduced
minimum initial investment pursuant to an automatic investment plan
is referred to in the Prospectus. An Investment Builder application
must be completed to open an automatic investment plan. An
application may be found in the Prospectus or may be obtained by
calling New England Funds, L.P. at 1-800-225-5478 or your investment
dealer.
This program is voluntary and may be terminated at any time by
the investor or by New England Funds, L.P. upon notice to existing
plan participants.
The Investment Builder Program plan may be discontinued by
written notice to New England Funds, L.P., which must be received at
least five business days prior to any payment date. The plan may be
discontinued by State Street Bank at any time without prior notice if
any check is not paid upon presentation; or by written notice to the
investor at least thirty days prior to any payment date. State
Street Bank is under no obligation to notify shareholders as to the
nonpayment of any check.
Retirement Plans Offering Tax Benefits
The federal tax laws provide for a variety of retirement plans
offering tax benefits. These plans may be funded with shares of the
Fund or with certain other investments. The plans include H.R. 10
(Keogh) plans for self-employed individuals and partnerships,
individual retirement accounts (IRAs), corporate pension trust and
profit sharing plans, including 401(k) plans, and retirement plans
for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.
The reduced minimum initial investment available to retirement
plans offering tax benefits is referred to in the Prospectus. For
these plans, initial and subsequent investments in the Fund must be
at least $25 for each participant in a plan, and income dividends and
capital gain distributions must be reinvested (unless the investor is
over age 59 1/2 or disabled). Plan documents and further information
can be obtained from New England Funds, L.P.
An investor should consult a competent tax or other adviser as
to the suitability of the Fund's shares as a vehicle for funding a
plan, in whole or in part, under the Employee Retirement Income
Security Act of 1974 and as to the eligibility requirements for a
specific plan and its state as well as federal tax aspects.
Systematic Withdrawal Plans
An investor owning Fund shares having a value of $5,000 or more
at the current public offering price may establish a Systematic
Withdrawal Plan providing for periodic payments of a fixed or
variable amount. An investor may terminate the plan at any time. A
form for use in establishing such a plan is available from the
servicing agent or your investment dealer. Withdrawals may be paid
to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or New England
Funds, L.P.
A shareholder under a Systematic Withdrawal Plan may elect to
receive payments monthly, quarterly, semiannually or annually for a
fixed amount of not less than $50 or a variable amount based on (1)
the market value of a stated number of shares, (2) a specified
percentage of the account's market value or (3) a specified number of
years for liquidating the account (e.g., a 20-year program of 240
monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment
option may be $50 or more.
In the case of shares subject to a contingent deferred sales
charge ("CDSC"), the amount or percentage you specify may not, on an
annualized basis, exceed 10% of the value, as of the time you make
the election, of your account with the Fund. No CDSC applies to a
redemption pursuant to the Plan.
All shares under the Plan must be held in an open
(uncertificated) account. Income dividends and capital gain
distributions will be reinvested (without a sales charge) at net
asset value determined on the record date.
Since withdrawal payments represent proceeds from the
liquidation of shares, withdrawals may reduce and possibly exhaust
the value of the account, particularly in the event of a decline in
net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be
withdrawn are appropriate in the circumstances. The Fund and New
England Funds, L.P. make no recommendations or representations in
this regard. It may be appropriate for the shareholder to consult a
tax adviser before establishing such a plan.
It may be disadvantageous for a shareholder to purchase on a
regular basis additional Fund shares with a sales charge while
redeeming shares under a Systematic Withdrawal Plan. Accordingly,
the Fund and New England Funds, L.P. do not recommend additional
investments in the Fund by a shareholder who has a withdrawal plan in
effect and who would be subject to a sales load on such additional
investments.
Because of statutory restrictions this plan is not available to
pension or profit-sharing plans, IRAs or 403(b) plans that have State
Street Bank as trustee.
Exchange Privilege
A shareholder may exchange the shares of the Fund for Class A
shares of the same class of any other series of the Trusts (subject
to the investor eligibility requirements of the series into which the
exchange is being made) on the basis of relative net asset values at
the time of the exchange without any sales charge. You may also
elect to exchange your shares of the Fund for Class A shares of
either of the Money Market Funds. On all exchanges of Class A shares
subject to a CDSC into the Money Market Funds, the exchange stops the
aging period relating to the contingent deferred sales charge. These
options are summarized in the Prospectus. An exchange may be
effected, provided that neither the registered name nor address of
the accounts are different and provided that a certificate
representing the shares being exchanged has not been issued to the
shareholder, by (1) a telephone request to New England Funds, L.P. at
1-800-223-7124 or (2) a written exchange request to New England
Funds, P.O. Box 8551, Boston, MA 02266-8551. You must acknowledge
receipt of a current prospectus for a series before an exchange for
that series can be effected.
The investment objectives of the series of the Trusts are as follows:
Stock Funds:
New England Capital Growth Fund seeks long-term growth of
capital.
New England Value Fund seeks a reasonable long-term investment
return from a combination of market appreciation and dividend income
from equity securities.
New England Balanced Fund seeks a reasonable long-term
investment return from a combination of long-tern capital
appreciation and moderate current income.
New England Growth Opportunities Fund seeks opportunities for
long-term growth of capital and income.
New England International Equity Fund seeks total return from
long-term growth of capital and dividend income primarily through
investment in a diversified portfolio of marketable international
equity securities.
New England Star Advisers Fund seeks long-term of capital.
New England Growth Fund seeks long-term of capital through
investment in equity securities of companies whose earnings are
expected to grow at a faster rate than the U.S. economy.
Bond Funds:
New England Government Securities Fund seeks a high level of
current income consistent with safety of principal by investing in
U.S. Government securities and engaging in transactions involving
related options, futures an options on futures.
New England Limited Term U.S. Government Fund seeks a high
current return consistent with preservation of capital.
New England Adjustable Rate U.S. Government Fund seeks a high
level of current income consistent with low volatility of principal.
New England Strategic Income Fund seeks high current income with
a secondary objective of capital growth.
New England Bond Income Fund seeks a high level of current
income consistent with what the Fund considers reasonable risk. The
Bond Income Fund invests primarily in corporate and U.S. Government
bonds.
New England High Income Fund seeks high current income plus the
opportunity for capital appreciation to produce a high total return.
New England Tax Exempt Income Fund seeks as high a level of
current income exempt from federal income taxes as is consistent with
reasonable risk and protection of shareholder's' capital. The Tax
Exempt Income Fund invests primarily in debt securities, the interest
of which is, in the opinion of the debt issuer's counsel, exempt from
federal income tax ("tax exempt bonds"), and may engage in
transactions in financial futures contracts and options on futures.
New England Massachusetts Tax Free Income Fund seeks as high a
level of current income exempt from federal income tax and
Massachusetts personal income taxes as Back Bay Advisors(R), the
Fund's investment adviser, believes is consistent with preservation
of capital.
New England Intermediate Term Tax Free Fund of California seeks
as high a level of current income exempt from federal income tax and
its state personal income tax as is consistent with preservation of
capital.
New England Intermediate Term Tax Free Funds of New York seeks
as high a level of current income exempt from federal income tax and
its state personal income tax and New York City personal income tax
as is consistent with preservation of capital.
Money Market Funds:
NEW ENGLAND CASH MANAGEMENT TRUST -
Money Market Series -- maximum current income consistent with
preservation of capital and liquidity.
U.S. Government Series -- highest current income consistent
with preservation of capital and liquidity.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- current income exempt
from federal income taxes consistent with preservation of capital and
liquidity.
As of May 1, 1995, the net assets of the series in the Trusts
totaled over $4.5 billion.
An exchange constitutes a sale of shares for federal income tax
purposes in which the investor may realize a long- or short-term
capital gain or loss.
Automatic Exchange Plan
As described in the Prospectus following the caption "Owning
Fund Shares", a shareholder may establish an Automatic Exchange Plan
under which shares of the Fund are automatically exchanged each month
for Class A shares of one or more of the other series in the Trusts.
Registration on all accounts must be identical. The exchanges are
made on the 15th of each month or the first business day thereafter
if the 15th is not a business day until the account is exhausted or
until New England Funds, L.P. is notified in writing to terminate the
plan. Exchanges may be made in amounts of $500 or over ($1000 for
spousal IRAs). The Service Options Form is available from New
England Funds, L.P. or your financial representative to establish an
Automatic Exchange Plan.
______________________________________________________________________
REDEMPTIONS
______________________________________________________________________
The procedures for redemption of shares of the Fund are
summarized in the Prospectus.
Signatures on redemption requests must be guaranteed by an
"Eligible Guarantor Institution," as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934. However, a signature guarantee
will not be required if the proceeds of the redemption do not exceed
$100,000 and the proceeds check is made payable to the registered
owner(s) and mailed to the record address.
If you select the telephone redemption service in the manner
described in the next paragraph, shares of the Fund may be redeemed
by calling toll free 1-800-225-5478. A wire fee, currently $5.00,
will be deducted from the proceeds. Telephone redemption requests
must be received by the close of regular trading on the Exchange.
Requests made after that time or on a day when the Exchange is not
open for business cannot be accepted and a new request on a later day
will be necessary. The proceeds of a telephone withdrawal will
normally be sent on the first business day following receipt of a
proper redemption request.
In order to redeem shares by telephone, a shareholder must
either select this service when completing the Fund application or
must do so subsequently on the Service Options Form, available from
your investment dealer. When selecting the service, a shareholder
must designate a bank account to which the redemption proceeds should
be sent. Any change in the bank account so designated may be made by
furnishing to your investment dealer a completed Service Options Form
with a signature guarantee. Whenever the Service Options Form is
used, the shareholder's signature must be guaranteed as described
above. Telephone redemptions may only be made if the designated bank
is a member of the Federal Reserve System or has a correspondent bank
that is a member of the System. If the account is with a savings
bank, it must have only one correspondent bank that is a member of
the System.
The redemption price will be the net asset value per share (less
any applicable CDSC) next determined after the redemption request and
any necessary special documentation are received by State Street Bank
or your investment dealer in proper form. Payment normally will be
made by State Street Bank on behalf of the Fund within seven days
thereafter. However, in the event of a request to redeem shares for
which the Trust has not yet received good payment, the Fund reserves
the right to withhold payments of redemption proceeds if the purchase
of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that
the check has cleared).
The Fund will normally redeem shares for cash; however, the Fund
reserves the right to pay the redemption price wholly or partly in
kind if the board of trustees determines it to be advisable and in
the interest of the remaining shareholders of the Fund. If portfolio
securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of
any such securities. However, the Fund has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which the Fund is obligated
to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset
value of the Trust at the beginning of such period. The Fund does
not currently intend to impose any redemption charge (other than the
CDSC imposed by the Distributor), although it reserves the right to
charge a fee not exceeding 1% of the redemption price. A redemption
constitutes a sale of shares for federal income tax purposes on which
the investor may realize a long- or short-term capital gain or loss.
See also "Income Dividends, Capital Gain Distributions and Tax
Status," below.
Reinstatement Privilege
The Prospectus describes redeeming shareholders' reinstatement
privileges. Written notice and the investment check from persons
wishing to exercise this reinstatement privilege must be received by
your investment dealer within 120 days after the date of the
redemption. The reinstatement or exchange will be made at net asset
value next determined after receipt of the notice and the investment
check and will be limited to the amount of the redemption proceeds or
to the nearest full share if fractional shares are not purchased.
Even though an account is reinstated, the redemption will
constitute a sale for federal income tax purposes. Investors who
reinstate their accounts by purchasing shares of series in the Trusts
should consult with their tax advisers with respect to the effect of
the "wash sale" rule if a loss is realized at the time of the
redemption.
______________________________________________________________________
STANDARD PERFORMANCE MEASURES
______________________________________________________________________
Calculations of Yield
Calculation of Total Return. Total return is a measure of the
change in value of an investment in the Fund over the period covered,
which assumes that any dividends or capital gains distributions are
automatically reinvested in shares of the Fund rather than paid to
the investor in cash. The formula for total return used by the Fund
is prescribed by the SEC and includes three steps: (1) adding to the
total number of shares that would be purchased by a hypothetical
$1,000 investment in the Fund (with or without giving effect to the
deduction of sales charge or CDSC, if applicable) all additional
shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by
multiplying the total of shares owned at the end of the period by the
net asset value per share on the last trading day of the period; (3)
dividing this account value for the hypothetical investor by the
amount of the initial investment, and annualizing the result for
periods of less than one year. Total return may be stated with or
without giving effect to any expense limitations in effect for the
Fund.
Performance Comparisons
The Fund may from time to time include its total return in
advertisements or in information furnished to present or prospective
shareholders. The Fund may from time to time include in
advertisements its total return and the ranking of those performance
figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having similar
investment objectives.
Total return may also be used to compare the performance of the
Fund against certain widely acknowledged standards or indices for
stock and bond market performance or against the U.S. Bureau of Labor
Statistics' Consumer Price Index.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P
500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of
common stocks of companies listed on the Exchange, although the
common stocks of a few companies listed on the American Stock
Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the
market value of all issues traded on the Exchange.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the Exchange.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the
prices of goods and services in major expenditure groups.
Lipper Analytical Services, Inc. is an independent service that
monitors the performance of over 1,300 mutual funds, and calculates
total return for the funds grouped by investment objective.
Articles and releases, developed by the Fund and other parties,
about the Fund regarding performance, rankings, statistics and
analyses of the Fund and the fund group's asset levels and sales
volumes, numbers of shareholders in the Fund or in the aggregate for
New England Funds, statistics and analyses of industry sales volumes
and asset levels, and other characteristics may appear in
advertising, promotional literature, publications and on various
computer networks, including, but not limited to, those publications
and computer networks listed in Appendix B to this Statement. In
particular, some or all of these publications may publish their own
rankings or performance reviews of mutual funds, including the Fund.
References to or reprints of such articles may be used in the Fund's
advertising and promotional literature. Such advertising and
promotional material may refer to NEIC, its structure, goals and
objectives and the advisory subsidiaries of NEIC, including their
portfolio management responsibilities, portfolio managers and their
categories and background; their tenure, styles and strategies and
their shared commitment to fundamental investment principles and may
identify specific clients, as well as discuss the types of
institutional investors who have selected the advisers to manage
their investment portfolios and the reasons for that selection. The
references may discuss the independent, entrepreneurial nature of
each advisory organization and allude to or include excerpts from
articles appearing in the media regarding NEIC, its advisory
subsidiaries and their personnel.
The Fund may use the accumulation charts below in its
advertisements to demonstrate the benefits of monthly savings at an
8% and 10% rate of return, respectively.
Investments At 8% Rate of Return
5 yrs. 10 15 20 25 30
$50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148
Investments At 10% Rate of Return
5 yrs. 10 15 20 25 30
$50 3,904 10,328 20,896 38,285 66,895 113,966
75 5,856 15,491 31,344 57,427 100,342 170,949
100 7,808 20,655 41,792 76,570 133,789 227,933
150 11,712 30,983 62,689 114,855 200,684 341,899
200 15,616 41,310 83,585 153,139 267,578 455,865
500 39,041 103,276 208,962 382,848 668,945 1,139,663
The Fund's advertising and sales literature may refer to
historical, current and prospective economic trends and may include
historical and current performance and total returns of investment
alternatives to the New England Funds. Articles, releases,
advertising and literature may discuss the range of services offered
by the Trusts and New England Funds, L.P., as distributor and
transfer agent of the Fund, with respect to investing in shares of
the Fund and other series of the Trusts and customer service. Such
materials may discuss the multiple classes of shares available
through the Trusts and their features and benefits, including the
details of the pricing structure.
Advertising and sales literature may also refer to the beta
coefficient of the New England Funds. A beta coefficient is a
measure of systematic or undiversifiable risk of a stock. A beta
coefficient of more than 1 means that the company's stock has shown
more volatility than the market index (e.g., Standard & Poor's 500)
to which it is being related. If the beta is less than 1, it is less
volatile than the market average to which it is being compared. If
it equals 1, its risk is the same as the market index. High
variability in stock price may indicate greater business risk,
instability in operations and low quality of earnings. The beta
coefficients of the New England Funds may be compared to the beta
coefficients of other funds.
The Fund may enter into arrangements with banks exempted from
registration under the Securities Exchange Act of 1934. Advertising
and sales literature developed to publicize such arrangements will
explain the relationship of the bank to New England Funds and New
England Funds, L.P. as well as the services provided by the bank
relative to the Fund. The material may identify the bank by name and
discuss the history of the bank including, but not limited to, the
type of bank, its asset size, the nature of its business and services
and its status and standing in the industry.
In addition, sales literature may be published concerning topics
of general investor interest for the benefit of registered
representatives and the Fund's prospective shareholders. These
materials may include, but are not limited to, discussions of college
planning, retirement planning, reasons for investing and historical
examples of the investment performance of various classes of
securities, securities markets and indices.
_____________________________________________________________________
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
_____________________________________________________________________
As described in the Fund's prospectus, it is the policy of the
Fund to pay its shareholders, as dividends, substantially all net
investment income and to distribute annually all net realized capital
gains, if any, after offsetting any capital loss carryovers.
Income dividends and capital gain distributions are payable in
full and fractional shares of the Fund based upon the net asset value
determined as of the close of the Exchange on the record date for
each dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gain distributions, or
both, in cash. The election may be made at any time by submitting a
written request directly to New England Funds. In order for a change
to be in effect for any dividend or distribution, it must be received
by New England Funds on or before the record date for such dividend
or distribution.
As required by federal law, detailed federal tax information
will be furnished to each shareholder for each calendar year on or
before January 31 of the succeeding year.
The Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Code. In order to qualify, the
Fund must, among other things (i) derive at least 90% of its gross
income from dividends, interest, payments with respect to certain
securities loans, gains from sale of securities or foreign
currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; (ii)
derive less than 30% of its gross income from gains from the sale or
other disposition of securities held for less than three months;
(iii) distribute at least 90% of its dividend, interest and certain
other taxable income each year; and (iv) at the end of each fiscal
quarter maintain at least 50% of the value of its total assets in
cash, government securities, securities of other regulated investment
companies, other securities of issuers which represent, with respect
to each issuer, no more than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer,
and with no more than 25% of its assets invested in the securities
(other than those of the U.S. government or other regulated
investment companies) of any one issuer or of two or more issuers
which the Fund controls and which are engaged in the same, similar or
related trades and businesses. To the extent it qualifies for
treatment as a regulated investment company, the Fund will not be
subject to federal income tax on income paid to its shareholders in
the form of dividends or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess,
if any, of the Fund's "required distribution" over its actual
distributions in any calendar year. Generally, the "required
distribution" is 98% of the Fund's ordinary income for the calendar
year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund
intends to make distributions sufficient to avoid imposition of the
excise tax. Distributions declared by the Fund during October,
November or December to shareholders of record on a date in any such
month and paid by the Fund during the following January will be
treated for federal tax purposes as paid by the Fund and received by
shareholders on December 31 of the year in which declared.
Shareholders of the Fund will be subject to federal income taxes
on distributions made by the Fund whether received in cash or
additional shares of the Fund. Distributions by the Fund of net
income and short-term capital gains, if any, will be taxable to
shareholders as ordinary income. Distributions of long-term capital
gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of
the Fund. A loss on the sale of shares held for 12 months or less
will be treated as a long-term capital loss to the extent of any long-
term capital gain dividend paid to the shareholder with respect to
such shares.
Dividends and distributions on Fund shares received shortly
after their purchase, although in effect a return of capital, are
subject to federal income taxes.
The Fund's transactions, if any, in foreign currencies are
likely to result in a difference between the Fund's book income and
taxable income. This difference may cause a portion of the Fund's
income distributions to constitute a return of capital for tax
purposes or require the Fund to make distributions exceeding book
income to avoid excise tax liability and to qualify as a regulated
investment company.
The Fund may limit its investments in certain "passive foreign
investment companies" in order to avoid certain taxes that arise as a
result of such investments.
Redemptions and exchanges of Fund shares are taxable events and,
accordingly, shareholders may realize gains and losses on these
transactions. If shares have been held for more than one year, gain
or loss realized will be long-term capital gain or loss, provided the
shareholder holds the shares as a capital asset. However, if a
shareholder sells Fund shares at a loss within six months after
purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain
distributions received by the shareholder. Furthermore, no loss will
be allowed on the sale of Fund shares to the extent the shareholder
acquired other shares of the same Fund within 30 days prior to the
sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and related regulations currently
in effect. For the complete provisions, reference should be made to
the pertinent Code sections and regulations. The Code and
regulations are subject to change by legislative or administrative
actions.
Dividends and distributions also may be subject to state and
local taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income
tax law. Non-U.S. investors should consult their tax advisers
concerning the tax consequences of ownership of shares of the Fund,
including the possibility that distributions may be subject to a 30%
United States withholding tax (or a reduced rate of withholding
provided by treaty).
______________________________________________________________________
APPENDIX A
______________________________________________________________________
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group
AAA
This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest
and repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay interest and repay principal is very strong, and in
the majority of instances they differ from AAA issues only in small
degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to repay
principal and pay interest for bonds in this category than for bonds
in higher rated categories.
BB, B, CCC, CC, C
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CI
The rating CI is reserved for income bonds on which no interest is
being paid.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-); The ratings from "AA' to "B" may be modified
by the addition of a plus or minus sigh to show relative standing
within the major rating categories.
Moody's Investors Service, Inc.
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large, or by an exceptionally stable, margin, and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present that make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present that suggest a susceptibility to
impairment sometime in the future.
Baa
Bonds that are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, if fact, have
speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long period
of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be
in default of there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there
is not longer available reasonable up-to-date data to permit a
judgment to be formed; if a bond is called for redemption; or for
other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated
by the symbols Aa1, A1, Baa1, and B1.
<PAGE>
______________________________________________________________________
APPENDIX B
______________________________________________________________________
PUBLICATIONS THAT MAY BE REFERRED TO IN TRUST ADVERTISEMENTS AND
SALES LITERATURE
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
Worth Magazine
WRKO
<PAGE>
NEW ENGLAND FUNDS TRUST III
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
(b) Exhibits:
1. The Registrant's Declaration of Trust is filed herein.
2. By-Laws of the Registrant are filed herein.
3. Not applicable.
4. Not applicable.
5.(A) Form of Advisory Agreement between the Registrant,
on behalf of its New England Equity Income Fund, and
New England Funds Management, L.P. is filed herein.
(B) Form of Subadvisory Agreement for New England Equity
Income Fund between New England Funds Management, L.P.
and Loomis, Sayles & Company, L.P. is filed herein.
6. Form of Distribution Agreement between the Registrant,
on behalf of its New England Equity Income Fund, and
New England Funds, L.P. (the "Distributor") is filed
herein.
7. Not applicable.
8. Custodian Agreement between the Registrant and State
Street Bank and Trust Company will be filed by
amendment.
9.(A) Form of Transfer Agency Agreement between the
Registrant and New England Funds, L.P. will be filed by
amendment.
(B) Form of Dealer Agreement of New England Funds, L.P.,
the Trust's Distributor, will be filed by amendment.
10. Opinion of Ropes & Gray with respect to New
England Equity Income Fund will be filed by amendment.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Form of Rule 12b-1 Plan relating to Class A shares
of New England Equity Income Fund is filed herein.
16. Not applicable.
Item 25. Persons Controlled by or under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
Not applicable.
Item 27. Indemnification
See Article 4 of the Registrant's By-Laws filed as Exhibit 2
herein.
In addition, New England Mutual Life Insurance Company, the
parent company of the Trust's adviser and distributor,
maintains a directors and officers liability insurance
policy with maximum coverage of $15 million, under which the
trustee and officers of the trust are named insureds.
Item 28. Business and Other Connections of Investment Adviser
(a) New England Funds Management, L.P. ("NEFM"), a wholly-owned
subsidiary of New England Investment Companies, L.P.
("NEIC"), serves as investment adviser to New England Growth
Opportunities Fund. NEFM was organized in 1995.
NEFM's officers have been engaged during the past two years
in the following businesses, vocations or employments of a
substantial nature (former affiliations are marked with an
asterisk):
Name and Office Name and Address of Nature of
with NEFM Other Affiliations Connection
NEF Corporation None None
General Partner
Henry L.P. New England Funds, President and
Schmelzer, L.P. CEO
President and Chief 399 Boylston Street
Executive Officer Boston, MA 02116
NEF Corporation President, CEO
399 Boylston Street and Director
Boston, MA 02116
Back Bay Advisors, Director
Inc.
399 Boylston Street
Boston, MA 02116
TNE Investment Director and
Services Corporation* Officer
399 Boylston Street
Boston, MA 02116
Name and Office Name and Address of Nature of
with NEFM Other Affiliations Connection
Frank Nesvet, New England Funds, Senior Vice
Senior Vice L.P. President and
President, Chief 399 Boylston Street CFO
Financial Officer Boston, MA 02116
and Treasurer
NEF Corporation Senior Vice
399 Boylston Street President, CFO
Boston, MA 02116 and Treasurer
TNE Investment Senior Vice
Services Corp.* President and
399 Boylston Street CFO
Boston, MA 02116
Sheila M. Barry, NEF Corporation Vice President,
Secretary 399 Boylston Street Senior Counsel,
Boston, MA 02116 Secretary and
Clerk
New England Funds, Vice President,
L.P. Senior Counsel,
399 Boylston Street Secretary and
Boston, MA 02116 Clerk
(b) Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the
subadviser to New England Equity Income Fund, provides
investment advice to a number of other registered investment
companies and to other organizations and individuals.
Information about the businesses, vocations or employments
of a substantial nature that the subadvisers' directors and
officers engage in will be filed by amendment.
Item 29. Principal Underwriter
(a) New England Funds, L.P. also serves as principal underwriter
for:
New England Funds Trust I
New England Funds Trust II
New England Tax Exempt Money Market Trust
New England Cash Management Trust
(b) The general partner and officers of the Registrant's
principal underwriter, New England Funds, L.P., and their
address are as follows:
Positions and Offices Positions and
Name with Principal Offices
Underwriter with Registrant
NEF Corporation General Partner None
Henry L.P. Schmelzer President President and
Trustee
J. Steven Neamtz Executive Vice Vice President
President
Bruce R. Speca Executive Vice Vice President
President
Frank Nesvet Senior Vice President Treasurer
and Chief Financial
Officer
Robert P. Connolly Senior Vice President Secretary
and General Counsel
Sheila M. Barry Vice President, Senior Assistant Secretary
Counsel, Secretary and
Clerk
Elizabeth P. Burns Vice President None
James H. Davis Vice President None
Peter H. Duffy Vice President None
Tracy A. Fagan Vice President None
William H. Finnegan Vice President None
Raymond K. Girouard Vice President None
Treasurer and
Controller
Annette Golia Vice President None
Ralph M. Greggs Vice President None
Caren I. Leedom Vice President None
Marie McKenzie Vice President None
Bernard M. Shavelson Vice President None
Christine L. Swanson Vice President None
Kristine E. Swanson Vice President None
The principal business address of all the above persons or
entities is 399 Boylston Street, Boston, MA 02116.
(c) Not applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Registrant
Rule 31a-1(b)(4)
Rule 31a-2(d)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(d)
(c) New England Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(d); and 31a-2(e)
(d) Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 311a-1(f)
Rule 31a-2(e)
(e) New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
None.
Item 32. Undertakings
(a) The Registrant undertakes to provide any Fund's annual
report to any person who receives a Fund prospectus and who
requests the annual report.
(b) The Registrant undertakes to file a post-effective amendment
including financial statements, which need not be certified,
within four to six months after the effectiveness of its New
England Equity Income Fund's registration statement.
(c) The Registrant hereby undertakes that, if requested to do so
by holders of at least 10% of the Fund's outstanding shares,
it will call a meeting of shareholders for the purpose of
voting upon the question of removal of a trustee or trustees
and will assist in communications between shareholders for
such purpose as provided in Section 16(c) of the Investment
Company Act of 1940.
<PAGE>
NEW ENGLAND FUNDS TRUST III
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston, in
the Commonwealth of Massachusetts on the 22 day of August, 1995.
New England Funds Trust III
By: /s/ HENRY L.P. SCHMELZER
Henry L.P. Schmelzer
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
/s/HENRY L.P. SCHMELZER
Henry L. P. Schmelzer Trustee and President August 22, 1995
/s/FRANK NESVET
Frank Nesvet Treasurer August 22, 1995
<PAGE>
N-1A EXHIBITS ITEM 24(B)
EXHIBIT NUMBER EXHIBIT
EX-99.B1 Registrant's Declaration of Trust
EX-99.B2 Registrant's By-Laws
EX-99.B5A Form of Advisory Agreement
EX-99.B5B Form of Subadvisory Agreement
EX-99.B6 Form of Distribution Agreement
EX-99.B15 Form of Rule 12b-1 Plan
<PAGE>
EXHIBIT-99.B1
REGISTRANT'S DECLARATION OF TRUST
<PAGE>
EXHIBIT-99.B2
REGISTRANT'S BY-LAWS
<PAGE>
EXHIBIT-99.B5A
FORM OF ADVISORY AGREEMENT
<PAGE>
EXHIBIT-99.B5B
FORM OF SUBADVISORY AGREEMENT
<PAGE>
EXHIBIT-99.B6
FORM OF DISTRIBUTION AGREEMENT
<PAGE>
EXHIBIT-99.B15
FORM OF RULE 12B-1 PLAN
NEW ENGLAND FUNDS TRUST III
AGREEMENT AND DECLARATION OF TRUST
THIS AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts this
22d day of August, 1995 by the Trustees hereunder and the holders of shares of
beneficial interest issued hereunder and to be issued hereunder as hereinafter
provided:
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
shares in accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustee hereunder, IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 0. This Trust shall be known as "New England Funds Trust III" and
the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
Section 1. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named in Article IV
hereof or elected in accordance with such Article;
(c) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust or in the Trust property belonging to any
Series of the Trust or in any class of Shares of the Trust (as the context may
require) shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
PAGE 1
<PAGE>
(f) The terms "Commission" and "principal underwriter" shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust, as amended from time
to time;
(i) "Series Company" refers to the form of registered open-end investment
company described in Section 18(f)(2) of the 1940 Act or in any successor
statutory provision;
(j) "Series" refers to Series of Shares established and designated under
or in accordance with the provisions of Article III;
(k) "Multi-Class Series" refers to Series of Shares established and
designated as Multi-Class Series under or in accordance with the provisions of
Article III, Section 6; and
(l) The terms "class" and "class of Shares" refer to the division of
Shares representing any Multi-Class Series into two or more classes in
accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities (including options), debt instruments, commodities,
commodity contracts and options thereon.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into an unlimited number of Shares,
without par value. Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and
holders of the Shares of any Series or class shall be entitled to receive
dividends, when and as declared with respect thereto in the manner provided in
Article VI, Section 1 hereof. Except as otherwise provided in Section 6 of
this Article III with respect to Shares of Multi-Class Series, no Share shall
have any priority or preference over any other Share of the same Series with
respect to dividends or distributions upon termination of the Trust or of such
Series made pursuant to Article VIII, Section 4 hereof. Except as otherwise
provided in Section 6 of this Article III with respect to Shares of Multi-
Class Series, all dividends and distributions shall be made ratably among all
Shareholders of a particular Series from the assets belonging to such Series
according to the number of Shares of such Series held of record by such
Shareholders on the record date for any dividend or distribution or on the date
of termination, as the case may be. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust. The Trustees may from time to time divide or combine the Shares of
any particular Series or class into a greater or lesser number of Shares of
that Series or class without thereby changing the proportionate beneficial
interest of the Shares of that Series or class in the assets belonging to that
Series or attributable to that class or in any way affecting the rights of
Shares of any other Series or class.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
and class. No certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the transfer of Shares of
each Series and class and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each Series and class and as to
the number of Shares of each Series and class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and for such
consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall
be held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the rights of said deceased Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in
or to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust, shall have any power
to bind personally any Shareholders, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as
provided elsewhere herein, the Trustees shall have the power to amend this
Declaration of Trust, at any time and from time to time, in such manner as the
Trustees may determine in their sole discretion, without the need for
PAGE 3
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust for
the purpose of (i) responding to or complying with any regulations, orders,
rulings or interpretations of any governmental agency or any laws, now or
hereafter applicable to the Trust, or (ii) designating and establishing Series
or classes in addition to those established in Section 6 of this Article III;
provided that before adopting any such amendment without Shareholder approval
the Trustees shall determine that it is consistent with the fair and equitable
treatment of all Shareholders. The establishment and designation of any Series
of classes of Shares in addition to the Series established and designated in
Section 6 of this Article III shall be effective upon the execution by a
majority of the then Trustees of an amendment to this Declaration of Trust,
taking the form of a complete restatement or otherwise, setting forth such
establishment and designation and the relative rights and preferences of such
Series, or as otherwise provided in such instrument. The establishment and
designation of any class of Shares shall be effective upon either the execution
by a majority of the then Trustees of an amendment to this Declaration of Trust
or the adoption by vote or written consent of a majority of the then Trustees
of a resolution setting forth such establishment and designation and the
relative rights and preferences of such class and such eligibility requirements
for investment therein as the Trustees may determine, or as otherwise provided
in such amendment or resolution.
Without limiting the generality of the foregoing, the Trustees may, for
the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series or classes of Shares (in addition to any
Series or classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all outstanding Shares as shares
of particular Series or classes in accordance with such eligibility
requirements;
(b) amend any of the provisions set forth in paragraphs (a) through (j)
of Section 6 of this Article III;
(c) combine one or more Series or classes of Shares into a single Series
or class on such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment in
Shares of any Series or class, including without limitation the power to
provide for the issue of Shares of any Series or class in connection with any
merger or consolidation of the Trust with another trust or company or any
acquisition by the Trust of part or all of the assets of another trust or
company;
(e) change the designation of any Series or class of Shares;
(f) change the method of allocating dividends among the various Series
and classes of Shares;
PAGE 4
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
classes of Shares; and
(h) specifically allocate assets to any or all Series of Shares or create
one or more additional Series of Shares which are preferred over all other
Series of Shares in respect of assets specifically allocated thereto or any
dividends paid by the Trust with respect to any net income, however determined,
earned from the investment and reinvestment of any assets so allocated or
otherwise and provide for any special voting or other rights with respect to
such Series or any classes of Shares thereof.
Section 6. Establishment and Designation of Series and Classes. Without
limiting the authority of the Trustees set forth in Section 5, inter alia, to
establish and designate any further Series or classes or to modify the rights
and preferences of any Series or class, the following Series shall be, and is
hereby, established and designated as a Multi-Class Series: New England Equity
Income Fund.
Shares of each Series established in this Section 6 shall have the
following rights and preferences relative to Shares of each other Series, and
Shares of each class of a Multi-Class Series shall have such rights and
preferences relative to other classes of the same Series as are set forth
below, together with such other rights and preferences relative to such other
classes as are set forth in any resolution of the Trustees establishing and
designating such class of Shares:
(a) Assets belonging to Series. Subject to the provisions of paragraph
(c) of this Section 6:
All consideration received by the Trust for the issue or sale of Shares of
a particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds thereof from
whatever source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books of
account of the Trust. Such consideration, assets, income, earnings, profits
and proceeds thereof, from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable, and any General Asset so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes.
PAGE 5
(b) Liabilities Belonging to Series. Subject to the provisions of
paragraph (c) of this Section 6:
The assets belonging to each particular Series shall be charged solely
with the liabilities of the Trust in respect to that Series, the expenses,
costs, charges and reserves attributable to that Series, and any general
liabilities of the Trust which are not readily identifiable as belonging to any
particular Series but which are allocated and charged by the Trustees to and
among any one or more of the Series established and designated from time to
time in a manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs, charges and
reserves so charged to a Series are herein referred to as "liabilities
belonging to" that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(c) Apportionment of Assets etc. in Case of Multi-Class Series. In the
case of any Multi-Class Series, to the extent necessary or appropriate to give
effect to the relative rights and preferences of any classes of Shares of such
Series, (i) any assets, income, earnings, profits, proceeds, liabilities,
expenses, charges, costs and reserves belonging or attributable to that Series
may be allocated or attributed to a particular class of Shares of that Series
or apportioned among two or more classes of Shares of that Series; and (ii)
Shares of any class of such Series may have priority or preference over shares
of other classes of such Series with respect to dividends or distributions upon
termination of the Trust or of such Series or class or otherwise, provided that
no Share shall have any priority or preference over any other Shares of the
same class and that all dividends and distributions to Shareholders of a
particular class shall be made ratably among all Shareholders of such class
according to the number of Shares and such class held of record by such
Shareholders on the record date for any dividend or distribution or on the date
of termination, as the case may be.
(d) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series or class) with respect to, nor any redemption or repurchase of, the
Shares of any Series or class shall be effected by the Trust other than from
the assets belonging to such Series or attributable to such class, nor shall
any Shareholder of any particular Series or class otherwise have any right or
claim against the assets belonging to any other Series or attributable to any
other class except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series or class.
(e) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series or class shall not be entitled to vote on
any matters as to which such Series or class is not affected. On any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
PAGE 6
vote shall be voted by individual Series, unless otherwise required by the 1940
Act or other applicable law.
(f) Equality. Except to the extent necessary or appropriate to give
effect to the relative rights and preferences of any classes of Shares of a
Multi-Class Series, all the Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series. All the Shares of
each particular class of Shares within a Multi-Class Series shall represent an
equal proportionate interest in the assets belonging to such Series that are
attributable to such class (subject to the liabilities attributable to such
class), and each Share of any particular class within a Multi-Class Series
shall be equal to each other Share of such class.
(g) Fractions. Any fractional Share of a Series or class shall carry
proportionately all the rights and obligations of a whole Share of that Series
or class, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(h) Exchange Privilege. The Trustees shall have the authority to provide
that the holders of Shares of any Series or class shall have the right to
exchange said Shares for Shares of one or more other Series or classes of
Shares in accordance with such requirements and procedures as may be
established by the Trustees.
(i) Combination of Series or Classes. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities
belonging to any two or more Series or attributable to any class into assets
and liabilities belonging to a single Series or attributable to a single class.
(j) Elimination of Series or Class. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be
effected in the manner provided in Section 5 of this Article III. At any time
that there are no Shares outstanding of any particular class previously
established and designated of a Multi-Series Class, the Trustees may abolish
that class and rescind the establishment and designation thereof, either by
amending this Declaration of Trust in the manner provided in Section 5 of this
Article III (if such class was established and designated by an amendment to
this Declaration of Trust), or by vote or written consent of a majority of the
then Trustees (if such class was established and designated by Trustee vote or
written consent).
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of
his or her being or having been a Shareholder of the Trust or of a particular
Series or class and not because of his or her acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
PAGE 7
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Series (or attributable to the class) of
which he or she is a Shareholder or former Shareholder to be held harmless from
and indemnified against all loss and expense arising from such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The initial Trustee shall be Henry L.P.
Schmelzer. The Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the number of
Trustees, or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. Any Trustee may resign at any time by written instrument signed
by him or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
The Shareholders may fix the number of Trustees and elect Trustees at any
meeting of Shareholders called by the Trustees for that purpose and to the
extent required by applicable law, including paragraphs (a) and (b) of Section
16 of the 1940 Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
including the power to engage in securities transactions of all kinds on behalf
of the Trust. Without limiting the foregoing, the Trustees may adopt By-Laws
not inconsistent with this Declaration of Trust providing for the regulation
and management of the affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders; they
may elect and remove such officers and appoint and terminate such agents as
they consider appropriate; they may appoint from their own number and terminate
one or more committees consisting of two or more Trustees which may exercise
the powers and authority of the Trustees to the extent that the Trustees
determine; they may employ one or more custodians of the assets of the Trust
and may authorize such custodians to employ subcustodians and to deposit all or
any part of such assets in a system or systems for the central handling of
PAGE 8
securities or with a Federal Reserve Bank, retain a transfer agent or a
shareholder servicing agent, or both, provide for the distribution of Shares by
the Trust, through one or more principal underwriters or otherwise, set record
dates for the determination of Shareholders with respect to various matters,
and in general delegate such authority as they consider desirable to any
officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, write
options with respect to or otherwise deal in any property rights relating to
any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in its own name or
in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer; and to pay calls or
subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall
deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
PAGE 9
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other obligations
of any person; and to make contracts of guaranty or suretyship, or otherwise
assume liability for payment of such notes or other obligations;
(l) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the business of
the Trust, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to adopt,
establish and carry out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are authorized
to pay or cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, investment
advisers or managers, principal underwriter, auditor, counsel, custodian,
transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series or class, to pay directly, in advance
or arrears, for charges of the Trust's custodian or transfer, shareholder
servicing or similar agent, an amount fixed from time to time by the Trustees,
by setting off such charges due from such Shareholder from declared but unpaid
PAGE 10
dividends owed such Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or fractional Shares
which represents the outstanding amount of such charges due from such
Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts. Subject to
such requirements and restrictions as may be set forth in the By-Laws, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services for the Trust or for any
Series or class with New England Funds Management, L.P. or any other
corporation, trust, association or other organization (the "Manager"); and any
such contract may contain such other terms as the Trustees may determine,
including without limitation, authority for a Manager to determine from time to
time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time,
contract with New England Funds, L.P., the Manager or any other corporation,
trust, association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares, every such
contract to comply with such requirements and restrictions as may be set forth
in the By-Laws; and any such contract may contain such other terms as the
Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor or affiliate or agent of or
for any corporation, trust, association or other organization, or of or
for any parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other agency contract may have been
or may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other agency contract with one or
more other corporations, trusts, associations or other organizations, or
has other business or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
PAGE 11
same or create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV, Section 1, (ii)
with respect to any amendment of this Declaration of Trust to the extent and as
provided in Article VIII, Section 8, (iii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
(iv) with respect to the termination of the Trust or any Series or class to the
extent and as provided in Article VIII, Section 4, (v) to remove Trustees from
office to the extent and as provided in Article V, Section 7 and (vi) with
respect to such additional matters relating to the Trust as may be required by
this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
At any time when no Shares of a Series or class are outstanding the Trustees
may exercise all rights of Shareholders of that Series or class with respect to
matters affecting that Series or class and may with respect to that Series or
class take any action required by law, this Declaration of Trust or the By-
Laws to be taken by the Shareholders thereof.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders
may also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by
the Trustees. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time and place of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. Whenever notice of a meeting is required to be given to
a Shareholder under this Declaration of Trust or the By-Laws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his
PAGE 12
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the By-Laws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series or classes is to vote as a single class separate
from any other Shares which are to vote on the same matters as a separate class
or classes, 40% of the Shares of each such class entitled to vote shall
constitute a quorum at a Shareholders' meeting of that class. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned within a reasonable time after the date set
for the original meeting without further notice. When a quorum is present at
any meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by law. If any
question on which the Shareholders are entitled to vote would adversely affect
the rights of any Series or class of Shares, the vote of a majority (or such
larger vote as is required as aforesaid) of the Shares of such Series or class
which are entitled to vote, voting separately, shall also be required to decide
such question.
Section 4. Action by Written Consent. Any action taken by Shareholders
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the By-
Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series or class entitled to vote separately on the matter consent
to the action in writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders
of any Series or class who are entitled to vote or act at any meeting or any
adjournment thereof, the Trustees may from time to time fix a time, which shall
be not more than 60 days before the date of any meeting of Shareholders, as the
record date for determining the Shareholders of such Series or class having the
right to notice of and to vote at such meeting and any adjournment thereof, and
in such case only Shareholders of record on such record date shall have such
right, notwithstanding any transfer of Shares on the books of the Trust after
the record date. For the purpose of determining the Shareholders of any Series
or class who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a date, which shall be
before the date for the payment of such dividend or such other payment, as the
record date for determining the Shareholders of such Series or class having the
right to receive such dividend or distribution. Without fixing a record date
the Trustees may for voting and/or distribution purposes close the register or
transfer books for one or more Series or classes for all or any part of the
period prior to a meeting of Shareholders or the payment of a distribution.
Nothing in this Section shall be construed as precluding the Trustees from
setting different record dates for different Series or classes.
PAGE 13
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
Section 7. Removal of Trustees. No natural person shall serve as Trustee
after the holders of record of not less than two-thirds of the outstanding
Shares have declared that such Trustee be removed from that office either by
declaration in writing filed with the Trust's custodian or by votes cast in
person or by proxy at a meeting called for the purpose. The Trustees shall
promptly call a meeting of Shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing so to do by the
record holders of not less than 10 per centum of the outstanding Shares.
Whenever ten or more Shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate Shares having a net asset value of at least 1 per centum of the
outstanding Shares, shall apply to the Trustees in writing, stating that they
wish to communicate with other Shareholders with a view to obtaining signatures
to a request for a meeting pursuant to this Section and accompanied by a form
of communication and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application either (a) afford
to such applicants access to a list of the names and addresses of all
Shareholders as recorded on the books of the Trust; or (b) inform such
applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect to follow the course specified in clause (b),
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books of the Trust, unless within
five business days after such tender the Trustees shall mail to such applicants
and file with the Commission, together with a copy of the material proposed to
be mailed, a written statement signed by at least a majority of the Trustees to
the effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the statements
contained therein not misleading, or would be in violation of applicable law,
and specifying the basis of such opinion. If the Commission shall enter an
order refusing to sustain any of the objections specified in the written
statement so filed, or if, after the entry of an order sustaining one or more
of such objections, the Commission shall find, after notice and opportunity for
hearing, that all objections so sustained have been met, and shall enter an
order so declaring, the Trustees shall mail copies of such material to all
Shareholders with reasonable promptness after the entry of such order and the
renewal of such tender.
ARTICLE VI
Net Income, Distributions, and Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year, or
more frequently if they so determine in their sole discretion, distribute to
PAGE 14
the Shareholders of each Series, in Shares of that Series, cash or otherwise,
an amount approximately equal to the net income attributable to the assets
belonging to such Series and may from time to time distribute to the
Shareholders of each Series, in Shares of that Series, cash or otherwise, such
additional amounts, but only from the assets belonging to such Series, as they
may authorize. Except as otherwise permitted by paragraph (c) of Section 6 of
Article III in the case of Multi-Class Series, all dividends and distributions
on Shares of a particular Series shall be distributed pro rata to the holders
of that Series in proportion to the number of Shares of that Series held by
such holders and recorded on the books of the Trust at the date and time of
record established for the payment of such dividend or distributions.
The manner of determining net income, income, asset values, capital gains,
expenses, liabilities and reserves of any Series or class may from time to time
be altered as necessary or desirable in the judgment of the Trustees to conform
such manner of determination to any other method prescribed or permitted by
applicable law. Net income shall be determined by the Trustees or by such
person as they may authorize at the times and in the manner provided in the By-
Laws. Determinations of net income of any Series or class and determinations
of income, asset value, capital gains, expenses, and liabilities made by the
Trustees, or by such person as they may authorize, in good faith, shall be
binding on all parties concerned. The foregoing sentence shall not be
construed to protect any Trustee, officer or agent of the Trust against any
liability to the Trust or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
If, for any reason, the net income of any Series or class determined at
any time is a negative amount, the pro rata share of such negative amount
allocable to each Shareholder of such Series or class shall constitute a
liability of such Shareholder to that Series or class which shall be paid out
of such Shareholder's account at such times and in such manner as the Trustees
may from time to time determine (x) out of the accrued dividend account of such
Shareholder, (y) by reducing the number of Shares of that Series or class in
the account of such Shareholder, or (z) otherwise.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the
Trust or a person designated by the Trust that the Trust purchase such Shares
or in accordance with such other procedures for redemption as the Trustees may
from time to time authorize; and the Trust will pay therefor the net asset
value thereof, as determined in accordance with the By-Laws, next determined.
Payment for said Shares shall be made by the Trust to the Shareholder within
seven days after the date on which the request is made. The obligation set
forth in this Section 2 is subject to the provision that in the event that any
time the New York Stock Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the Commission during periods when trading on
the New York Stock Exchange is restricted or during any emergency which makes
it impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets belonging to such
Series or attributable to any class thereof or during any other period
PAGE 15
permitted by order of the Commission for the protection of investors, such
obligations may be suspended or postponed by the Trustees. The Trust may also
purchase or repurchase Shares at a price not exceeding the net asset value of
such Shares in effect when the purchase or repurchase or any contract to
purchase or repurchase is made.
The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series the Shares of which are being
redeemed. In making any such payment wholly or partly in kind, the Trust
shall, so far as may be practicable, deliver assets which approximate the
diversification of all of the assets belonging at the time to the Series the
Shares of which are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under authority of
the Trustees. In no case shall the Trust be liable for any delay of any
corporation or other person in transferring securities selected for delivery as
all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i)
if at such time such Shareholder owns Shares of any Series or class having an
aggregate net asset value of less than an amount determined from time to time
by the Trustees; or (ii) to the extent that such Shareholder owns Shares equal
to or in excess of a percentage determined from time to time by the Trustees of
the outstanding Shares of the Trust or of any Series or class.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustee against any liability to
which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
PAGE 16
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust or any Series or class shall look only to the assets of the Trust,
or, to the extent that the liability of the Trust may have been expressly
limited by contract to the assets of a particular Series or attributable to a
particular class, only to the assets belonging to the relevant Series or
attributable to the relevant class, for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Nothing in this Declaration of Trust shall protect
any Trustee against any liability to which such Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by any officers or officer or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the same
was executed or made by or on behalf of the Trust or by them as Trustee or
Trustees or as officers or officer or otherwise and not individually and that
the obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or upon the assets belonging to the Series or attributable to the
class for the benefit of which the Trustees have caused the note, bond,
contract, instrument, certificate or undertaking to be made or issued, and may
contain such further recital as he or she or they may deem appropriate, but the
omission of any such recital shall not operate to bind any Trustee or Trustees
or officers or officer or Shareholders or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice. The Trustees shall not be required to give any bond as
such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
PAGE 17
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust, Series or Class. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by vote of at least 66-2/3% of the Shares
of each Series entitled to vote and voting separately by Series or by the
Trustees by written notice to the Shareholders. Any Series or class may be
terminated at any time by vote of at least 66-2/3% of the Shares of that Series
or class or by the Trustees by written notice to the Shareholders of that
Series or class.
Upon termination of the Trust (or any Series or class, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable Series or
attributable to the particular class, as the case may be), whether due or
accrued or anticipated as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees consider appropriate reduce the
remaining assets belonging, severally, to each Series (or the applicable Series
or attributable to the particular class, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds belonging to each Series (or the applicable Series or
attributable to the particular class, as the case may be), to the Shareholders
of that Series (or class, as the case may be), as a Series (or class, as the
case may be), ratably according to the number of Shares of that Series (or
class, as the case may be) held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust to
be merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares; provided that in all respects not governed by statute or applicable
law, the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, Reference, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this instrument and in
any such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such amendments. Headings are placed herein for
PAGE 18
convenience of reference only and shall not be taken as a part hereof or to
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Section 7. Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and,
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of a majority of the Shares entitled to vote with
respect to such amendment, except that amendments described in Article III,
Section 5 hereof or having the purpose of changing the name of the Trust or of
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained herein shall
not require authorization by Shareholder vote.
Section 9. Addresses. The address of the Trust is 399 Boylston Street,
Boston, Massachusetts 02116. The address of the initial Trustee is c/o New
England Funds, L.P., 399 Boylston Street, Boston, Massachusetts 02116.
PAGE 19
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal for
himself and for his successors and assigns this 22d day of August, 1995.
_______________________________
Henry L.P. Schmelzer
Initial Trustee
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 22, 1995
Then personally appeared the above named Henry L.P. Schmelzer, and
acknowledged the foregoing instrument to be his free act and deed, before me.
_______________________________
Notary Public
PAGE 20
BY-LAWS
OF
NEW ENGLAND FUNDS TRUST III
ARTICLE 0
Agreement and Declaration
of Trust and Principal Office
0.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the
Agreement and Declaration of Trust, as from time to time in effect (the
Declaration of Trust ), of New England Funds Trust III (the Trust ), the
Massachusetts business trust established by the Declaration of Trust.
0.2 Principal Office of the Trust. The principal office of the Trust shall be
located in Boston, Massachusetts.
ARTICLE 1
Meetings of Trustees
1.1 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time
to time determine, provided that notice of the first regular meeting following
any such determination shall be given to absent Trustees.
1.2 Special Meetings. Special meetings of the Trustees may be held, at any
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board, if any, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.
1.3 Notice. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his usual or
last known business or residence address or to give notice to him in person or
by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the meeting.
1.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice to
any Trustee who was present at the time of such adjournment; notice of the time
and place of any adjourned session of such meeting shall, however, be given in
the manner provided in Section 2.3 of these By-Laws to each Trustee who was not
present at the time of such adjournment.
PAGE 1
1.5 Action by Vote. When a quorum is present at any meeting, a majority of
Trustees present may take any action, except when a larger vote is expressly
required by law, by the Declaration of Trust or by these By-Laws.
1.6 Action by Writing. Except as required by law, any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a majority of the Trustees (or such larger proportion thereof as
shall be required by any express provision of the Declaration of Trust or these
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of the Trustees. Such consent shall be
treated for all purposes as a vote taken at a meeting of Trustees.
1.7 Presence through Communications Equipment. Except as required by law, the
Trustees may participate in a meeting of Trustees by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
ARTICLE 2
Officers
2.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Clerk, and such other officers, if any, as the
Trustees from time to time may in their discretion elect. The Trust may also
have such agents as the Trustees from time to time may in their discretion
appoint. If a Chairman of the Board is elected, he shall be a Trustee and may
but need not be a Shareholder; and any other officer may be but none need be a
Trustee or Shareholder. Any two or more offices may be held by the same
person.
2.2 Election and Tenure. The President, the Treasurer, the Clerk and such
other officers as the Trustees may in their discretion from time to time elect
shall each be elected by the Trustees to serve until his successor is elected
or qualified, or until he sooner dies, resigns, is removed or becomes
disqualified. Each officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
2.3 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
2.4 President and Vice Presidents. The President shall have the duties and
powers specified in these By-Laws and shall have such other duties and powers
as may be determined by the Trustees.
Any Vice Presidents shall have such duties and powers as shall be designated
from time to time by the Trustees.
PAGE 2
2.5 Chief Executive Officer. The Chief Executive Officer of the Trust shall
be the Chairman of the Board, the President or such other officer as is
designated by the Trustees and shall, subject to the control of the Trustees,
have general charge and supervision of the business of the Trust and, except as
the Trustees shall otherwise determine, preside at all meetings of the
Shareholders and of the Trustees. If no such designation is made, the
President shall be the Chief Executive Officer.
2.6 Chairman of the Board. If a Chairman of the Board of Trustees is elected,
he shall have the duties and powers specified in these By-Laws and shall have
such other duties and powers as may be determined by the Trustees.
2.7 Treasurer. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration
of Trust and to any arrangement made by the Trustees with a custodian,
investment adviser or manager or transfer, shareholder servicing or similar
agent, be in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
2.8 Clerk. The Clerk shall record all proceedings of the Shareholders and the
Trustees in books to be kept therefor, which books or a copy thereof shall be
kept at the principal office of the Trust. In the absence of the Clerk from
any meeting of the Shareholders or Trustees, an assistant Clerk, or if there be
none or if he is absent, a temporary clerk chosen at such meeting shall record
the proceedings thereof in the aforesaid books.
2.9 Resignations and Removals. Any officer may resign at any time by written
instrument signed by him and delivered to the President or the Clerk or to a
meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. The Trustees may remove
any officer with or without cause. Except to the extent expressly provided in
a written agreement with the Trust, no officer resigning and no officer removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.
ARTICLE 3
Indemnification
3.1 Trustees, Officers, etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust s request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) (hereinafter referred to as a
Covered Person ) against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of any alleged act or
PAGE 3
omission as a Trustee or officer or by reason of his being or having been such
a Trustee or officer, except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding not to have acted in good faith in the reasonable belief that
such Covered Person s action was in the best interest of the Trust and except
that no Covered Person shall be indemnified against any liability to the Trust
or its Shareholders to which such Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person s
office. Expenses, including counsel fees so incurred by any such Covered
Person, may be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding on the condition that the
amounts so paid shall be repaid to the Trust if it is ultimately determined
that indemnification of such expenses is not authorized under this Article.
3.2 Compromise Payment. As to any matter disposed of by a compromise payment
by any such Covered Person referred to in Section 4.1 above, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b)
or (c) there has been obtained an opinion in writing of independent legal
counsel to the effect that such Covered Person appears to have acted in good
faith in the reasonable belief that his or her action was in the best interests
of the Trust and that such indemnification would not protect such person
against any liability to the Trust or its Shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
office; or (d) by vote of Shareholders holding a majority of the Shares
entitled to vote thereon, exclusive of any Shares beneficially owned by any
interested Covered Person. Approval by the Trustees pursuant to clause (a) or
(b) or by any disinterested person or persons pursuant to clause (c) of this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with any of such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court
of competent jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person s action was in the best interests of the Trust
or to have been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person s office.
3.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term Covered
Person shall include such person s heirs, executors and administrators; an
interested Covered Person is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on the same
or similar grounds is then or has been pending; and a disinterested Trustee
or disinterested person is a Trustee or a person against whom none of such
PAGE 4
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending. Nothing contained
in this Article shall affect any rights to indemnification to which personnel
of the Trust, other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such person.
ARTICLE 4
Reports
4.1 General. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 5
Fiscal Year
5.1 General. Except as from time to time otherwise provided by the Trustees,
the fiscal year of the Trust shall end on December 31 in each year.
ARTICLE 6
Seal
6.1 General. The seal of the Trust shall consist of a flat-faced die with the
word Massachusetts , together with the name of the Trust and the year of its
organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 7
Execution of Papers
7.1 General. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all checks, notes, drafts
and other obligations and all registration statements and amendments thereto
and all applications and amendments thereto to the Securities and Exchange
Commission shall be signed by the Chairman, if any, the President, any Vice
President or the Treasurer or any of such other officers or agents as shall be
designated for that purpose by a vote of the Trustees.
ARTICLE 8
Provisions Relating to the
Conduct of the Trust s Business
PAGE 5
8.1 Certain Definitions. When used herein the following words shall have the
following meanings: Distributor shall mean any one or more corporations,
firms or associations which have distributor s or principal underwriter s
contracts in effect with the Trust providing that redeemable shares of any
class or series issued by the Trust shall be offered and sold by such
Distributor. Adviser shall mean any corporation, firm or association which
may at the time have an advisory or management contract with the Trust.
8.2 Limitation on Dealings with Officers or Trustees. The Trust will not lend
any of its assets to the Distributor or Adviser or to any officer or director
of the Distributor or Adviser or any officer or Trustee of the Trust, and shall
not permit any officer or Trustee or any officer or director of the Distributor
or Adviser to deal for or on behalf of the Trust with himself as principal or
agent, or with any partnership, association or corporation in which he has a
financial interest; provided that the foregoing provisions shall not prevent
(a) officers and Trustees of the Trust or officers and directors of the
Distributor or Adviser from buying, holding or selling shares in the Trust or
from being partners, officers or directors of or otherwise financially
interested in the Distributor or the Adviser; (b) a purchase or sale of
securities or other property if such transaction is permitted by or is exempt
or exempted from the provisions of the Investment Company Act of 1940 and does
not involve any commission or profit to any securities dealer who is, or one or
more of whose partners, shareholders, officers or directors is, an officer or
Trustee of the Trust or an officer or director of the Distributor or Adviser;
(c) employment of legal counsel, registrars, transfer agents, shareholder
servicing agents, dividend disbursing agents or custodians who are, or any one
of which has a partner, shareholder, officer or director who is, an officer or
Trustee of the Trust or an officer or director of the Distributor or Adviser if
only customary fees are charged for services to the Trust; (d) sharing of
statistical, research, legal and management expenses and office hire and
expenses with any other investment company in which an officer or Trustee of
the Trust or an officer or director of the Distributor or Adviser is an officer
or director or otherwise financially interested.
8.3 Limitation on Dealing in Securities of the Trust by Certain Officers,
Trustees, Distributor or Adviser. Neither the Distributor nor Adviser, nor any
officer or Trustee of the Trust or officer or director of the Distributor or
Adviser shall take long or short positions in securities issued by the Trust;
provided, however, that:
(a) The Distributor may purchase from the Trust and otherwise deal in shares
issued by the Trust pursuant to the terms of its contract with the Trust;
(b) Any officer or Trustee of the Trust or officer or director of the
Distributor or Adviser or any trustee or fiduciary for the benefit of any of
them may at any time, or from time to time, purchase from the Trust or from the
Distributor shares issued by the Trust at the price available to the public or
to such officer, Trustee, director or fiduciary, no such purchase to be in
contravention of any applicable state or federal requirement; and
(c) The Distributor or the Adviser may at any time, or from time to time,
purchase for investment shares issued by the Trust.
PAGE 6
8.4 Securities and Cash of the Trust to be Held by Custodian Subject to
Certain Terms and Conditions.
(a) All securities and cash owned by the Trust shall, as hereinafter provided,
be held by or deposited with one or more banks or trust companies having
(according to its last published report) not less than $2,000,000 aggregate
capital, surplus and undivided profits (any such bank or trust company being
hereby designated as Custodian ), provided such a Custodian can be found ready
and willing to act. The Trust may, or may permit any Custodian to, deposit all
or any part of the securities owned by any class or series of Shares of the
Trust in a system for the central handling of securities established by a
national securities exchange or national securities association registered with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, or such other person as may be permitted by said Commission, including,
without limitation, a clearing agency registered under Section 17A of said
Securities Exchange Act of 1934, pursuant to which system all securities of any
particular class or series of any issue deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry, without
physical delivery of such securities.
(b) The Trust shall enter into a written contact with each Custodian regarding
the powers, duties and compensation of such Custodian with respect to the cash
and securities of the Trust held by such Custodian. Said contract and all
amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability to serve of any
Custodian or upon change of any Custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor Custodian;
(ii) require that the cash and securities owned by any class or series of
shares of the Trust and in the possession of the resigning or disqualified
Custodian be delivered directly to the successor Custodian; and
(iii) in the event that no successor Custodian can be found, submit to
the Shareholders, before permitting delivery of the cash and securities owned
by any class or Series of Shares of the Trust and in the possession of the
resigning or disqualified Custodian otherwise than to a successor Custodian,
the question whether that class or Series shall be liquidated or shall function
without a Custodian.
8.5 Limitations on Investment by the Trust in Securities of Any One Issuer.
The Trust may not purchase for its portfolio or for the portfolio of any class
or Series of the Trust s Shares the securities of any issuer if immediately
after such purchase that class or Series would thereupon hold securities
representing more than 10% of the voting securities of such issuer as disclosed
in the last available financial statements of such issuer. This limitation
shall not apply to obligations issued or guaranteed by the government of the
United States of America or to obligations of any corporation organized under a
general Act of Congress if such corporation is an instrumentality of the United
PAGE 7
States. For purposes of this limitation, each state and each political
subdivision, agency, authority or instrumentality thereof and each multistate
agency and authority shall be considered a separate issuer.
8.6 Determination of Net Asset Value. The Trustees or any officer or officers
or agent or agents of the Trust designated from time to time for this purpose
by the Trustees shall determine at least once daily the net income and the
value of all the assets attributable to any class or Series of Shares of the
Trust on each day upon which the New York Stock Exchange is open for
unrestricted trading and at such other times as the Trustees shall designate.
In determining asset values, all securities for which representative market
quotations are readily available shall be valued at fair value, all as
determined in good faith by the Trustees or an officer or officers or agent or
agents, as aforesaid, in accordance with accounting principles generally
accepted at the time. Notwithstanding the foregoing, the assets belonging to
any class or Series of Shares of the Trust may, if so authorized by the
Trustees, be valued in accordance with the amortized cost method, and the asset
value so determined, subject to the power of the Trustees to alter the asset
value so determined, less total liabilities belonging to that class or Series
of Shares (exclusive of capital stock and surplus) shall be the net asset value
until a new asset value is determined by the Trustees or such officers or
agents. In determining the net asst value the Trustees or such officers or
agents may include in liabilities such reserves for taxes, estimated accrued
expenses and contingencies in accordance with accounting principles generally
accepted at the time as the Trustees or such officers or agents may in their
best judgment deem fair and reasonable under the circumstances. The manner of
determining net asset value may from time to time be altered as necessary or
desirable in the judgment of the Trustees to conform it to any other method
prescribed or permitted by applicable law or regulation. Determinations of net
asset value made by the Trust or such officers or agents in good faith shall be
binding on all parties concerned. The foregoing sentence shall not be
construed to protect any Trustee, officer or agent of the Trust against any
liability to the Trust or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE 9
Amendments to the By-Laws
9.1 General. These By-Laws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the Trustees.
ARTICLE 10
10.1 Proxy Instructions Transmitted by Telephonic or Electronic Means. The
placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized by
such Shareholder shall constitute execution of such proxy by or on behalf of
such Shareholder.
PAGE 8
NEW ENGLAND EQUITY INCOME FUND
Advisory Agreement
AGREEMENT made this___ day of __________, 1995 by and between NEW ENGLAND
FUNDS TRUST III, a Massachusetts business trust (the "Fund") with respect to
its New England Equity Income Fund series (the "Series"), and NEW ENGLAND FUNDS
MANAGEMENT, L.P., a Delaware limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
0. (a) The Fund hereby employs the Manager to furnish the Fund
with Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided.
The Manager shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
PAGE 1
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
II. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
A. obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
B. taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
C. regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
III. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
A. office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
B. necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
C. compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
D. supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Fund's investment
policies, restrictions and guidelines, if the Manager has delegated to one
or more Sub-Advisers any or all of its responsibilities hereunder with
respect to the provision of Portfolio Management Services.
IV. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
PAGE 2
A. any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
B. any of the costs of preparing, printing and distributing sales
literature;
C. compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
D. registration, filing and other fees in connection with
requirements or regulatory authorities;
E. the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
F. charges and expenses of independent accountants retained by the
Fund;
G. charges and expenses of any transfer agents and registrars
appointed by the Fund;
H. brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
I. taxes and fees payable by the Fund to federal, state or other
governmental agencies;
J. any cost of certificates representing shares of the Fund;
K. legal fees and expenses in connection with the affairs of the
Fund including registering and qualifying its shares with Federal and
State regulatory authorities;
L. expenses of meetings of shareholders and trustees of the Fund;
M. interest, including interest on borrowings by the Fund;
N. the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
O. the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
V. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
PAGE 3
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
VI. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
VII. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.70% of the first $200 million of the
Series's average daily net assets, 0.65% of next $300 million of such assets
and 0.60% of such assets in excess of $500 million. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Board of Trustees of the Fund may from time to time determine
and specify in writing to the Manager. The Manager hereby acknowledges that
the Fund's obligation to pay such compensation is binding only on the assets
and property belonging to the Series.
VIII. If the total of all ordinary business expenses of the Fund as a
whole (including investment advisory fees but excluding interest, taxes,
portfolio brokerage commissions, distribution-related expenses and
extraordinary expenses) for any fiscal year exceeds the lowest applicable
percentage of average net assets or income limitations prescribed by any state
in which shares of the Series are qualified for sale, the Manager shall pay
such excess. Solely for purposes of applying such limitations in accordance
with the foregoing sentence, the Series and the Fund shall each be deemed to be
a separate fund subject to such limitations. Should the applicable state
limitation provisions fail to specify how the average net assets of the Fund or
belonging to the Series are to be calculated, that figure shall be calculated
by reference to the average daily net assets of the Fund or the Series, as the
case may be.
IX. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any
affiliated person of the Manager, any organization in which the Manager may
have an interest or any organization which may have an interest in the Manager;
that the Manager, any such affiliated person or any such organization may have
an interest in the Fund; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Fund, the
partnership agreement of the Manager or specific provisions of applicable law.
X. This Agreement shall become effective as of the date of its
execution, and
A. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a majority
PAGE 4
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Fund who are not interested persons of the
Fund or the Manager, cast in person at a meeting called for the purpose of
voting on, such approval;
B. this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of
the Series;
C. this Agreement shall automatically terminate in the event of its
assignment;
D. this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund; and
E. if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically approved by vote
of a majority of the outstanding voting securities of the Series and by
vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this section 10 shall be without
the payment of any penalty.
XI. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
XII. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the
meaning defined in the Fund's Agreement and Declaration of Trust as amended
from time to time.
XIII. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be subject to any liability to the
Fund, to any shareholder of the Fund or to any other person, firm or
PAGE 5
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST III, NEW ENGLAND
on behalf of its New England FUNDS MANAGEMENT, L.P.
Equity Income Fund series
By: By:
______________________________ ______________________________
PAGE 6
NOTICE
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust III (the "Fund") is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Fund's New England Equity Income Fund series (the "Series")
on behalf of the Fund by officers of the Fund as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders individually but are binding
only upon the assets and property belonging to the Series.
PAGE 7
NEW ENGLAND EQUITY INCOME FUND
Sub-Advisory Agreement
(Loomis, Sayles & Company, L.P.)
This Sub-Advisory Agreement (this "Agreement") is entered into as of
_____, 1995 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Loomis, Sayles & Company, L.P., a
Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated _____,
1995 (the "Advisory Agreement") with New England Funds Trust III (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Equity Income 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:
. 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 the assets of the Series. The
Sub-Adviser shall manage the Series 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. 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 Series may be invested in such proportions of stocks, bonds,
PAGE 1
other securities or investment instruments, or cash, as the Sub-Adviser
shall determine.
B. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions
and performance of the Series in such form as may be mutually agreed upon,
and agrees to review the Series and discuss the management of it. The
Sub-Adviser shall permit all books and records with respect to the Series
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 pursuant to Section 15(c) of
the 1940 Act.
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.
I. Obligations of the Manager.
A. The Manager shall provide (or cause the Custodian, as defined in
Section 3, to provide) timely information to the Sub-Adviser regarding
such matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, 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.
II. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' 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 Series 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
PAGE 2
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 Series shall be delivered directly to the Custodian.
III. 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 6 hereof).
IV. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series 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 Series 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 Series
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 Series.
V. 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 0.40% of the first $200 million of the average daily net assets of the
PAGE 3
Series, 0.325% of the next $300 million of such assets and 0.275% of such
assets in excess of $500 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.
VI. 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.
VII. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by
reason of willful misfeasance, bad faith or gross negligence in the performance
of the Sub-Adviser's duties or by reason of reckless disregard by the Sub-
Adviser of its obligations and duties hereunder. The Manager shall hold
harmless and indemnify the Sub-Adviser for any loss, liability, cost, damage or
expense (including reasonable attorneys fees and costs) arising from any claim
or demand by any past or present shareholder of the Series that is not based
upon the obligations of the Sub-Adviser under this Agreement.
VIII. 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;
PAGE 4
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; and
D. this Agreement may be terminated by the Sub-Adviser on ninety
days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 9 shall be without
the payment of any penalty.
IX. 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.
X. 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.
XI. 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.
PAGE 5
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By:
Name:
Title:
LOOMIS, SAYLES & COMPANY, L.P.
By:
Name:
Title:
PAGE 6
NEW ENGLAND EQUITY INCOME FUND
Distribution Agreement
AGREEMENT made this ___ day of _______ 1995 by and between NEW ENGLAND
FUNDS TRUST III, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
In consideration of the covenants hereinafter contained, the Trust and the
Distributor agree as follows:
0. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Equity Income Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
1. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
2. Fee. For its services as general distributor of the Series shares, the
Distributor shall receive from the Trust, in addition to the sales charge
referred to below, if any, a distribution fee at the rate and upon the
terms and conditions set forth in the Distribution Plan(s) attached as
Exhibit A hereto, and as amended from time to time, and any contingent
deferred sales charges that may be payable upon redemption of Series
shares. The distribution fee shall be accrued daily and paid monthly
within five business days following the last day of the month.
3. Public Offering Price. The public offering price shall be the net asset
value of Series shares, plus any applicable sales charge, all as set forth
PAGE 1
in the current prospectus and statement of additional information
("prospectus") of the Trust relating to the Series shares. In no event
shall the public offering price exceed 1000/942.50 of such net asset
value, and in no event shall any applicable sales charge or underwriting
discount exceed 5.75% of the public offering price. The net asset value
of Series shares shall be determined in accordance with the provisions of
the Agreement and Declaration of Trust and By-Laws of the Trust and the
current prospectus of the Trust relating to the Series shares.
4. Trust Issuance of Series Shares. The delivery of Series shares shall be
made promptly by a credit to a shareholder's open account for the Series.
The Trust reserves the right (a) to issue Series shares at any time
directly to the shareholders of the Series as a stock dividend or stock
split, (b) to issue to such shareholders shares of the Series, or rights
to subscribe to shares of the Series, as all or part of any dividend that
may be distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to shareholders
of the Series, and (c) to sell Series shares in accordance with the
current applicable prospectus of the Trust relating to the Series shares.
5. Repurchase. The Distributor shall act as agent for the Trust in
connection with the repurchase of Series shares by the Trust to the extent
and upon the terms and conditions set forth in the current applicable
prospectus of the Trust relating to the Series shares, and the Trust
agrees to reimburse the Distributor, from time to time upon demand, for
any reasonable expenses incurred in connection with such repurchases.
6. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
to sell Series shares but does not agree hereby to sell any specific
number of Series shares and shall be free to act as distributor of the
shares of other investment companies. Series shares will be sold by the
Distributor only against orders therefor. The Distributor shall not
purchase Series shares from anyone except in accordance with Sections 2
and 6 and shall not take "long" or "short" positions in Series shares
contrary to the agreement and declaration of trust or by-laws of the
Trust.
7. Compliance. The Distributor shall conform to the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD") and
the sale of securities laws of any jurisdiction in which it sells,
directly or indirectly, any Series shares. The Distributor agrees to make
timely filings, with the Securities and Exchange Commission in Washington,
D.C. (the "SEC"), the NASD and such other regulatory authorities as may be
required, of any sales literature relating to the Series and intended for
distribution to prospective investors. The Distributor also agrees to
furnish to the Trust sufficient copies of any agreements or plans it
intends to use in connection with any sales of Series shares in adequate
time for the Trust to file and clear them with the proper authorities
before they are put in use (which the Trust agrees to use its best efforts
to do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
PAGE 2
8. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time to
time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940 (the
"1940 Act"), to the end that there will be available for sale from time to
time such number of Series shares as the Distributor may reasonably be
expected to sell. The Trust shall advise the Distributor promptly of (a)
any action of the SEC or any authorities of any state or territory, of
which it may be advised, affecting registration or qualification of the
Trust or the Series shares, or rights to offer Series shares for sale, and
(b) the happening of any event which makes untrue any statement or which
requires the making of any change in the Trust's registration statement or
its prospectus relating to the Series shares in order to make the
statements therein not misleading.
9. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
10. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
11. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated person of the Distributor,
any organization in which the Distributor may have an interest or any
organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have
an interest in the Trust; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder
except as otherwise provided in the agreement and declaration of trust or
by-laws of the Trust, in the limited partnership agreement of the
Distributor or by specific provision of applicable law.
PAGE 3
12. Words "New England" and Letters "TNE". The Distributor and/or its parent
organizations, New England Mutual Life Insurance Company ("The New
England") and New England Investment Companies, L.P. ("NEIC"), retain
proprietary rights in the words "New England" and the letters "TNE", which
may be used by the Trust and the Series only with the consent of the
Distributor, which is authorized by The New England and NEIC to give such
consent as provided herein. The Distributor consents to the use by the
Series of the name "New England Equity Income Fund" or any other name
embodying the words "New England" or the letters "TNE", in such forms as
the Distributor shall in writing approve, but only on condition and so
long as (i) this Agreement shall remain in full force and (ii) the Trust
shall fully perform, fulfill and comply with all provisions of this
Agreement expressed herein to be performed, fulfilled or complied with by
it. No such name shall be used by the Trust or the Series at any time or
in any place or for any purposes or under any conditions except as in this
section provided. The foregoing authorization by the Distributor as agent
of The New England and NEIC to the Trust and the Series to use said words
or letters as part of a business or name is not exclusive of the right of
the Distributor itself to use, or to authorize others to use, the same;
the Trust acknowledges and agrees that as between the Distributor and the
Trust and the Series, the Distributor has the exclusive right so to use,
or authorize others to use, said words and letters, and the Trust agrees
to take such action as may reasonably be requested by the Distributor to
give full effect to the provisions of this section (including, without
limitation, consenting to such use of said words or letters). Without
limiting the generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of any
of its provisions by the Trust, the Trust will, at the request of the
Distributor made within six months after the Distributor has knowledge of
such termination or violation, use its best efforts to change the name of
the Trust and the Series so as to eliminate all reference, if any, to the
words "New England" or the letters "TNE" and will not thereafter transact
any business in a name containing the words "New England" or the letters
"TNE" in any form or combination whatsoever, or designate itself as the
same entity as or successor to any entity of such name, or otherwise use
the words "New England" or the letters "TNE" or any other reference to the
Distributor. Such covenants on the part of the Trust and the Series shall
be binding upon it, its trustees, officers, shareholders, creditors and
all other persons claiming under or through it.
13. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in effect
with respect to the shares of the Series for two years from the date
of execution, and from year to year thereafter so long as such
continuation is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by the vote of a majority of the
votes which may be cast by shareholders of the Series and (ii) by a
vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Distributor or the Trust, cast in person at
a meeting called for the purpose of voting on such approval;
PAGE 4
(b) This Agreement may at any time be terminated on sixty days' notice to
the Distributor either by vote of a majority of the Trust's Board of
Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series;
(c) This Agreement shall automatically terminate in the event of its
assignment; and
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
14. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of the
Series present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of
the Series entitled to vote at such meeting are present; or (2) the
vote of the holders of more than 50% of the outstanding shares of the
Series entitled to vote at such meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
15. Amendment. This Agreement may be amended at any time by mutual consent of
the parties, provided that such consent on the part of the Series shall be
approved (i) by the Board of Trustees of the Trust or by vote of a
majority of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the Trust who are
not interested persons of the Distributor or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
16. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the
Series shares shall pass, in Boston, Massachusetts.
17. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
PAGE 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST III,
on behalf of its New England
Equity Income Fund series
By________________________________
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By________________________________
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust III (the "Trust") is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Trust's New England Equity Income Fund series (the
"Series") on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Series.
PAGE 6
NEW ENGLAND EQUITY INCOME FUND
Class A Service Plan
This Plan (the "Plan") constitutes the Service Plan relating to the Class
A shares of NEW ENGLAND EQUITY INCOME FUND (the "Series"), a series of New
England Funds Trust III, a Massachusetts business trust (the "Trust").
Section 0. The Trust, on behalf of the Series, will pay to NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership which acts as the Principal
Distributor of the Series' shares, or such other entity as shall from time to
time act as the Principal Distributor of the Series' shares (the
"Distributor"), a fee (the "Service Fee") for expenses borne by the Distributor
in connection with the provision of personal services provided to investors in
Class A shares of the Series and/or the maintenance of shareholder accounts, at
an annual rate not to exceed .25% of the Series' average daily net assets
attributable to the Class A shares. Subject to such limit and subject to the
provisions of Section 7 hereof, the Service Fee shall be as approved from time
to time by (a) the Trustees of the Trust and (b) the Independent Trustees of
the Trust. The Service Fee shall be accrued daily and paid monthly or at such
other intervals as the Trustees shall determine. All payments under this
Service Plan are intended to qualify as "service fees" as defined in Section 26
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (or any successor provision) as in effect from time to time.
Section 1. The Service Fee may be paid only to reimburse the Distributor
for expenses of providing personal services to investors in Class A shares of
the Series and/or in connection with the maintenance of shareholder accounts
including, but not limited to, (i) expenses (including overhead expenses) of
the Distributor for providing personal services to investors in Class A shares
of the Series or in connection with the maintenance of shareholder accounts and
(ii) payments made by the Distributor to any securities dealer or other
organization (including, but not limited to, any affiliate of the Distributor)
with which the Distributor has entered into a written agreement for this
purpose, for providing personal services to investors in Class A shares of the
Series and/or the maintenance of shareholder accounts, which payments to any
such organization may be in amounts in excess of the cost incurred by such
organization in connection therewith.
Section 2. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class A shares of this Series, and shall in no event take effect
before ___________, 1995. This Plan shall continue in effect for a period of
more than one year after __________, 1995 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
PAGE 1
voting on this Plan.
Section 3. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 4. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class
A shares of the Series.
Section 5. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class A shares of the Series,
on not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 6. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Section 1 hereof without approval by a vote
of at least a majority of the outstanding Class A shares of the Series, and all
material amendments of this Plan shall be approved in the manner provided for
continuation of this Plan in Section 3.
Section 7. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder, and (c) the term "majority of the
outstanding Class A shares of the Series" shall mean the lesser of the 67% or
the 50% voting requirements specified in clauses (A) and (B), respectively, of
the third sentence of Section 2(a)(42) of the Act, all subject to such
exemptions as may be granted by the Securities and Exchange Commission.
PAGE 2
