<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
DECEMBER 31, 1997
Registration Nos. 33-62061
811-7345
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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. 4 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. 7 [ X ]
(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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John E. Pelletier, Esq.
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, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective (check appropriate box) [
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on ______ pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[X] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE> 2
NEW ENGLAND FUNDS TRUST III
(Prospectus and Statement of Additional Information)
CROSS REFERENCE SHEET
Items required by Form N-1A
<TABLE>
<CAPTION>
Item No. of
Form N-1A Caption in Prospectus
--------- ---------------------
<S> <C>
1 . . . . . . . . . Cover page
2 . . . . . . . . . Schedule of Fees
3 . . . . . . . . . Not Applicable
4 . . . . . . . . . Cover page; Additional Facts about the
Fund; Investment Strategy; How the Funds
Pursues Its Objective; Fund Investments;
Investment Risks
5 . . . . . . . . . Fund Management; Additional Facts About
the Fund
6 . . . . . . . . . Cover page; Additional Facts about the
Fund; 6 Ways to Buy Fund Shares; Fund
Dividend Payment; Income Tax
Considerations
7 . . . . . . . . . Cover page; Schedule of Fees; 6 Ways to Buy
Fund Shares; Minimum Investment; How
Fund Share Price is Determined; Sales
Charges; Reduced Sales Charges; Additional
Facts About the Fund; The Fund's Expenses
8 . . . . . . . . . 4 Ways to Sell Fund Shares; Repurchase
Option; Exchanging Among New England
Funds; Additional Facts About the Fund
9 . . . . . . . . . None
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of Caption in Statement of
Form N-1A Additional Information
--------- ----------------------
<S> <C>
10 . . . . . . . . . Cover page
11 . . . . . . . . . Table of Contents
12 . . . . . . . . . Description of the Trust and Ownership of
Shares
13 . . . . . . . . . Miscellaneous Investment Practices;
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 . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 4
[New England Funds Logo(R) New England Funds(R) Where the Best Minds Meets(R)]
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NEW ENGLAND BULLSEYE FUND
Prospectus and Application
March 31, 1998
New England Bullseye Fund (the "Fund") is a newly organized, non-diversified and
actively managed mutual fund and is a series of New England Funds Trust III (the
"Trust"), a registered open-end management investment company.
The Fund's investment objective is long-term capital growth. The Fund intends to
pursue its investment objective by investing primarily in equity securities.
There can be no assurance that the Fund will achieve its objective, which may be
changed without shareholder approval.
The Fund offers three classes of shares to the general public (Classes A, B and
C). The offering price is based on the net asset value per share next determined
after an order is received. Class A share purchases generally involve a sales
charge at the time of purchase. No initial sales charge applies to Class B and
Class C share purchases. A contingent deferred sales charge (a "CDSC"), however,
is imposed upon certain redemptions of Class B and Class C shares. Class B
shares automatically convert to Class A shares eight years after purchase. Class
C shares do not have a conversion feature. Class B shares and Class C shares
bear higher annual 12b-1 fees than Class A shares. See "Buying Fund
Shares -- Sales Charges." Through a separate prospectus, the Fund also offers an
additional class of shares, Class Y shares, to certain institutional investors.
To obtain more information about Class Y shares, please call New England Funds,
L.P. (the "Distributor") at 1-800-225-5478.
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 (the "Statement") about the Fund dated March 31, 1998 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., SAI Fulfillment Desk, 399 Boylston Street, Boston, MA 02116
or call toll free at 1-800-225-5478. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement, materials incorporated by
reference, and other information regarding the Fund. 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 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
For general
information on
the Fund or any
of its services
and for assis-
tance in opening
an account,
contact your
investment
dealer or call
the Distributor
toll free at
1-800-225-5478.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
FUND EXPENSES
1 Schedule of Fees Sales charges, yearly operating
expenses.
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INVESTMENT STRATEGY
3 How the Fund Pursues Its Investment
Objective
----------------------------------------------------------------------------------------
4 INVESTMENT RISKS It is important to understand the risks
inherent in the Fund before you invest.
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8 FUND MANAGEMENT
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BUYING FUND SHARES
9 Minimum Investment Everything you need to know to open and
add to a New England Bullseye Fund
9 6 Ways to Buy Fund Shares account.
- Through your investment dealer
- By mail
- By wire transfer of Federal Funds
- By Investment Builder
- By electronic purchase through ACH
- By exchange from another New England
Fund
10 Sales Charges
13 Reduced Sales Charges
(Class A Shares Only)
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OWNING FUND SHARES
15 Exchanging Among New England Funds New England Funds offers three
convenient ways to exchange Fund shares.
16 Fund Dividend Payments
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SELLING FUND SHARES
17 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
19 Repurchase Option An opportunity to reinvest your
(Class A Shares Only) redemption proceeds within 120 days for
no sals charge.
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FUND DETAILS
20 How Fund Share Price is Determined Additional information you may find
important.
20 Income Tax Considerations
21 The Fund's Expenses
22 Performance Criteria
22 Additional Facts About the Fund
24 Glossary of Terms
</TABLE>
<PAGE> 6
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 for the Fund. The Example shows the
cumulative expenses attributable to a hypothetical $1,000 investment in the Fund
for the periods specified.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as a percentage of offering
price)(1)(2)................................................................................ 5.75% None None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)(2)...................................................... (3) 5.00% 1.00%(4)
</TABLE>
(1) A reduced sales charge applies in some cases. See "Buying Fund
Shares -- Reduced Sales Charges (Class A Shares Only)."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to any portion
of certain purchases of Class A shares greater than $1,000,000 redeemed
within 1 year after purchase, but not to any other purchases or redemptions
of Class A shares. See "Buying Fund Shares -- Sales Charges."
(4) A 1.00% contingent deferred sales charge only applies with respect to any
portion of certain purchases of Class C shares if redeemed within one year.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management Fees (after voluntary fee deferral and expense reduction).......................... [0.70%] [0.70%] [0.70%]
12b-1 Fees.................................................................................... 0.25% 1.00%* 1.00%*
Other Expenses**.............................................................................. [0.80%] [0.80%] [0.80%]
Total Fund Operating Expenses (after voluntary fee deferral and expense reduction)............ [1.75%] [2.50%] [2.50%]
</TABLE>
* Because of the higher 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
rules of the NASD Regulation, Inc.
** Other expenses are based on estimated expenses for the Fund's first full
fiscal year.
The Fund's adviser and subadviser have voluntarily agreed, until December 31,
1998, to defer, on a pro rata basis, their respective management fees and, if
necessary, NEFM has agreed to bear certain expenses associated with operating
the Fund, to the extent necessary to limit the Fund's total operating expenses
to an annual rate of 1.75% of the Fund's average net assets for Class A shares
and 2.50% of the Fund's average net assets for both Class B and C shares.
Without the voluntary fee deferral and expense reduction by the Fund's adviser
and subadviser, Management Fees, Other Expenses and Total Fund Operating
Expenses would be 0.95%, 0.80% and 2.00%, respectively, for Class A shares; and
0.95%, 0.80% and 2.75%, respectively for both Class B and Class C shares. See
"Fund Management."
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (i) a 5%
annual return and (ii) unless otherwise indicated, redemption at period end. The
5% annual return and expenses in the Example should not be considered indicative
of actual or expected Fund performance or expenses, both of which may be more or
less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
(1) (2)
<S> <C> <C> <C> <C>
1 year......................................................................... $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------
3 years........................................................................ $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes redemption at end of period.
(2) Assumes no redemption at end of period.
1
<PAGE> 7
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," "The Fund's Expenses" and "Additional Facts About
the Fund."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect to
transfer redemption proceeds by wire.
2
<PAGE> 8
INVESTMENT STRATEGY
The Fund's objective is long-term capital growth.
How the Fund Pursues
Its Investment Objective
The Fund intends to pursue its investment objective by assembling a portfolio of
from 15 to 20 stocks. The Fund looks to invest in stocks that represent
ownership of quality businesses whose equity, the sub-adviser believes, is
undervalued based on their current operations and price earnings multiples
relative to the market average. The businesses must also possess significant
potential or a catalyst for future earnings growth in the judgement of the
sub-adviser.
In selecting stocks for the Fund, the sub-adviser also considers other factors,
including: Competitive advantage -- what is it that a business does better; does
a business have better products or services, or are they the lowest cost
provider?; Clear business focus -- does the company follow a consistent and
focused line of business, within a defined niche or segment of a broad market?;
Financial Health -- does the business have stronger cash flows, less debt,
stronger balance sheets, and higher returns on equity than the market average
(as measured by the Standard & Poor's Composite Index of 500 Stocks [the "S&P
500"])?; and Quality Management -- does the business have experienced managers
with little turnover and a long track record, as well as substantial equity
ownership positions? Although the sub-adviser seeks companies that have all of
these characteristics, there is no assurance that every company in which the
Fund invests will have all of these characteristics.
The sub-adviser believes the targeted strategy used by the Fund allows investors
to best capitalize on its in-depth fundamental research. The targeted approach
allows investors to own a small number of well-researched companies rather than
a more broad portfolio holding a significantly greater number of stocks. The
targeted portfolio allows the sub-adviser to select only the stocks it considers
to have the greatest potential for future return than a broader portfolio
holding a significantly greater number of stocks would allow. The Fund may
invest in stocks with different levels of market capitalization and different
industry focuses.
Due to the highly undiversified nature of the Fund, the performance may deviate
significantly from the market. Nondiversified portfolios, such as the Fund's,
should exhibit more volatility and thus more risk than the market. By attempting
to capitalize on this risk in conjunction with strong stock selection, the
Fund's sub-adviser will attempt to earn greater returns than the S&P 500 over
the long term, although this result cannot be assured.
The Fund will invest primarily in common stocks, but also may invest in other
equity securities including convertible preferred stock, convertible debt
securities and warrants. The Fund may also invest up to 20% of its total assets
in foreign securities, but will limit its investment in securities of the
issuers of any one foreign country to 10% of its total assets. There are no
assurances that the Fund will achieve its investment objective and the Fund may
change its investment objective without shareholder approval.
3
<PAGE> 9
INVESTMENT RISKS
It is important to understand the following risks inherent in the Fund before
you invest.
- -- LACK OF DIVERSIFICATION
As a non-diversified mutual fund, the Fund is able to take larger positions
in a smaller number of companies than a comparable diversified fund.
Therefore, the value of the Fund will likely be subject to greater
fluctuations than a diversified fund as a result of any change in the value
of one or more equity securities or other instruments in its portfolio.
- -- 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 small and medium 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 and Medium Market Capitalization 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 increase or decrease as the values of the underlying equity
securities increase or decrease. The movements in the prices of convertible
securities, however, may be smaller than the movements in the value of the
underlying equity securities. The value of convertible securities that pay
dividends or interest, like the value of other fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants have
no voting rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. They do not represent ownership of
the securities for which they are exercisable, but only the right to buy such
securities at a particular price.
- -- SMALL AND MEDIUM MARKET CAPITALIZATION COMPANIES
The Fund, in the discretion of its sub-adviser, may invest without limit in
the securities of companies of small and medium market capitalization.
Investments in such companies will generally entail greater risk than is
usually associated with larger, more well established companies. Small and
medium market capitalization companies tend to have smaller revenues,
narrower product lines, less management depth and experience, and smaller
market shares of their products or services than larger capitalization
companies. In many instances, the frequency and volume of trading in small
and medium market capitalization companies is substantially less than is
typical of larger capitalization companies. Therefore, 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
than market averages in general. The net asset value of funds that invest in
companies with small and medium capitalization therefore may fluctuate more
widely than market averages.
- -- FOREIGN SECURITIES
Investments in foreign securities present risks not typically associated with
investments in comparable securities of U.S. issuers.
Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected
favorably or unfavorably by changes in currency exchange rates or exchange
4
<PAGE> 10
control regulations. Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of any such currency against the
U.S. dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution.
In addition, although the Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that
currency, translated by the Fund (but not exchanged) into U.S. dollars and
declared as a dividend, but before payment of such dividend, the Fund could
be required to liquidate portfolio securities to pay such dividend.
Similarly, if the value of a currency relative to the U.S. dollar declines
between the time the Fund incurs expenses in U.S. dollars and the time such
expenses are paid, the amount of such currency required to be converted into
U.S. dollars in order to pay such expenses in U.S. dollars will be greater
than the equivalent amount in such currency, of such expenses, at the time
they were incurred.
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 may invest in foreign equity securities either by purchasing such
securities directly or by purchasing "depository receipts." Depository
receipts are instruments issued by a bank that represent an interest in
equity securities held by arrangement with the bank. Depository receipts can
be either "sponsored" or "unsponsored." Sponsored depository receipts are
issued by banks in cooperation with the issuer of the underlying equity
securities. Unsponsored depository receipts are arranged without involvement
by the issuer of the underlying equity securities. Less information about the
issuer of the underlying equity securities may be available in the case of
unsponsored depository receipts.
In determining whether to invest in securities of foreign issuers, the
subadviser of the Fund will consider the likely effects of foreign taxes on
the net yield available to the Fund and its shareholders. Compliance with
foreign tax law may reduce the Fund's net income available for distribution
to shareholders.
- -- FOREIGN CURRENCY
The Fund's portfolio may include securities denominated in foreign currencies
or traded in securities markets in which settlements are made in foreign
currencies. 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.
5
<PAGE> 11
- -- SECURITIES LENDING
The Fund may lend its portfolio securities to broker-dealers or other parties
under contracts calling for the deposit by the borrower with the Fund's
custodian of cash collateral equal to at least the market value of the
securities loaned, marked to market on a daily basis. 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. No loans will be made if, as a result, the aggregate
amount of such loans outstanding at any time would exceed 33 1/3% of the
Fund's total assets (taken at current value). Any voting rights or rights to
consent relating to the loaned securities 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 custodial
or placement fees.
- -- REPURCHASE AGREEMENTS
Under a repurchase agreement, 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. If the seller
fails to repurchase the securities, the Fund has the right to sell the
securities to third parties. Repurchase agreements can be regarded as loans
by the Fund to the seller, collateralized by securities that are the subject
of the agreement. Repurchase agreements afford an opportunity for the Fund to
earn a return on available cash at relatively low credit risk, although the
Fund may be subject to various delays and risks of loss if the seller fails
to meet its obligation to repurchase. The staff of the SEC is currently of
the view that repurchase agreements maturing in more than 7 days are
illiquid.
- -- MISCELLANEOUS
The Fund will not invest more than 15% of its assets in "illiquid
securities," that is, securities which are not readily resalable, which may
include securities whose disposition is restricted by federal securities
laws.
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. 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. 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 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
6
<PAGE> 12
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 the
security. For more information on "when-issued" and "delayed-delivery"
securities, see the Statement.
The Fund does not trade actively for short-term profits. Therefore, the Fund
does not purchase securities with the intention of engaging in short-term
trading. The Fund, however, will sell any particular security and reinvest
the proceeds when it is deemed prudent by the Fund's subadviser, regardless
of the length of the holding period. This policy may result in higher
securities transaction costs than if the Fund were to follow a policy of
holding all securities for a longer period of time. To the extent that this
policy results in gains on investments, the Fund will make distributions to
its shareholders, which may accelerate the shareholders' tax liabilities. The
Fund's portfolio turnover rate is not expected to exceed 150% during its
initial year of operation, although the actual rate could be higher. The
Fund's investments in options and futures contracts that mature in less than
one year are excluded for purposes of computing the Fund's turnover rate.
7
<PAGE> 13
FUND MANAGEMENT
New England Funds Management, L.P. ("NEFM"), 399 Boylston Street, Boston,
Massachusetts 02116, serves as the Fund's adviser, and has delegated day-to-day
portfolio management responsibility to the Fund's subadviser, Jurika & Voyles,
L.P. ("Jurika & Voyles"), Lake Merritt Plaza, 1999 Harrison, Suite 700, Oakland,
California 94612. Founded in 1983 by William K. Jurika and Glenn C. Voyles, the
firm has discretionary management authority with respect to approximately $7
billion of assets for various clients including corporations, pension plans,
401(k) plans, profit sharing plans, trusts and estates, foundations and
charitable endowments, mutual funds and individuals.
William K. Jurika and Peter Goetz are primarily responsible for the day-to-day
management of the Fund. Messrs. Jurika and Goetz manage the Fund's portfolio in
accordance with company research provided by the Jurika & Voyles research
department, and report to the Investment Committee, which has final
responsibility for all Jurika & Voyles investments on behalf of its clients.
Members of the Investment Committee include Mr. Jurika, Mr. Goetz, James
Christensen, Karl Mills, Guy Elliffe and Paul Meeks. Mr. Jurika has been
associated with Jurika and Voyles since its founding in 1983. Mr. Goetz joined
Jurika & Voyles in 1996, prior to which he spent nine years as Portfolio Manager
in the Private Asset Division of Bank of America.
NEFM oversees, evaluates and monitors Jurika & Voyles' provision of subadvisory
services to the Fund and provides general business management and administration
to the Fund. The Fund pays NEFM a management fee at the annual rate of 0.95% of
the first $200 million of the Fund's average daily net assets, 0.90% of the next
$300 million of such assets and 0.85% of such assets in excess of $500 million.
This fee rate payable by the Fund is higher than that paid by most other mutual
funds, but is believed to be appropriate for the services received by the Fund
and to be comparable to fees paid by some other mutual funds investing in a
manner similar to the Fund. NEFM pays Jurika & Voyles a sub-advisory fee at an
annual rate of 0.570% of the first $200 million of the average daily assets of
the Fund, 0.500% of the next $300 million of such assets and 0.430% of such
assets in excess of $500 million. In addition, under a fee deferral arrangement
and an expense reimbursement arrangement, NEFM and Jurika & Voyles have agreed,
until December 31, 1998, to defer, on a pro rata basis, their respective
management and subadvisory fees for the Fund and, if necessary, NEFM has agreed
to bear certain expenses associated with the Fund to the extent necessary to
limit the Fund's expenses to the annual rate of 1.75% for Class A shares, 2.50%
for Class B shares and 2.50% for Class C shares, subject to the obligation of
the Fund to pay NEFM and/or Jurika & Voyles such deferred fees in later periods
to the extent that the Fund's expenses fall below the annual rate of 1.75% for
Class A shares, 2.50% for Class B shares and 2.50% for Class C shares; provided,
however, that the Fund is not obligated to pay any such deferred fees more than
two years after the end of the fiscal year in which the fee was deferred.
The general partners of each of NEFM, Jurika & Voyles and the Distributor are
special purpose corporations 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 an indirect wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife").
In placing portfolio transactions for the Fund, Jurika & Voyles seeks the most
favorable price and execution available. Subject to applicable regulatory
restrictions and such policies as the Trust's trustees may adopt, Jurika &
Voyles may consider sales of shares of the Fund and other mutual funds that it
manages as a factor in the selection of broker-dealers to effect portfolio
transactions for the Fund.
NEFM provides executive and other personnel for the management of the Trust. The
Trust's Board of Trustees supervises the affairs of the Trust as conducted by
NEFM and Jurika & Voyles.
The Fund has received an exemptive order from the SEC to permit NEFM, subject to
certain conditions, to enter into subadvisory agreements with sub-advisers other
than the existing sub-adviser of the Fund when approved by the Board of
Trustees, without obtaining shareholder approval. The exemptive order also
permits, without shareholder approval, the terms of an existing subadvisory
agreement to be changed or the employment of an existing subadviser to be
continued after events that would otherwise cause an automatic termination of a
subadvisory agreement, when such changes or continuation are approved by the
Trust's Board of Trustees. Shareholders would be notified of any sub-adviser
changes.
8
<PAGE> 14
BUYING FUND SHARES
Minimum Investment
$2,500 is the minimum for an initial investment in any Fund, and $100 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, SEP, SIMPLE Plans, 403(b)(7) retirement plans
and certain other retirement plans.
- -- $100 on initial and subsequent investments for automatic investing through
the Investment Builder program.
- -- $250 on initial and $100 on subsequent investments for retirement plans with
tax benefits such as corporate pension and profit sharing plans and Keogh
plans.
- -- $500 on initial and $100 on subsequent investments for IRAs.
- -- $2,000 on initial and $100 on subsequent investments for accounts registered
under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act.
6 Ways to Buy Fund Shares
You may purchase Class A, Class B and Class C shares of the Funds in the
following ways:
[PROFILE LOGO] Through your investment dealer:
Many investment dealers have a sales agreement with the Distributor and would be
pleased to accept your order.
[ENVELOPE LOGO] By Mail:
FOR AN INITIAL INVESTMENT, simply complete an application and return it, with a
check payable to New England Funds, to P.O. Box 8551, Boston, MA 02266-8551.
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 between
8:00 a.m. and 7:00 p.m. (Eastern time).
All purchases made by check should be in U.S. dollars and made payable to New
England Funds, or, in the case of a retirement account, the custodian or
trustee. Third party checks will generally not be accepted except under certain
circumstances approved by the Distributor. When purchases are made by check or
periodic account investment, redemptions may not be allowed until the investment
being redeemed has been in the account for a minimum of ten calendar days.
[LOGO] By wire transfer of Federal Funds:
FOR AN INITIAL INVESTMENT, call us at 1-800-225-5478 between 8:00 a.m. and 7:00
p.m. (Eastern time) on a day when the Fund is open for business 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
Bullseye Fund (class of shares), Shareholder Name, Shareholder Account Number.
Funds may be transferred between 9:00 a.m. and 4:00 p.m. (Eastern time) on a day
when the Fund is open for business. Your bank may charge a fee for this service.
[LOGO] By Investment Builder:
Investment Builder is New England Funds' automatic investment plan. You may
authorize automatic monthly transfers of $100 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 check
marked "Void" or a deposit slip from your bank account.
TO ADD INVESTMENT BUILDER TO AN EXISTING ACCOUNT, please call us at
1-800-225-5478 for a Service Options Form.
Using
New England
Funds
Personal
Access Line(TM)
1-800-346-
5984
New England
Funds
Personal
Access Line(TM)
is New England
Funds'
automated
service system
that gives
you 24-hour
access to
your account.
Through your
touch-tone tele-
phone, you can
receive your
current account
balance, your
recent trans-
actions, Fund
prices and
recent
performance
information.
You can also
purchase, sell
or exchange
Class A or
Class C shares
of any
New England
Fund. For
more information
on New England
Funds
Personal Access
Line(TM)
call us at
1-800-225-
5478.
9
<PAGE> 15
[Electric Plug Logo] By Electronic Purchase Through ACH:
You may purchase additional shares electronically through the Automated Clearing
House ("ACH") system as long as your bank or credit union is a member of the ACH
system and you have a completed, approved ACH application on file with the Fund.
To purchase through ACH, call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m.
(Eastern time) on a day when the Fund is open for business. You may also
purchase shares through ACH by calling New England Funds Personal Access
Line(TM) at 1-800-346-5984 twenty-four hours a day. Under normal circumstances,
the New York Stock Exchange (the "Exchange") closes at 4:00 p.m. (Eastern time).
Purchase orders accepted through ACH or New England Funds Facts Line(TM) will be
complete only upon the receipt by New England Funds of funds from your bank and,
on the day that the funds are received, will be processed at the net asset value
next determined at the close of regular trading on the Exchange on days that the
Exchange is open. Proceeds of redemptions of Fund shares purchased through ACH
may not be available for up to ten days after the purchase date.
[Arrow Logo]By exchange from another New England Fund:
You may also purchase shares of the Fund by exchanging from another New England
Fund. Please see "Owning Fund Shares -- Exchanging Among New England Funds" for
complete details.
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 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.
Class B shares and certain shareholder features may not be available to persons
whose shares are held in street name accounts.
You will not receive any certificates for your Class A shares unless you request
them in writing from the Distributor. The Fund's "open account" system for
recording your investment eliminates the problems and expense of handling and
safekeeping certificates. Certificates will not be issued for Class B shares or
Class C shares. If you wish transactions in your account to be effected by
another person under a power of attorney from you, special rules apply. Please
contact your investment dealer or the Distributor for details.
Sales Charges
Except as otherwise indicated in this prospectus, the Fund offers three classes
of shares to the general public:
CLASS A SHARES
Class A shares are offered at net asset value plus a sales charge which varies
depending on the size of your purchase. They are also subject to a 0.25% annual
service fee. Class A shares are offered subject to the following sales charges:
<TABLE>
<CAPTION>
SALES CHARGES AS A % OF DEALER'S
----------------------- CONCESSION
PUBLIC NET AS A % OF
VALUE OF TOTAL OFFERING AMOUNT OFFERING
INVESTMENT PRICE INVESTED PRICE
-------------- ----- -------- -----
<S> <C> <C> <C>
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 *
</TABLE>
* The Distributor may, at its discretion, pay investment dealers who initiate
and are responsible for such purchases (except investments by plans under
Sections 401(a) or 401(k) of the Code whose total investments amount to $1
million or more or that have 100 or more eligible employees ["Retirement
Plans"]) a commission of up to the following amounts: 1% on the first $3
million invested and 0.50% on the excess over $3 million. For investments by
Retirement Plans, the Distributor may, at its discretion, pay investment
dealers who initiate and are responsible for such purchases a commission of up
10
<PAGE> 16
to the following amounts: 1% on the first $3 million invested and 0.50% on
amounts over $3 million and up to $10 million. These commissions are not
payable if the purchase represents the reinvestment of a redemption made
during the previous 12 calendar months. Section 401(a), 401(k), 457 and 403(b)
plans that have total investment assets of at least $10 million are eligible
to purchase Class Y shares of the Fund, which are described in a separate
prospectus.
CONTINGENT DEFERRED SALES CHARGE (CLASS A SHARES ONLY). For purchases of
$1,000,000 or more of Class A shares of the Fund or purchases by Retirement
Plans as defined above, a CDSC, at the rate of 1% of the lesser of the purchase
price or the net asset value at the time of redemption applies to redemptions of
shares within one year after purchase. If an exchange is made to Class A shares
of any of New England Cash Management Trust Money Market 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 New England Funds Trust I, New England Funds Trust II or New England
Funds Trust III (the "Trusts"). If the Money Market Fund shares are redeemed
rather than exchanged back into the Trusts, then a CDSC as described above
applies to the redemption. For purposes of the CDSC, it is assumed that the
shares held the longest are the first to be redeemed. No CDSC applies to a
redemption of shares followed by a reinvestment effected within 30 days after
the date of the redemption.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales charge,
and are subject to a 0.25% annual service fee, a 0.75% annual distribution fee
for 8 years (at which time they automatically convert to Class A shares) and a
CDSC if they are redeemed within 6 years of purchase. The holding period for
purposes of timing the conversion to Class A shares and determining the CDSC
will continue to run after an exchange to Class B shares of another series of
the Trusts. If the exchange is made to Class B shares of a Money Market Fund,
then the holding period stops and will resume only when an exchange is made back
into Class B shares of a series of the Trusts. If the Money Market Fund shares
are redeemed rather than exchanged back into a series of the Trusts, then a CDSC
applies to the redemption, at the same rate as if the Class B shares of the Fund
had been redeemed at the time they were exchanged for Money Market Fund shares.
For the purpose of the CDSC, it is assumed that the shares held the longest are
the first to be redeemed.
The CDSC will be assessed on an amount equal to the lesser of the cost of the
shares being redeemed or their net asset value at the time of redemption.
Accordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on shares of the
Fund purchased with reinvested dividends or capital gains distributions. The
amount of the CDSC, if any, will vary depending on the number of years from the
time of payment for the purchase of Class B shares until the time of redemption
of such shares. The CDSC equals the following percentages of the dollar amounts
subject to the charge:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHANGE
------------------- ------------------------
<S> <C>
1st.......................................... 5%
2nd.......................................... 4%
3rd.......................................... 3%
4th.......................................... 3%
5th.......................................... 2%
6th.......................................... 1%
thereafter................................... 0%
</TABLE>
Year one ends one year after the day on which the purchase was accepted, and so
on.
The CDSC is deducted from the proceeds of the redemption, not the amount
remaining in the account, unless otherwise requested, and is paid to the
Distributor. The CDSC may be eliminated for certain persons and organizations.
See "Sales Charges -- General" below. At the time of sale, the Distributor pays
investment dealers a commission of 3.75% and advances the first year's service
fee (up to 0.25%) on purchases of Class B shares.
CLASS C SHARES
Class C shares are offered at net asset value without an initial sales charge
and are subject to a 0.25% annual service fee, a 0.75% annual distri-
A, B OR C SHARES-
WHICH SHOULD
YOU CHOOSE?
Your choice
of share class
depends on the
size of your
investment and
how long you
intend to hold
your shares.
In general,
there are only
minor differences
in performance
results for the
different classes
if held for
the long term.
Consult your
financial
representative
for help in
deciding which
class is
appropriate
for you.
11
<PAGE> 17
bution fee and a 1.00% CDSC on redemptions made within one year from the date of
purchase.
The Distributor currently pays to investment dealers a sales commission of 1.00%
of the sales price of Class C shares sold by such investment dealer. The
Distributor will retain the service and distribution fees assessed against Class
C shares in the first year of investment, and the entire amount of the CDSC paid
by Class C shareholders upon redemption in the first year, in order to
compensate the Distributor for providing distribution related services to the
Fund in connection with the sale of Class C shares, and to reimburse the
Distributor, in whole or in part, for the commissions paid (and related
financing cost) to investment dealers at the time of a sale of shares. There are
no conversion features associated with Class C shares; therefore, Class C
shareholders will be subject to higher distribution fees than shareholders of
other classes if Class C shares are held for more than eight years.
DECIDING WHICH CLASS TO PURCHASE
The decision as to whether Class A, Class B or Class C shares are more
appropriate for an investor depends on the amount and intended length of the
investment. Investors making large investments, qualifying for a reduced initial
sales charge, might consider Class A shares because Class A shares have lower
12b-1 fees and pay correspondingly higher dividends per share. For these
reasons, the Distributor will treat any order of $1 million or more for Class B
shares as a Class A order. Any order of $1 million or more for Class C shares
will be treated as an order for Class A shares, unless you indicate on the
relevant section of your application that you have been informed of the relative
advantages and disadvantages of Class A and Class C shares. Investors making
smaller investments might consider Class B or Class C shares because 100% of the
purchase is invested immediately. Investors making smaller investments who
anticipate redeeming their shares within six years may find Class C shares more
favorable than Class B shares, because Class B shares are subject to a CDSC on
redemptions made within six years after purchase. Class B shares are more
favorable than Class C shares for investors who anticipate holding their
investment for more than eight years, since Class B shares convert to Class A
shares (and thus bear lower ongoing fees) after eight years. Consult your
investment dealer for advice applicable to your particular circumstances.
GENERAL
NO CDSC ON ANY CLASS OF SHARES APPLIES in connection with (1) redemptions by
retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, when
such redemptions are necessary to make distributions to plan participants; (2)
distributions from an IRA due to death, disability or a tax-free return of an
excess contribution; (3) distributions by other employee benefit plans to pay
benefits; and (4) distributions by a Section 401(a) plan due to death. For
403(b)(7) and IRA accounts established before January 3, 1995, the CDSC is
waived for redemptions made after attainment of age 59 1/2. The CDSC is waived
for redemptions made to make required minimum distributions after attainment of
age 70 1/2 for 403(b)(7) and IRA accounts established on or after January 3,
1995. There is also no CDSC on redemptions following the death or disability (as
defined in Section 72(m)(7) of the Code) of a shareholder if the redemption is
made within one year after the shareholder's death or disability. In addition,
there is no CDSC on certain withdrawals pursuant to a Systematic Withdrawal
Plan. See "Selling Fund Shares -- 4 Ways to Sell Fund Shares -- By Systematic
Withdrawal Plan" below.
The Fund receives the net asset value next determined after an order is received
on sales of each class of shares. The sales charge is allocated between the
investment dealer and the Distributor. The Distributor receives the CDSC. For
purposes of the CDSC, an exchange from one series of 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 Class A shares of the Fund 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
12
<PAGE> 18
charge may be deemed underwriters of the 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 (including in some cases,
exclusively to New England Securities Corporation, a broker-dealer affiliate of
the Distributor, and MetLife). In some instances additional compensation is
provided to certain dealers who achieve certain sales goals or who have sold or
may sell significant amounts of shares. Such compensation may include (i) full
reallowance of the sales charge on the Class A shares; (ii) additional
compensation with respect to the sale of Class A, B and C shares; or (iii)
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. The participation of representatives in such
incentive programs is at the discretion of the broker-dealer or financial
institution with which the representative is associated.
Reduced Sales Charges (Class A Shares Only)
- -- LETTER OF INTENT -- if an investor indicates through a letter of intent that
aggregate purchases of all series and classes of the Trusts over a 13-month
period will reach a breakpoint (a dollar amount at which a lower sales charge
applies), smaller individual amounts can be invested at the sales charge
applicable to that breakpoint.
- -- COMBINING ACCOUNTS -- purchases by all qualifying accounts of all series and
classes of the Trusts (which do not include the Money Market Funds unless the
shares were purchased through an exchange from a series of the Trusts) may be
combined with purchases of qualifying accounts of a spouse, parents,
children, siblings, grandparents or grandchildren, individual fiduciary
accounts, sole proprietorships and/or single trust estates. The values of all
accounts are combined to determine the sales charge.
- -- UNIT HOLDERS OF UNIT INVESTMENT TRUSTS -- unit investment trust distributions
of less than $1 million may be invested in Class A shares of 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 -- no sales charge or CDSC applies to
investments of $25,000 or more in the Fund by (1) clients of an adviser or
subadviser to any series of the Trusts, any director, officer or partner of a
client of an adviser or subadviser 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
13
<PAGE> 19
or subadviser 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 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 by investment
advisers, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisers, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master
account of such investment adviser, financial planner or other intermediary
on the books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used for those plans, including, but not
limited to, those defined in Sections 401(a), 403(b), 401(k) and 457 of the
Code and "rabbi trusts." Investors may be charged a fee if they effect
transactions through a broker or agent.
- -- There is no sales charge, CDSC or initial investment minimum related to
investments by current and retired employees of the Trusts' investment
advisers and subadvisers, the Distributor, New England Life Insurance Company
("NELICO") or MetLife or any other company affiliated with NELICO or MetLife;
current and former directors and trustees of the Trusts, NELICO or MetLife or
their predecessor companies; agents and general agents of NELICO or MetLife
and their insurance company subsidiaries; current and retired employees of
such agents and general agents; registered representatives of broker-dealers
who have selling arrangements with the Distributor; the spouse, parents,
children, siblings, in-laws, 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 NELICO or MetLife
or of any insurance company affiliated with NELICO or MetLife.
- -- Shares of the Fund are available at net asset value for investments by
participant-directed 401(a) and 401(k) plans that have 100 or more eligible
employees.
- -- Shares of the Fund are available at net asset value for investments by
non-discretionary and non-retirement accounts of bank trust departments or
trust companies, but are unavailable if the trust department or institution
is part of an organization not principally engaged in banking or trust
activities.
- -- Shares of the Fund also may be purchased at net asset value through certain
broker-dealers and/or financial services organizations without any
transaction fee. Such organizations may receive compensation, in an amount of
up to 0.35% annually of the average value of the Fund shares held by their
customers. This compensation may be paid by NEFM and/or Jurika & Voyles out
of their own assets, or may be paid indirectly by the Fund in the form of
servicing, distribution or transfer agent fees.
- -- Shareholders of Reich and Tang Government Securities Trust may exchange their
shares of that fund for Class A shares of the Fund at net asset value and
without imposition of a sales charge.
The reduction or elimination of the sales charge in connection with sales
described above reflects the absence or reduction of sales expenses associated
with such sales.
14
<PAGE> 20
OWNING FUND SHARES
Exchanging Among New
England Funds
CLASS A SHARES. Except as indicated in the next two sentences, you may exchange
Class A shares of any series of the Trusts (and Class A shares of the Money
Market Funds acquired through exchanges from any series of the Trusts) for Class
A shares of any other series of the Trusts without paying a sales charge; such
exchanges will be made at the next-determined net asset value of the shares.
Class A shares of New England Intermediate Term Tax Free Fund of California and
New England Intermediate Term Tax Free Fund of New York (the "California and New
York Funds") (and shares of the Money Market Funds acquired through exchanges of
such shares) may be exchanged for Class A shares of another series of the Trusts
at net asset value only if you have held the California or New York Fund shares
for at least six months; otherwise, you will pay the difference between any
sales charge you have already paid on your California or New York Fund shares
and the higher sales charge of the series into which you are exchanging. If you
exchange Class A shares of New England Adjustable Rate U.S. Government Fund (the
"Adjustable Rate Fund") (and shares of the Money Market Funds acquired through
exchanges of such shares) for shares of another series of the Trusts that has a
higher sales charge, you will pay the difference between any sales charge you
have already paid on your Adjustable Rate Fund shares and the higher sales
charge of the series into which you are exchanging. In addition, you may redeem
Class A shares of any Money Market Fund that were not acquired through exchanges
from any series of the Trusts and have the proceeds directly applied to the
purchase of shares of a series of the Trusts at the applicable sales charge.
CLASS B SHARES. You may exchange Class B shares of any series of the Trusts (and
Class B shares of the Money Market Funds or Class A shares of the Money Market
Funds which have not been subject to a previous sales charge) for Class B shares
of any other series of the Trusts. Such exchanges will be made at the
next-determined net asset value of the shares. Class B shares will automatically
convert on a tax-free basis to Class A shares eight years after they are
purchased (excluding the time the shares are held in a Money Market Fund). See
"Sales Charges -- Class B Shares" above.
CLASS C SHARES. You may exchange Class C shares of any series of the Trusts for
Class C shares of any other series of the Trusts which offers Class C shares or
for Class A shares of the Money Market Funds.
TO MAKE AN EXCHANGE, please call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m.
(Eastern time) on a day when the Fund is open for business, call New England
Funds Personal Access Line(TM) at 1-800-346-5984 twenty-four hours a day or
write to New England Funds. Exchange requests after 4:00 p.m. will be processed
at the net asset value determined at the close of regular trading on the next
day the Exchange is open. The exchange must be for a minimum of $1,000 (or the
total net asset value of your account, whichever is less), except that under the
Automatic Exchange Plan the minimum is $100. 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 obtain and carefully read
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.
MARKET TIMER RESTRICTIONS. Purchases and exchanges into the Funds should be made
for investment purposes only. Effective March 2, 1997, the Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) when such transaction
is deemed harmful to the best interests of the Fund's other shareholders or
would disrupt the management of the Fund. Without limiting the generality
AUTOMATIC
EXCHANGE
PLAN
The Fund has
an automatic
exchange plan
under which
shares of a
class of the
Fund are
automatically
exchanged each
month for
shares of the
same class of
other series of
the Trusts.
The minimum
monthly
exchange
amount under
the plan
is $100.
There is no fee
for exchanges
made pursuant
to this
program, but
there may be a
sales charge as
described on
this page.
Shares of
the Adjustable
Rate Fund
that are
subject to a
differential
sales charge as
described on
the page may
not participate
in this
program.
15
<PAGE> 21
of the foregoing, the Funds and the Distributor reserve the right to restrict
(e.g., by limiting to a specified maximum dollar amount) purchases and exchanges
for the account of "market timers." An account will be deemed to be the account
of a market timer if (i) more than two exchange purchases of a given Fund are
effected for the account in a calendar quarter or (ii) the account effects one
or more exchange purchases of a given Fund in a calendar quarter in an aggregate
amount in excess of 1.00% of the Fund's total net assets.
For federal tax purposes, an exchange of shares from one series of the Trusts
for shares of another series is considered to be a redemption and purchase and,
therefore, is considered to be a taxable event on which you may recognize a gain
or a loss.
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 (other than long-term capital gains)
each year and distributes annually all net realized long- and short-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 or a capital gain distribution, you should be aware that a
portion of the purchase price may be returned to you as a taxable distribution.
You have the option to reinvest all distributions in additional shares of the
same class of the Fund or in shares of the same class of other series of the
Trusts, to receive distributions from dividends and interest in cash while
reinvesting distributions from capital gains in additional shares of the same
class of the Fund or of the same class of other series of the Trusts, or to
receive all distributions in cash. Income distributions and capital gains
distributions will be reinvested in shares of the same class of the Fund at net
asset value (without a sales charge or CDSC) unless you select another option.
You may change your distribution option by notifying New England Funds in
writing or by calling 1-800-225-5478. If you elect to receive your dividends in
cash and the dividend checks sent to you are returned "undeliverable" to the
Fund or remain uncashed for six months, your cash election will automatically be
changed and your future dividends will be reinvested. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
- --------------------------------------------------------
- --------------------------------------------------------
DIVIDEND DIVERSIFICATION
PROGRAM
You may also establish a dividend diversification program, which allows
you to have all dividends and any other distributions automatically
invested in shares of the same class of another New England Fund, subject
to the investor eligibility requirements of that other fund and to state
securities law requirements. Shares will be purchased at the selected
fund's net asset value (without a sales charge or CDSC) 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 and carefully read a copy of that fund's prospectus.
- --------------------------------------------------------
16
<PAGE> 22
SELLING FUND SHARES
4 Ways to Sell Fund Shares
You may sell Class A, Class B and Class C shares of the Fund in the following
ways:
[Profile Logo] Through your investment dealer:
Call your authorized investment dealer for information.
[Telephone Logo] By telephone:
You or your investment dealer may redeem (sell) shares by telephone using any of
the three methods described below:
Wired to Your Bank Account -- If you have previously selected the telephone
redemption privilege on your account, shares may be redeemed by calling
1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day when the
Fund is open for business. Class A and Class C shares only may also be redeemed
by calling New England Funds Personal Access Line(TM) at 1-800-346-5984
twenty-four hours a day. 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 Federal Reserve System.
Mailed to Your Address of Record -- Shares may be redeemed by calling
1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day when the
Fund is open for business and requesting that a check for the proceeds (LESS ANY
APPLICABLE CDSC) be mailed to the address on your account, provided that the
address has not changed over the previous month and that the proceeds are for
$100,000 or less. Generally, the check will be mailed to your address of record
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 between 8:00 a.m. and 7:00 p.m. (Eastern
time) on a day when the Fund is open for business or, for Class A and Class C
shares only, call New England Funds Personal Access Line(TM) at 1-800-346-5984
twenty-four hours a day. 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.
Redemption requests accepted after 4:00 p.m. (Eastern time), or after the
Exchange closes if it closes before 4:00 p.m., will be processed at the net
asset value determined at the close of regular trading on the next day that the
Exchange is open.
[Envelope Logo] By mail:
You may redeem your shares at their net asset value (LESS ANY APPLICABLE CDSC)
next determined after receipt of your request in good order by sending a written
request (including any necessary special documentation) to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551.
The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, the number of shares or the dollar
amount to be redeemed and whether you wish the proceeds mailed to your address
of record, wired to your bank account or transmitted through ACH. All owners of
the shares must sign the request in the exact names in which the shares are
registered (this appears on your confirmation statement) and indicate any
special capacity in which you are signing (such as trustee, custodian, 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.
17
<PAGE> 23
If you hold certificates for your Class A shares, you must enclose them with
your redemption request or your request will not be honored. The Fund recommends
that certificates be sent by registered mail.
[Calendar Logo] By Systematic Withdrawal Plan:
You may establish a Systematic Withdrawal Plan that allows you to redeem shares
and receive payments on a regular schedule. In the case of shares subject to a
CDSC, the amount or percentage you specify may not exceed, on an annualized
basis, 10% of the value of your Fund account (based on the day you establish
your plan). Redemption of shares pursuant to the Systematic Withdrawal 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. However, in those cases
where you have recently purchased your shares by check or an electronic funds
transfer through the ACH system and you make a redemption request within 10 days
after such purchase or transfer, the Fund may withhold redemption proceeds until
the Fund knows that the check or the funds have cleared.
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.
The Fund reserves the right to suspend account services or refuse transaction
requests when notice has been received by the Fund of a dispute between the
registered or beneficial owners of an account or there is a suspicion or
evidence that a fraudulent act may result.
If NEFM or Jurika & Voyles determines, in its or their sole discretion, that it
would be detrimental to the best interests of the remaining shareholders of the
Fund to make payment wholly or partly in cash, the Fund may pay the redemption
price in whole or in part by a distribution in kind of readily marketable
securities held by the Fund, in lieu of cash. Securities used to redeem Fund
shares in kind will be valued in accordance with the Fund's procedures for
valuation described under "Fund Details -- How Fund Share Price Is Determined."
Securities distributed by the Fund in kind will be selected by NEFM and Jurika &
Voyles in light of the Fund's objective and will not generally represent a pro
rata distribution of each security held in the Fund's portfolio. Investors may
incur brokerage charges on the sale of any such securities so received in
payment of redemptions. The Fund's right to pay redemptions in kind is limited
by an election made by the Fund under Rule 18f-1 under the Investment Company
Act of 1940, as amended (the "1940 Act"). See "Redemptions" in Part II of the
Statement.
18
<PAGE> 24
Repurchase Option
(Class A Shares Only)
You may apply your proceeds from the redemption of Class A shares of the Fund
(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.
19
<PAGE> 25
FUND DETAILS
How Fund Share Price Is
Determined
The net asset value of the Fund is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on the Exchange on each day the Exchange is
open. The Fund's holdings of equity securities are valued at the most recent
sales prices on an applicable exchange or on the Nasdaq National Market System,
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. Securities traded primarily on an
exchange outside the United States which closes before the close of the Exchange
generally will be valued for purposes of calculating the Fund's net asset value
at the last sale or bid price on that non-U.S. exchange, except that when an
occurrence after the closing of that exchange is likely to have materially
changed such a security's value, such securities will be valued at fair value as
determined by or under the direction of the Trust's Board of Trustees as of the
close of regular trading on the Exchange. An option that is written by the Fund
generally will be valued at the last sale price or, in the absence of the last
sale price, at the last offer price. A futures contract will be valued at the
unrealized gain or loss on the contract that is determined by marking the
contract to the current settlement price. A settlement price may not be used if
the market makes a limit move with respect to a particular futures contract or
if the securities underlying the futures contract experience significant price
fluctuations after the determination of the settlement price. When a settlement
price is not used, futures contracts will be valued at their fair value as
determined by or under the direction of the Trust's Board of Trustees.
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's portfolio are valued at their fair market value as determined in
good faith by the subadviser of the Fund (or a pricing service selected by the
sub-adviser) under the supervision of the Trust's Board of Trustees. The value
of any assets for which the market price is expressed in terms of a foreign
currency will be translated into U.S. dollars at the prevailing market rate on
the date of the net asset value computation, or, if no such rate is quoted at
such time, at such appropriate rate as may be determined by or under the
direction of the Trust's Board of Trustees.
The net asset value per share of each class is determined by dividing the value
of each class's securities (determined as explained above) 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
such class outstanding. The public offering price of the Fund's Class A shares
is determined by adding the applicable sales charge to the net asset value. See
"Buying Fund Shares -- Sales Charges" above. The public offering price of the
Fund's Class B and Class C shares is the net asset value per share.
The price you pay for a share will be determined using the next set of
calculations made after your order is accepted by New England Funds, L.P. In
other words, if, on a Tuesday morning, your properly completed application is
received, your wire is received or your dealer places your trade for you, the
price you pay will be determined by the calculations made as of the close of
regular trading on the Exchange on Tuesday. If you buy shares through your
investment dealer, the dealer must receive your order by the close of regular
trading on the Exchange and transmit it to the Distributor by 5:00 p.m. (Eastern
time) (or, under limited circumstances, such other time no later than 8:00 p.m.
(Eastern time) as may be agreed upon between the dealer and the Distributor) to
receive that day's public offering price.
CALCULATING THE PRICE OF SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total Market Value Other Any Net Asset
of Portfolio Securities + Assets - Liabilities = Value (NAV)
- ------------------------------------------------------------------------
Total Number of Outstanding Shares in a Class
</TABLE>
THE PUBLIC OFFERING PRICE FOR CLASS A SHARES IS THE NAV PLUS THE APPLICABLE
SALES CHARGE. THE PUBLIC OFFERING PRICE FOR CLASS B AND CLASS C SHARES IS THE
NAV.
Income Tax Considerations
The Fund intends to meet all requirements of the Code necessary to qualify as a
"regulated invest-
20
<PAGE> 26
ment company" (including certain diversification requirements) 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 designated by the Fund as deriving from net gains
on securities held for more than one year but not more than 18 months ("28% Rate
Gain") and from net gains on securities held for more than 18 months ("20% Rate
Gain") are taxable to you as such, 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 earned during that calendar
year, and virtually all of the capital gain net income the Fund realized during
the twelve months ending October 31 but has not previously distributed. 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 of the year in
which declared.
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
In addition to the management fee paid to its adviser, the Fund pays all
expenses not borne by its adviser or subadviser 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 for the Fund and the
Trust's independent trustees, 12b-1 fees, all brokerage commissions and transfer
taxes in connection with portfolio transactions, all taxes and filing fees, the
fees and expenses for registration or qualification of its shares under federal
and state securities laws, all expenses of shareholders' and trustees' meetings,
preparing, printing and mailing prospectuses and reports to shareholders and the
compensation of trustees who are not directors, officers or employees of NELICO
or MetLife or their affiliates, other than affiliated registered investment
companies. Certain expenses may be allocated differently between the Fund's
Class A, Class B and Class C shares, on the one hand, and its Class Y shares, on
the other hand. (See "Additional Facts about the Fund" below.)
Under Service Plans, adopted pursuant to Rule 12b-1 under the 1940 Act, 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 attributable to Class A, Class B and
Class C shares. The Distributor may pay up to the entire amount of this fee to
securities dealers who are dealers of record with respect to the Fund's shares,
for providing personal services to investors in shares of the Fund and/or the
maintenance of shareholder accounts. In the case of Class B shares, the
Distributor pays investment dealers at the time of sale the first year's service
fee, in the
21
<PAGE> 27
amount of up to 0.25% of the amount invested. The Class A service fee is payable
only to reimburse the Distributor for amounts it pays or expends in connection
with the provision of personal services to investors and/or the maintenance of
shareholder accounts. 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.
The Fund's Class B and C shares also pay the Distributor a monthly distribution
fee at an annual rate not to exceed 0.75% of the average net assets of the
Fund's Class B and C shares. The Distributor may pay up to the entire amount of
this fee to securities dealers who are dealers of record with respect to the
Fund's shares. The Distributor retains the balance of the fee as compensation
for its services as distributor of the Fund's Class B and Class C shares.
In addition, the Distributor performs certain accounting and administrative
services for the Fund. For those services the Fund reimburses the Distributor
for all or part of its expenses of providing these services to the Fund, which
includes the following: (i) expenses for personnel performing bookkeeping,
accounting, internal auditing, financial reporting and clerical functions
relating to the Fund, (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder reports and
notices, proxy solicitation materials furnished to shareholders of the Fund or
regulatory authorities and reports and questionnaires for SEC compliance, and
(iii) registration, filing and other fees in connection with requirements of
regulatory authorities.
Performance Criteria
The Fund may include total return information for each class of shares in
advertisements or other written sales material. The Fund will show each class's
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 class at the beginning of the relevant period to the
value of the investment at the end of the period (assuming deduction of the
current maximum sales charge on Class A shares, automatic reinvestment of all
dividends and capital gains distributions and, in the case of Class B and C
shares, imposition of the CDSC relevant to the period quoted). Total return may
be quoted with or without giving effect to any voluntary expense limitations in
effect during the relevant period. The Fund or classes may also show total
return over other periods, on an aggregate basis for the period presented, or
without deduction of a sales charge. If a sales charge is not deducted in
calculating total return, the class's total return will be higher.
All performance information is based on past results and is not an indication of
likely future performance.
Additional Facts About
the Fund
- -- The Trust 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. The Fund is a newly organized series of the Trust.
- -- When you invest in the Fund, you acquire freely transferable shares of
beneficial interest that entitle you to receive annual dividends as
determined by the trustees of the Trust 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. Shares of
all classes of the Fund vote together, except as to matters relating to a
class's Rule 12b-1 plan, on which only shares of that class are entitled to
vote. No Rule 12b-1 plan applies to the Class Y shares of the Fund.
- -- Except for matters that are explicitly identified as "fundamental" in this
Prospectus or the Statement, the investment policies of the Fund may be
changed by the trustees of the Trust 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
22
<PAGE> 28
investment in light of their current financial position and needs.
- -- The Fund offers Class Y shares to certain qualified investors. Class Y shares
are identical to Class A, Class B and Class C shares, except that Class Y
shares have no sales charge or CDSC, bear no Rule 12b-1 fees and have
separate voting rights in certain circumstances. Class Y shares may bear
their own transfer agency and prospectus printing costs and, if so, will not
bear any portion of those costs relating to other classes of shares.
- -- 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
Service Corporation, 399 Boylston Street, Boston, MA 02116. New England Funds
Service Corporation 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 $1,000 for all
accounts except as indicated below), 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 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 contains additional performance information and is
available upon request and without charge. The Fund will send a single copy
of its annual and semi-annual reports to an address to which more than one
shareholder of record with the same last name has indicated that mail is to
be delivered. Shareholders may request additional copies of any annual or
semi-annual report in writing or by telephone.
- -- The Class A, Class B, Class C and Class Y structure could be terminated
should certain IRS rulings be rescinded.
- -- Summit Cash Reserves Fund (the "Cash Fund"), a series of Financial
Institutions Series Trust, is related to the Fund for purposes of investment
and investor services. Shares of all classes of the Fund may be exchanged for
shares of the Cash Fund at net asset value. If shares of the Fund that are
exchanged for shares of the Cash Fund are subject to a CDSC, the holding
period for purposes of determining expiration of the CDSC will stop and
resume only when an exchange is made back into shares of a series of the
Trusts. If Fund shares subject to a CDSC are exchanged for Cash Fund shares
and the Cash Fund shares are later redeemed rather than being exchanged back
into shares of a series of the Trusts, then a CDSC will apply at the same
rate as if the Fund shares were redeemed at the time of the exchange.
- -- The trustees of the Trust have the authority without shareholder approval to
issue other classes of shares of the Fund that represent interest in the
Fund's portfolio but that have different sales load and fee arrangements.
23
<PAGE> 29
GLOSSARY OF TERMS
Capital gain distributions -- Payments to shareholders of 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.
New England Funds Management, L.P. -- The investment adviser to 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 -- 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 the fund to a fund's distributor or a financial
representative for personal services to investors and/or for maintenance of
shareholder accounts.
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. Total return is expressed as a percentage.
Yield -- The rate at which a fund earns income, expressed as a percentage. Yield
calculations are standardized among mutual funds, based on a formula developed
by the SEC.
12b-1 fees -- Fees paid by a mutual fund under a plan adopted under the 1940 Act
Rule 12b-1. They can include both distribution fees and service fees.
24
<PAGE> 30
Printed on Recycled Paper XE51-0997
<PAGE> 31
[New England Funds(R) Logo]
- --------------------------------------------------------------------------------
NEW ENGLAND BULLSEYE FUND
Prospectus and Application
March 31, 1998
New England Bullseye Fund (the "Fund") is a newly organized, non-diversified and
actively managed mutual fund and is a series of New England Funds Trust III (the
"Trust"), a registered open-end management investment company.
The Fund's investment objective is long-term capital growth. The Fund intends to
pursue its investment objective by investing primarily in equity securities.
There can be no assurance that the Fund will achieve its objective, which may be
changed without shareholder approval.
The Fund offers four classes of shares: Class Y (for qualified institutional
investors) and Classes A, B and C (for other investors). This prospectus sets
forth information investors should know before investing in Class Y shares.
Please read it carefully and keep it for future reference. A statement of
additional information (the "Statement") about the Fund dated March 31, 1998,
has been filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. Write to New England Funds, L.P. (the "Distributor"),
SAI Fulfillment Desk, 399 Boylston Street, Boston, Massachusetts 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. Class A, B
and C shares of the Fund are described in a separate prospectus. To obtain more
information about Class A, B and C shares, please call the Distributor toll-free
at 1-800-225-5478.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
For general
information on
the Fund or any
of its services
and for assis-
tance in opening
an account,
contact your
investment
dealer or call
the Distributor
toll free at
1-800-225-5478.
<PAGE> 32
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
FUND EXPENSES
1 Schedule of Fees
----------------------------------------------------------------------------------------------------
INVESTMENT STRATEGY
2 How the Fund Pursues Its Investment Objective
----------------------------------------------------------------------------------------------------
3 INVESTMENT RISKS
----------------------------------------------------------------------------------------------------
7 FUND MANAGEMENT
----------------------------------------------------------------------------------------------------
BUYING FUND SHARES
9 Minimum Investment
9 Ways to Buy Fund Shares
- By wire transfer
- By mail
----------------------------------------------------------------------------------------------------
OWNING FUND SHARES
12 Exchanging Among New England Funds
12 Fund Dividend Payments
----------------------------------------------------------------------------------------------------
SELLING FUND SHARES
14 Ways to Sell Fund Shares
- By telephone
- By mail
----------------------------------------------------------------------------------------------------
FUND DETAILS
16 How Fund Share Price is Determined
16 Income Tax Considerations
17 Performance Criteria
18 Additional Facts About the Fund
20 Glossary of Terms
</TABLE>
<PAGE> 33
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 for the Fund. The Example shows the
cumulative expenses attributable to a hypothetical $1,000 investment in the Fund
for the periods specified.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS Y
-------
<S> <C>
Maximum Initial Sales Charge Imposed on a Purchase.................................................................... None
Maximum Contingent Deferred Sales Charge.............................................................................. None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS Y
-------
<S> <C>
Management Fees (after voluntary fee deferral and expense reduction).................................................. 0.70%
12b-1 Fees............................................................................................................ None
Other Expenses*....................................................................................................... 0.80%
Total Fund Operating Expenses (after voluntary fee deferral and expense reduction).................................... 1.50%
</TABLE>
* Other expenses are based on estimated expenses for the Fund's first fiscal
year.
The Fund's adviser and subadviser have voluntarily agreed, until December 31,
1998, to defer, on a pro rata basis, their respective management fees and, if
necessary, NEFM has agreed to bear certain expenses associated with operating
the Fund, to the extent necessary to limit the Fund's total operating expenses
to an annual rate of 1.50% of the Fund's average net assets for Class Y shares.
Without the voluntary fee deferral and expense reduction by the Fund's adviser
and subadviser, Management Fees, Other Expenses and Total Fund Operating
Expenses would be 0.95%, 0.80% and 1.75% for Class Y shares. See "Fund
Management."
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) unless otherwise indicated, redemption at period end. The
5% annual return and expenses in the Example should not be considered indicative
of actual or expected Fund performance or expenses, both of which may be more or
less than those shown.
<TABLE>
<CAPTION>
CLASS Y
<S> <C>
1 year..................................................................................................... $ --
- ----------------------------------------------------------------------------------------------------------------------
3 years.................................................................................................... $ --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of this fee schedule is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly if you invest in
the Fund. For additional information about the Fund's fees and other expenses,
please see "Fund Management," "The Fund's Expenses" and "Additional Facts About
the Fund."
A wire fee (currently $5.00) will be deducted from your proceeds if you elect to
transfer redemption proceeds by wire.
1
<PAGE> 34
INVESTMENT STRATEGY
The Fund's objective is long-term capital growth.
How the Fund Pursues
Its Investment Objective
The Fund intends to pursue its investment objective by assembling a portfolio of
from 15 to 20 stocks. The Fund looks to invest in stocks that represent
ownership of quality businesses whose equity, the sub-adviser believes, is
undervalued based on their current operations and price earnings multiples
relative to the market average. The businesses must also possess significant
potential or a catalyst for future earnings growth in the judgement of the
sub-adviser.
In selecting stocks for the Fund, the sub-adviser also considers other factors,
including: Competitive advantage -- what is it that a business does better; does
a business have better products or services, or are they the lowest cost
provider?; Clear business focus -- does the company follow a consistent and
focused line of business, within a defined niche or segment of a broad market?;
Financial Health -- does the business have stronger cash flows, less debt,
stronger balance sheets, and higher returns on equity than the market average
(as measured by the Standard & Poor's Composite Index of 500 Stocks [the "S&P
500"])?; and Quality Management -- does the business have experienced managers
with little turnover and a long track record, as well as substantial equity
ownership positions? Although the sub-adviser seeks companies that have all of
these characteristics, there is no assurance that every company in which the
Fund invests will have all of these characteristics.
The sub-adviser believes the targeted strategy used by the Fund allows investors
to best capitalize on its in-depth fundamental research. The targeted approach
allows investors to own a small number of well-researched companies rather than
a more broad portfolio holding a significantly greater number of stocks. The
targeted portfolio allows the sub-adviser to select only the stocks it considers
to have the greatest potential for future return than a broader portfolio
holding a significantly greater number of stocks would allow. The Fund may
invest in stocks with different levels of market capitalization and different
industry focuses.
Due to the highly undiversified nature of the Fund, the performance may deviate
significantly from the market. Nondiversified portfolios, such as the Fund's,
should exhibit more volatility and thus more risk than the market. By attempting
to capitalize on this risk in conjunction with strong stock selection, the
Fund's sub-adviser will attempt to earn greater returns than the S&P 500 over
the long term, although this result cannot be assured.
The Fund will invest primarily in common stocks, but also may invest in other
equity securities including convertible preferred stock, convertible debt
securities and warrants. The Fund may also invest up to 20% of its total assets
in foreign securities, but will limit its investment in securities of the
issuers of any one foreign country to 10% of its total assets. There are no
assurances that the Fund will achieve its investment objective and the Fund may
change its investment objective without shareholder approval.
2
<PAGE> 35
INVESTMENT RISKS
It is important to understand the following risks inherent in the Fund before
you invest.
- -- LACK OF DIVERSIFICATION
As a non-diversified mutual fund, the Fund is able to take larger positions
in a smaller number of companies than a comparable diversified fund.
Therefore, the value of the Fund will likely be subject to greater
fluctuations than a diversified fund as a result of any change in the value
of one or more equity securities or other instruments in its portfolio.
- -- 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 small and medium 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 and Medium Market Capitalization 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 increase or decrease as the values of the underlying equity
securities increase or decrease. The movements in the prices of convertible
securities, however, may be smaller than the movements in the value of the
underlying equity securities. The value of convertible securities that pay
dividends or interest, like the value of other fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants have
no voting rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. They do not represent ownership of
the securities for which they are exercisable, but only the right to buy such
securities at a particular price.
- -- SMALL AND MEDIUM MARKET CAPITALIZATION COMPANIES
The Fund, in the discretion of its sub-adviser, may invest without limit in
the securities of companies of small and medium market capitalization.
Investments in such companies will generally entail greater risk than is
usually associated with larger, more well established companies. Small and
medium market capitalization companies tend to have smaller revenues,
narrower product lines, less management depth and experience, and smaller
market shares of their products or services than larger capitalization
companies. In many instances, the frequency and volume of trading in small
and medium market capitalization companies is substantially less than is
typical of larger capitalization companies. Therefore, 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
than market averages in general. The net asset value of funds that invest in
companies with small and medium capitalization therefore may fluctuate more
widely than market averages.
- -- FOREIGN SECURITIES
Investments in foreign securities present risks not typically associated with
investments in comparable securities of U.S. issuers.
Since most foreign securities are denominated in foreign currencies or traded
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected
favorably or unfavorably by changes in currency exchange rates or exchange
3
<PAGE> 36
control regulations. Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of any such currency against the
U.S. dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution.
In addition, although the Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that
currency, translated by the Fund (but not exchanged) into U.S. dollars and
declared as a dividend, but before payment of such dividend, the Fund could
be required to liquidate portfolio securities to pay such dividend.
Similarly, if the value of a currency relative to the U.S. dollar declines
between the time the Fund incurs expenses in U.S. dollars and the time such
expenses are paid, the amount of such currency required to be converted into
U.S. dollars in order to pay such expenses in U.S. dollars will be greater
than the equivalent amount in such currency, of such expenses, at the time
they were incurred.
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 may invest in foreign equity securities either by purchasing such
securities directly or by purchasing "depository receipts." Depository
receipts are instruments issued by a bank that represent an interest in
equity securities held by arrangement with the bank. Depository receipts can
be either "sponsored" or "unsponsored." Sponsored depository receipts are
issued by banks in cooperation with the issuer of the underlying equity
securities. Unsponsored depository receipts are arranged without involvement
by the issuer of the underlying equity securities. Less information about the
issuer of the underlying equity securities may be available in the case of
unsponsored depository receipts.
In determining whether to invest in securities of foreign issuers, the
subadviser of the Fund will consider the likely effects of foreign taxes on
the net yield available to the Fund and its shareholders. Compliance with
foreign tax law may reduce the Fund's net income available for distribution
to shareholders.
- -- FOREIGN CURRENCY
The Fund's portfolio may include securities denominated in foreign currencies
or traded in securities markets in which settlements are made in foreign
currencies. 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
4
<PAGE> 37
time when the Fund accrues and pays an
operating expense in U.S. dollars.
- -- SECURITIES LENDING
The Fund may lend its portfolio securities to broker-dealers or other parties
under contracts calling for the deposit by the borrower with the Fund's
custodian of cash collateral equal to at least the market value of the
securities loaned, marked to market on a daily basis. 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. No loans will be made if, as a result, the aggregate
amount of such loans outstanding at any time would exceed 33 1/3% of the
Fund's total assets (taken at current value). Any voting rights or rights to
consent relating to the loaned securities 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 custodial
or placement fees.
- -- REPURCHASE AGREEMENTS
Under a repurchase agreement, 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. If the seller
fails to repurchase the securities, the Fund has the right to sell the
securities to third parties. Repurchase agreements can be regarded as loans
by the Fund to the seller, collateralized by securities that are the subject
of the agreement. Repurchase agreements afford an opportunity for the Fund to
earn a return on available cash at relatively low credit risk, although the
Fund may be subject to various delays and risks of loss if the seller fails
to meet its obligation to repurchase. The staff of the SEC is currently of
the view that repurchase agreements maturing in more than 7 days are
illiquid.
- -- MISCELLANEOUS
The Fund will not invest more than 15% of its assets in "illiquid
securities," that is, securities which are not readily resalable, which may
include securities whose disposition is restricted by federal securities
laws.
The Fund may purchase Rule 144A securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. 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. 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 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,
5
<PAGE> 38
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 the security. For more information on "when-issued" and
"delayed-delivery" securities, see the Statement.
The Fund does not trade actively for short-term profits. Therefore, the Fund
does not purchase securities with the intention of engaging in short-term
trading. The Fund, however, will sell any particular security and reinvest
the proceeds when it is deemed prudent by the Fund's subadviser, regardless
of the length of the holding period. This policy may result in higher
securities transaction costs than if the Fund were to follow a policy of
holding all securities for a longer period of time. To the extent that this
policy results in gains on investments, the Fund will make distributions to
its shareholders, which may accelerate the shareholders' tax liabilities. The
Fund's portfolio turnover rate is not expected to exceed 150% during its
initial year of operation, although the actual rate could be higher. The
Fund's investments in options and futures contracts that mature in less than
one year are excluded for purposes of computing the Fund's turnover rate.
6
<PAGE> 39
FUND MANAGEMENT
New England Funds Management, L.P. ("NEFM"), 399 Boylston Street, Boston,
Massachusetts 02116, serves as the Fund's adviser, and has delegated day-to-day
portfolio management responsibility to the Fund's subadviser, Jurika & Voyles,
L.P. ("Jurika & Voyles"), Lake Merritt Plaza, 1999 Harrison, Suite 700, Oakland,
California 94612. Founded in 1983 by William K. Jurika and Glenn C. Voyles, the
firm has discretionary management authority with respect to approximately $7
billion of assets for various clients including corporations, pension plans,
401(k) plans, profit sharing plans, trusts and estates, foundations and
charitable endowments, mutual funds and individuals.
William K. Jurika and Peter Goetz are primarily responsible for the day-to-day
management of the Fund. Messrs. Jurika and Goetz manage the Fund's portfolio in
accordance with company research provided by the Jurika & Voyles research
department, and report to the Investment Committee, which has final
responsibility for all Jurika & Voyles investments on behalf of its clients.
Members of the Investment Committee include Mr. Jurika, Mr. Goetz, James
Christensen, Karl Mills, Guy Elliffe and Paul Meeks. Mr. Jurika has been
associated with Jurika & Voyles since its founding in 1983. Mr. Goetz joined
Jurika & Voyles in 1996, prior to which he spent nine years as Portfolio Manager
in the Private Asset Division of Bank of America.
NEFM oversees, evaluates and monitors Jurika & Voyles' provision of subadvisory
services to the Fund and provides general business management and administration
to the Fund. The Fund pays NEFM a management fee at the annual rate of 0.95% of
the first $200 million of the Fund's average daily net assets, 0.90% of the next
$300 million of such assets and 0.85% of such assets in excess of $500 million.
This fee rate payable by the Fund is higher than that paid by most other mutual
funds, but is believed to be appropriate for the services received by the Fund
and to be comparable to fees paid by some other mutual funds investing in a
manner similar to the Fund. NEFM pays Jurika & Voyles a sub-advisory fee at an
annual rate of 0.570% of the first $200 million of the average daily assets of
the Fund, 0.500% for the next $300 million of such assets and 0.430% of such
assets in excess of $500 million. In addition, under a fee deferral arrangement
and an expense reimbursement arrangement, NEFM and Jurika & Voyles have agreed,
until December 31, 1998, to defer on a pro rata basis, their respective
management and subadvisory fees for the Fund and, if necessary, NEFM has agreed
to bear certain expenses associated with the Fund to the extent necessary to
limit the Fund's expenses to the annual rate of 1.50% for Class Y shares,
subject to the obligation of the Fund to pay NEFM and or Jurika & Voyles such
deferred fees in later periods to the extent that the Fund's expenses fall below
the annual rate of 1.50% for Class Y shares; provided, however, that the Fund is
not obligated to pay any such deferred fees more than two years after the end of
the fiscal year in which the fee was deferred.
The general partners of each of NEFM, Jurika & Voyles and the Distributor are
special purpose corporations 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 an indirect wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife").
In placing portfolio transactions for the Fund, Jurika & Voyles seeks the most
favorable price and execution available. Subject to applicable regulatory
restrictions and such policies as the Trust's trustees may adopt, Jurika &
Voyles may consider sales of shares of the Fund and other mutual funds that it
manages as a factor in the selection of broker-dealers to effect portfolio
transactions for the Fund.
NEFM provides executive and other personnel for the management of the Trust. The
Trust's Board of Trustees supervises the affairs of the Trust as conducted by
NEFM and Jurika & Voyles.
The Fund has received an exemptive order from the SEC to permit NEFM, subject to
certain conditions, to enter into subadvisory agreements with sub-advisers other
than the existing sub-adviser of the Fund when approved by the Board of
Trustees, without obtaining shareholder approval. The exemptive order also
permits, without shareholder approval, the terms of an existing subadvisory
agreement to be changed or the
7
<PAGE> 40
employment of an existing subadviser to be continued after events that would
otherwise cause an automatic termination of a subadvisory agreement, when such
changes or continuation are approved by the Trust's Board of Trustees.
Shareholders would be notified of any sub-adviser changes.
8
<PAGE> 41
BUYING FUND SHARES
Minimum Investment
Class Y shares of the Fund may be purchased by other mutual funds, endowments,
foundations, bank trust departments or trust companies. The minimum initial
investment is $1 million for these entities, and $10,000 is the minimum for each
subsequent investment. Class Y shares may also be purchased by plan sponsors of
401(a), 401(k), 457 or 403(b) plans ("Retirement Plans") that have total
investment assets of at least $10 million, and by NELICO or MetLife and any
other insurance company affiliated with NELICO or MetLife or any of their
successor entities (purchases by these entities referred to as, "Insurance
Company Accounts"). Plan sponsors' investment assets in multiple Retirement
Plans can be aggregated for purposes of meeting this minimum. Class Y shares may
also be purchased by any separate account of NELICO or MetLife, any other
insurance company affiliated with NELICO or MetLife ("Separate Accounts"). Class
Y shares may also be purchased by wrap fee programs of certain broker-dealers as
to which no service or marketing fees are paid to broker-dealers by the Fund,
NEFM or the Distributor ("Wrap Fee Programs"). There is no minimum initial or
subsequent investment amount for Retirement Plans, Separate Accounts, Insurance
Company Accounts or Wrap Fee Programs. Investments in the Fund may also be made
by certain individual retirement accounts if the amounts invested represent
rollover distributions from investments by any of the Retirement Plans of
amounts invested in the Fund. The Distributor serves as the principal
underwriter of the Fund's shares. Shares may be purchased on any day when the
New York Stock Exchange (the "Exchange") is open for business (a "business
day"). Investors should contact New England Funds before attempting to place an
order for Fund shares. The Fund and the Distributor reserve the right at any
time to reject a purchase order.
Class Y shares of the Fund may, at the discretion of NELICO, be purchased on
behalf of agents, general agents, directors and senior officers of NELICO and
its insurance company subsidiaries in connection with deferred compensation
plans offered by NELICO ("NELICO Deferred Compensation Plan Accounts"). There is
no minimum initial or subsequent investment amount for NELICO Deferred
Compensation Plan Accounts.
Class Y shares of the Fund may be purchased through Wrap Fee Programs offered by
certain broker-dealers. Such Wrap Fee Programs may be subject to additional or
different conditions, including a wrap account fee. Each broker-dealer that
offers Class Y shares through a Wrap Fee Program is responsible for transmitting
to its customer a schedule of fees and other information regarding any
conditions and restrictions which may be imposed by the broker-dealer on a
participant in its Wrap Fee Program. Shareholders who are customers of
broker-dealers should contact their broker-dealer for information regarding the
fees associated with the Wrap Fee Program and the conditions and restrictions
which the broker-dealer may impose. In the event that a participant who
purchased Class Y shares of a Fund through a Wrap Fee Program should terminate
the wrap fee arrangement with the broker-dealer, then the Class Y shares will,
at the discretion of the broker-dealer, automatically be converted to a number
of Class A shares of the same Fund having the same net asset value as the shares
converted, and the broker-dealer may thereafter be entitled to receive from that
Fund an annual service fee of 0.25% of the value of the Class A shares owned by
that shareholder.
Class Y shares of the Fund may be purchased through an omnibus account by
investment advisers, financial planners, broker-dealers or other intermediaries
who have entered into a service agreement with the Fund ("Service Accounts").
Shareholders who purchase shares through a Service Account may be charged a fee
if they effect transactions through such parties and should contact such parties
for information regarding such fees. There is no minimum initial or subsequent
investment amount for Retirement Plans, Separate Accounts, Insurance Company
Accounts, Wrap Fee Programs or Service Accounts.
Ways To Buy Fund Shares
A shareholder may purchase Class Y shares for cash on any business day by the
two methods described below:
[Wire Logo] By wire transfer:
PRIOR TO AN INITIAL INVESTMENT, obtain an account number and wire transfer
instructions by calling
9
<PAGE> 42
1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day when the
Funds are open for business. All funds should be transmitted to State Street
Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Bullseye Fund
Class Y shares, Shareholder Name, and Shareholder Account Number.
[Envelope Logo] By mail:
FOR AN INITIAL INVESTMENT, simply complete the attached application and return
it with a check payable to New England Funds and mailed to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551. All purchases made by check should be in
U.S. dollars and made payable to New England Funds, or, in the case of a
retirement account, the custodian or trustee. Third party checks will generally
not be accepted except under certain circumstances approved by the Distributor.
When purchases are made by check, redemptions may not be allowed until the
investment being redeemed has been in the account for a minimum of ten calendar
days.
Class Y shares of the Fund may also be purchased by exchanging securities on
deposit with a custodian acceptable to the sub-adviser of the Fund, or by a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by the
Fund's sub-adviser that the securities to be exchanged are acceptable for
purchase by the Fund. Securities accepted by the Fund's sub-adviser in exchange
for Fund shares will be valued in the same manner as the Fund's assets
(generally the last quoted sales price), as described below under "Fund
Details -- How Fund Share Price Is Determined," as of the time of the Fund's
next determination of net asset value after such acceptance. All dividends and
subscription or other rights which are reflected in the market price of accepted
securities at the time of valuation become the property of the Fund and must be
delivered to the Fund upon receipt by the investor from the issuer. A gain or
loss for federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by calling
1-800-225-5478.
The Fund's sub-adviser will not approve the acceptance of securities in exchange
for shares of the Fund it manages unless (1) the sub-adviser, in its sole
discretion, believes the securities are appropriate investments for the Fund;
(2) the investor represents and agrees that all securities offered to the Fund
are not subject to any restrictions upon their sale by the Fund under the
Securities Act of 1933, as amended, or otherwise; (3) the securities are
eligible to be acquired under the Fund's investment policies and restrictions;
and (4) the securities have a value which is readily ascertainable (not
established by evaluation procedures alone) as evidenced by a listing on the New
York Stock Exchange, the American Stock Exchange, NASDAQ or the principal
securities exchange of countries in which the Fund may invest. No investor
owning 5% or more of the Fund's shares may purchase additional Fund shares by
exchange of securities (other than by exchanging shares of other New England
Funds).
GENERAL
The purchase price of shares of the Fund is the net asset value next determined
after a purchase order is received in good order by New England Funds. For
purposes of calculating the purchase price of Fund shares, a purchase order is
considered received by the Fund on the day that it is "in good order" unless it
is rejected by the Fund. For a purchase order to be "in good order" on a
particular day, in the case of a purchase of Fund shares in exchange for
securities, the investor's securities must be placed on deposit at a depository
acceptable to the Fund's sub-adviser by 4:00 p.m. (Eastern time) and, in the
case of a cash investment, Federal funds must be wired to the Fund between 9:00
a.m. and 4:00 p.m. (Eastern time) or a check for the purchase price of the
shares, accompanied by a completed application, must have been received by New
England Funds before 4:00 p.m. (Eastern time) on that day. Orders received after
4:00 p.m. (Eastern time) will receive the next day's price.
Purchases will be made in full and fractional Class Y shares calculated to three
decimal places. The shareholder will receive a statement of Fund shares owned
following each transaction. Investors will not receive certificates representing
Class Y
10
<PAGE> 43
shares. The Fund and the Distributor reserve the right at any time to reject a
purchase order.
The Distributor may, at its expense, provide additional promotional incentives
or payments to dealers who sell shares of the Fund (including in some cases,
exclusively to New England Securities Corporation, a broker-dealer affiliate of
the Distributor, and MetLife). In some instances, additional compensation is
provided to certain dealers who achieve sales goals or who may sell significant
amounts of shares.
11
<PAGE> 44
OWNING FUND SHARES
Exchanging Among New
England Funds
You may exchange Class Y shares of the Fund or any other series of New England
Funds Trust I, New England Funds Trust II and New England Funds Trust III (the
"Trusts") for Class Y shares of any other series of the Trusts which offers
Class Y shares or for Class A shares of New England Cash Management Trust Money
Market Series or New England Tax Exempt Money Market Trust (the "Money Market
Funds"). Agents, general agents, directors and senior officers of NELICO and its
insurance company subsidiaries may, at the discretion of NELICO, elect to
exchange Class Y shares of any series of the Trusts in a NELICO Deferred
Compensation Plan Account for Class A shares of any other series of the Trusts
which do not offer Class Y shares. Class A shares of any series of the Trusts in
a NELICO Deferred Compensation Plan Account may also be exchanged for Class Y
shares of any series of the Trusts. To obtain a prospectus and more information
about Class A shares, please call the Distributor toll free at 1-800-225-5478.
TO MAKE AN EXCHANGE, please call 1-800-225-5478 between 8:00 a.m. and 7:00 p.m.
(Eastern time) on a day when the Funds are open for business or write to New
England Funds. Exchange requests after 4:00 p.m. (Eastern time), or after the
Exchange closes if it closes earlier than 4:00 p.m., will be processed at the
net asset value determined at the close of regular trading on the next day that
the Exchange is open. All exchanges are subject to the eligibility requirements
of the series into which you are exchanging. In connection with any exchange,
you must obtain and carefully read 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 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 telephone
instructions, will provide shareholders with written confirmations of such
transactions and will record your instructions.
MARKET TIMER RESTRICTIONS. Purchases and exchanges into the Funds should be made
for investment purposes only. Effective March 2, 1997, the Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) when such transaction
is deemed harmful to the best interests of the Fund's other shareholders or
would disrupt the management of the Fund. Without limiting the generality of the
foregoing, the Funds and the Distributor reserve the right to restrict (e.g., by
limiting to a specified maximum dollar amount) purchases and exchanges for the
account of "market timers." An account will be deemed to be the account of a
market timer if (i) more than two exchange purchases of a given Fund are
effected for the account in a calendar quarter or (ii) the account effects one
or more exchange purchases of a given Fund in a calendar quarter in an aggregate
amount in excess of 1.00% of the Fund's total net assets.
For federal tax purposes, an exchange of shares of one series of the Trusts for
shares of another series is considered to be a redemption and purchase and,
therefore, is considered to be a taxable event on which you may recognize a gain
or loss.
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 (other than long-term capital gains)
each year and distributes annually all net realized long- and short-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 or capital gain distribution, you should be aware that a
portion of the purchase price may be returned to you as a taxable distribution.
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<PAGE> 45
You have the option to reinvest all distributions in additional Class Y shares
of the Fund or in Class Y 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 Y 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 Y
shares of the respective Fund at net asset value 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. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
- --------------------------------------------------------
DIVIDEND DIVERSIFICATION
PROGRAM
- --------------------------------------------------------
You may also establish a dividend diversification program, which allows
you to have all dividends and any other distributions automatically
invested in Class Y shares of another New England Fund, subject to the
investor eligibility requirements of that other fund and to state
securities law requirements. Shares will be purchased at the selected
fund's net asset value 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
and carefully read a copy of that fund's prospectus.
- --------------------------------------------------------
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<PAGE> 46
SELLING FUND SHARES
Ways to Sell Fund Shares
You may sell Class Y shares of the Fund in the following ways:
[Telephone Logo] By telephone:
You may redeem (sell) shares by telephone for cash by the two 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 8:00 a.m. and 7:00 p.m. (Eastern time) on a day when the
Funds are open for business. The proceeds 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 Federal Reserve System.
Mailed to Your Address of Record -- Shares may be redeemed by calling
1-800-225-5478 between 8:00 a.m. and 7:00 p.m. (Eastern time) on a day when the
Funds are open for business and requesting that a check for the proceeds be
mailed to the address on your account, provided that the address has not changed
over the previous month and that the proceeds are for $100,000 or less.
Generally, the check will be mailed to your address of record on the business
day after your redemption request is received.
Redemption requests accepted after 4:00 p.m. (Eastern time), or after the
Exchange closes if it closes before 4:00 p.m., will be processed at the net
asset value determined at the close of regular trading on the next day that the
Exchange is open.
[Envelope Logo] By mail:
You may redeem your shares at their net asset value 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 or wired to your bank account. 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 they are
signing (such as trustee, custodian or under power of attorney or on behalf of a
partnership, corporation or other entity).
If you are redeeming shares worth less than $100,000 and the proceeds check is
made payable to the registered owner(s) and mailed to the record address, no
signature guarantee is required. Otherwise, you generally must have your
signature guaranteed by an eligible guarantor institution in accordance with
procedures established by New England Funds, L.P. Signature guarantees by
notaries public are not acceptable.
Additional written information may be required for redemptions by certain
benefit plans and IRAs. Contact the Distributor or your investment dealer for
details.
GENERAL. Redemption requests will be effected at the net asset value next
determined after the redemption request is received in proper form by State
Street Bank and Trust Company ("State Street Bank"). Redemption proceeds will
normally be mailed to you within seven days after State Street Bank or the
Distributor receives your request in good order. However, in those cases where
you have recently purchased your shares by check and you make a redemption
request within 10 days after such purchase or transfer, the Fund may withhold
redemption proceeds until the Fund knows that the check has cleared (which may
take up to 15 days).
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.
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<PAGE> 47
Special rules apply with respect to redemptions under powers of attorney. Please
call the Distributor for more information.
Telephone redemptions are not available for tax qualified retirement plans or
for Fund shares in certificate form. If certificates have been issued for your
investment, you must send them to New England Funds along with your request
before a redemption request can be honored. See the instructions for redemption
by mail above.
The Funds may suspend the right of redemption and may postpone payment for more
than seven days when the Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the SEC when trading on the Exchange is
restricted or during an emergency which makes it impracticable for the Funds to
dispose of their securities or to determine fairly the value of their net
assets, or during any other period permitted by the SEC for the protection of
investors. The Fund reserves the right to suspend account services or refuse
transaction requests when notice has been received of a dispute between the
registered or beneficial owners of an account or there is a suspicion or
evidence that a fraudulent act may result.
If a Fund's adviser or sub-adviser determines, in its or their sole discretion,
that it would be detrimental to the best interests of the remaining shareholders
of the Fund to make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by a distribution in kind of readily
marketable securities held by the Fund, in lieu of cash. Securities used to
redeem Fund shares in kind will be valued in accordance with the Fund's
procedures for valuation described under "Fund Details -- How Fund Share Price
Is Determined." Securities distributed by the Fund in kind will be selected by
NEFM and the Fund's sub-adviser in light of the Fund's objective and will not
generally represent a pro rata distribution of each security held in the Fund's
portfolio. Investors may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. The Fund's right to pay
redemptions in kind is limited by an election made by the Fund under Rule 18f-1
under the Investment Company Act of 1940, as amended (the "1940 Act"). See
"Redemptions" in Part II of the Statement.
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<PAGE> 48
FUND DETAILS
How Fund Share Price Is
Determined
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 on each day
that the Exchange is open for trading. 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. Securities traded primarily on an
exchange outside the United States except equity securities traded on the London
Stock Exchange ("British Equities"), which closes before the close of the
Exchange, generally will be valued for purposes of calculating the Fund's net
asset value at the last sale or bid price on that non-U.S. exchange, except that
when an occurrence after the closing of that exchange is likely to have
materially changed such a security's value, such security will be valued at fair
value as determined by or under the direction of the Trust's Board of Trustees
as of the close of regular trading on the Exchange. British Equities will be
valued at the mean between the last bid and last asked prices on the London
Stock Exchange. An option that is written by the Fund generally will be valued
at the last sale price or, in the absence of the last sale price, the last offer
price. A futures contract will be valued at the unrealized gain or loss on the
contract that is determined by marking the contract to the current settlement
price. A settlement price may not be used if the market makes a limit move with
respect to a particular futures contract or if the securities underlying the
futures contract experience significant price fluctuations after the
determination of the settlement price. When a settlement price is not used,
futures contracts will be valued at their fair value as determined by or under
the direction of the Trust's Board of Trustees. 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's
portfolio are valued at their fair value as determined in good faith by the
adviser or subadviser of the Fund (or pricing service selected by the adviser or
sub-adviser) under the supervision of the Trust's Board of Trustees. The value
of any assets for which the market price is expressed in terms of a foreign
currency will be translated into U.S. dollars at the prevailing market rate on
the date of the net asset value computation, or, if no such rate is quoted at
such time, at such other appropriate rate as may be determined by or under the
direction of the Trust's Board of Trustees.
The net asset value per share of each class is determined by dividing the value
of each class's securities (determined as explained above) 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
such class outstanding. The public offering price of the Fund's Class Y shares
is the net asset value per share.
The price you pay for a share will be determined using the next set of
calculations made after your order is accepted by New England Funds, L.P. In
other words, if, on a Tuesday morning, your properly completed application is
received, your wire is received or your dealer places your trade for you, the
price you pay will be determined by the calculations made as of the close of
regular trading on the Exchange on Tuesday. If you buy shares through your
investment dealer, the dealer must receive your order by the close of regular
trading on the Exchange and transmit it to the Distributor by 5:00 p.m. (Eastern
time) (or, under limited circumstances, such other time no later than 8:00 p.m.
(Eastern time) as may be agreed upon between the dealer and the Distributor) to
receive that day's public offering price.
Income Tax Considerations
The Fund intends to meet all requirements of the Code necessary to qualify as a
"regulated investment company" (including certain diversification requirements)
and thus does not expect to pay any federal income tax on investment income and
capital gains distributed to shareholders in cash or in additional shares.
Unless you are a tax-exempt entity, your distributions derived from a Fund's
short-term capital gains and ordinary income are taxable to you as ordinary
income. (A portion of these distributions may qualify for the dividends-
16
<PAGE> 49
received deduction for corporations.) Distributions designated by the Fund as
deriving from net gains in securities held for more than one year but not more
than 18 months ("28% Rate Gain") and from net gains on securities held for more
than 18 months ("20% Rate Gain") are taxable to you as such, regardless of how
long you have owned shares in the Fund. Both income distributions and Capital
Gains Distributions are taxable whether you elected 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 earned during that calendar year,
and virtually all of the capital gain net income the Fund realized during the
twelve months ending October 31 but has not previously distributed. 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 of the year in which
declared.
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 backup 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 Fund may be liable to foreign governments for taxes relating primarily to
investment income or capital gains on foreign securities in the Fund's
portfolio.
The 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.
In addition, the Distributor performs certain accounting and administrative
services for the Fund. For those services, the Fund reimburses the Distributor
for all or part of its expenses of providing these services to the Fund, which
includes the following: (i) expenses for personnel performing bookkeeping,
accounting, internal auditing, financial reporting and clerical functions
relating to the Fund, (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder reports and
notices, proxy solicitation materials furnished to shareholders of the Fund or
regulatory authorities and reports and questionnaires for SEC compliance, and
(iii) registration, filing and other fees in connection with requirements of
regulatory authorities.
Performance Criteria
The Fund may include total return information for each class of shares in
advertisements or other written sales material. The Fund may show each class's
average annual total return for the one-, five- and ten-year periods (or the
life of the class, if shorter) through the end of the most recent calendar
quarter. Total return is measured by comparing the value of a hypothetical
$1,000 investment in a class at the beginning of the relevant period to the
value of the investment at the end of the period (assuming deduction of the
current maximum sales charge on Class A shares, automatic reinvestment of all
dividends and capital gains distributions and, in the case of Class B shares,
imposition of the CDSC relevant to the period quoted). Total return may be
quoted with or without giving effect to any voluntary expense limitations in
effect for the class in question during the relevant period. The class may also
show total return over other periods, on an aggregate basis for the period
presented, or without deduction of a sales charge. If a sales charge is not
deducted in calculating total return, the class's total return will be higher.
17
<PAGE> 50
As a result of lower operating expenses, Class Y shares of the Fund can be
expected to achieve a higher investment return than the Fund's Class A, B or C
shares.
All performance information is based on past results and is not an indication of
likely future performance.
Additional Facts About
the Fund
- -- The Trust 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. The Fund is a newly organized series of the Trust.
- -- When you invest in the Fund, you acquire freely transferable shares of
beneficial interest that entitle you to receive annual dividends as
determined by the respective trustees of the Trust 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 same Trust, except as otherwise
required by law. Shares of all classes of the Fund vote together, except as
to matters relating to a class's Rule 12b-1 plan, on which only shares of
that class are entitled to vote. No Rule 12b-1 plan applies to the Class Y
shares of the Fund.
- -- Class A, B and C shares are identical to Class Y shares, except that Class A
and B shares are subject to a sales load or contingent deferred sales charge,
Class A, B and C shares bear a service fee at the annual rate of 0.25% of
average net assets (and in the case of Class B and Class C shares a 0.75%
distribution fee) and have separate voting rights in certain circumstances.
Class Y may bear its own transfer agency and prospectus printing costs and,
if so, will not bear any portion of those costs relating to other classes of
shares. The minimum initial investment in Class A, B and C shares is
generally $2,500 (but lower minimums apply to purchases under certain special
programs).
- -- Except for matters that are explicitly identified as "fundamental" in this
prospectus or the Statement, the investment policies of the Fund may be
changed by the trustees of the Trust 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 objective of the Fund, 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 that 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
Service Corporation, 399 Boylston Street, Boston, MA 02116. New England Funds
Service Corporation has subcontracted certain of its obligations as such to
State Street Bank, 225 Franklin Street, Boston, MA 02110.
- -- The Trusts, together with the Money Market Funds, constitute the New England
Funds.
- -- The Fund's annual report contains additional performance information and is
available upon request and without charge. The Fund will send a single copy
of its annual and semi-annual reports to an address at which more than one
shareholder of record with the same last name has indicated that mail is to
be delivered. Shareholders may request additional copies of any annual or
semi-annual report in writing or by telephone.
- -- The Class A, B, C and Y structure could be terminated should certain IRS
rulings be rescinded.
- -- The Distributor has entered into a selling agreement with investment dealers,
including a broker-dealer that is an affiliate of the Distributor, for the
sale of the Fund's Class Y Shares. The Distributor may at its expense pay an
amount not to exceed 0.50% of the amount invested to dealers who have selling
agreements with the Distributor. Registered representatives of the affiliated
broker-dealer are also employees of New England Investment Associates, Inc.
("NEIA"), an indirect, wholly owned subsidiary of NEIC. NEIA may receive
compensation with
18
<PAGE> 51
respect to certain sales of the Fund's Class Y shares from the Fund's
sub-adviser.
- -- The trustees of the Trust have the authority without shareholder approval to
issue other classes of shares of the Fund that represent interests in the
Fund's portfolio but that have different sales load and fee arrangements.
- -- Class Y Shares of the Fund may be purchased through certain broker-dealers
and/or financial services organizations including a broker-dealer that is an
affiliate of the Distributor. Such organizations may receive compensation, in
an amount of up to 0.25% annually of the value of the Fund shares held by
their clients. The compensation may be paid by NEFM and/or a Fund's
sub-adviser out of their own assets, or may be paid by the Fund in the form
of accounting, servicing, distribution or transfer agent fees.
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<PAGE> 52
GLOSSARY OF TERMS
Capital gain distributions -- Payments to shareholders of 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.
New England Funds Management, L.P. -- The investment adviser to 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 -- 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 the fund to a fund's distributor or a financial
representative for personal services to investors and/or for maintenance of
shareholder accounts.
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. Total return is expressed as a percentage.
Yield -- The rate at which a fund earns income, expressed as a percentage. Yield
calculations are standardized among mutual funds, based on a formula developed
by the SEC.
12b-1 fees -- Fees paid by a mutual fund under a plan adopted under the 1940 Act
Rule 12b-1. They can include both distribution fees and service fees.
20
<PAGE> 53
Printed on Recycled Paper XE51-0997
<PAGE> 54
[NEW ENGLAND FUNDS LOGO](R)
Where The Best Minds Meet(R)
NEW ENGLAND BULLSEYE FUND
STATEMENT OF ADDITIONAL INFORMATION
March 31, 1998
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 Bullseye Fund (the "Fund"). This Statement is not a
prospectus and is only authorized for distribution when accompanied or preceded
by the prospectus of the Fund dated March 31, 1998, as supplemented from time to
time (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, MA 02116.
This Statement contains information about the Class A, B, C and Y
shares of the Fund. The Fund is a series of New England Funds Trust III (the
"Trust"), a registered investment company that offers a total of two series.
Table of Contents
<TABLE>
<CAPTION>
Page
PART I
<S> <C>
Investment Restrictions
Fund Charges and Expenses
PART II
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 - Publications That May Contain Fund Information
Appendix B - Advertising and Promotional Literature
</TABLE>
1
<PAGE> 55
PART I
INVESTMENT RESTRICTIONS
The following is a description of restrictions on the investments to be
made by the Fund, some of which (those restrictions marked with an asterisk) may
not be changed without the approval of a majority of the outstanding voting
securities of the Fund (as defined in the Investment Company Act of 1940 [the
"1940 Act"]). Except in the case of restriction (7) below, 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 a purchase of such security.
The Fund may not:
*(1) Invest more than 25% of the Fund's total assets in the securities of
issuers engaged in any one industry (except securities issued by the
U.S. Government, its agencies or instrumentalities);
(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 it owns or, 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. (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) Borrow money in excess of 33 1/3% of its total assets;
*(4) 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;
*(5) Buy or sell real estate or commodities or commodity contracts, except
that the Fund may buy and sell financial futures contracts and options,
swap contracts, currency forward contracts, structured notes and other
similar instruments. (This restriction does not prevent the Fund from
purchasing securities of issuers that invest in the foregoing);
*(6) 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;
(7) 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 (excluding Rule 144A securities and certain Section 4(2)
commercial paper deemed to be liquid under guidelines established by
the Trust's trustees);
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<PAGE> 56
*(8) Issue senior securities, except as permitted by the 1940 Act or any
relevant exemption thereunder. (For the purpose of this restriction
none of the following is deemed to be a senior security: any pledge or
other encumbrance of assets; any borrowing permitted by restriction (3)
above; any collateral arrangements with respect to options or futures
contracts, and with respect to initial and variation margin; and the
purchase or sale of options, forward contracts, futures contracts, swap
contracts and other similar instruments.)
(9) Although the Fund is permitted to borrow money to a limited extent,
it does not currently intend to do so.
The staff of the Securities and Exchange Commission (the "SEC") is
currently of the view that repurchase agreements maturing in more than seven
days are illiquid and thus subject to restriction (8) above.
FUND CHARGES AND EXPENSES
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEES
Pursuant to an Advisory Agreement dated March __, 1998, 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, the Fund pays NEFM a
management fee at the annual rate of 0.95% of the first $200 million of the
Fund's average daily net assets, 0.90% of the next $300 million of such assets
and 0.85% of such assets in excess of $500 million.
The Advisory Agreement provides that NEFM may delegate its
responsibilities thereunder to other parties. Pursuant to a Sub-Advisory
Agreement dated March __, 1998 between NEFM and Jurika & Voyles L.P. ("Jurika &
Voyles"), NEFM has delegated responsibility for the investment and reinvestment
of the assets of the portfolio to Jurika & Voyles. NEFM pays Jurika & Voyles a
fee for managing the portfolio at an annual rate of 0.570% of the first $200
million of the average daily net assets of the Fund, 0.50% for the next $300
million of such average daily net assets and 0.430% for such average daily net
assets in excess of $500 million.
For more information about the Fund's investment advisory and
subadvisory agreements, see "Management of the Trust" in Part II of this
Statement.
PART II
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 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 Part I. 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
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<PAGE> 57
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.
U.S. Government securities generally 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.
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<PAGE> 58
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.
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.
5
<PAGE> 59
MANAGEMENT OF THE TRUST
Trustees
Trustees of the Trust and their ages (in parentheses), addresses and
principal occupations during the past five years are as follows:
GRAHAM T. ALLISON, JR. -- Trustee (57); 79 John F. Kennedy Street, Cambridge, MA
02138; Douglas Dillon Professor and Director for the Center of Science and
International Affairs, John F. Kennedy School of Government; Special Advisor to
the United States Secretary of Defense; formerly, Assistant Secretary of
Defense; formerly, Dean, John F. Kennedy School of Government.
DANIEL M. CAIN - Trustee (52); 452 Fifth Avenue, New York, NY 10018; President
and CEO, Cain Brothers & Company, Incorporated (investment banking); formerly,
Trustee, Universal Health Realty Income Trust; Chairman, Inter Fish, Inc., (an
aqua venture in Barbados).
KENNETH J. COWAN -- Trustee (65); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Retired; Director, A Young Woman's Residence; formerly, Senior
Vice President-Finance and Chief Financial Officer, Blue Cross of Massachusetts,
Inc.; and Blue Shield of Massachusetts, Inc.; Director, Neworld Bank for Savings
and Neworld Bancorp.
RICHARD DARMAN - Trustee (54); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
20004; Partner and Managing Director, The Carlyle Group (investments); Trustee,
Council for Excellence in Government (not-for-profit); Director, Frontier
Ventures (personal investment); Director, Highway Master Communications (mobile
communications); Managing Partner, Little Falls Partners (family investment);
Director, Sequana Therapeutics (biotechnology/genomics); Director, Telcom
Ventures (telecommunications); formerly, Director of the U.S. Office of
Management and Budget and a member of President Bush's Cabinet.
SANDRA O. MOOSE -- Trustee (55); 135 E. 57th Street New York, NY 10022; Senior
Vice President and Director, The Boston Consulting Group, Inc. (management
consulting); Director, GTE Corporation and Rohm and Haas Company (specialty
chemicals).
HENRY L.P. SCHMELZER* -- Trustee and President (54); President, Chief Executive
Officer and Director, NEF Corporation; President and Chief Executive Officer,
New England Funds, L.P.; President and Chief Executive Officer, New England
Funds Management, L.P. ("NEFM"); Director, Back Bay Advisors, Inc. ("BBAI");
Director, Maine Bank & Trust Company; formerly, Director, New England Securities
Corporation ("New England Securities").
JOHN A. SHANE -- Trustee (64); 200 Unicorn Park Drive, Woburn, Massachusetts
01801; President, Palmer Service Corporation (venture capital organization);
General Partner, Palmer Partners, L.P.; Director, Abt Associates, Inc.
(consulting firm); Director, Arch Communications Group, Inc. (paging service);
Director, Dowden Publishing Company, Inc. (publishers of medical magazines);
Director, Eastern Bank Corporation; Director, Gensym Corporation (expert system
software); Director, Overland Data, Inc. (manufacturer of computer tape drives);
Director, Summa Four, Inc. (manufacturer of telephone switching equipment);
Director, United Asset Management Corporation (holding company for institutional
money management).
- --------
* Trustee deemed an "interested person" of the Trust, as defined in the 1940
Act.
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<PAGE> 60
PETER S. VOSS* -- Chairman of the Board, Chief Executive Officer and Trustee
(51); President and Chief Executive Officer, New England Investment Companies,
L.P. ("NEIC"); Director, President and Chief Executive Officer, New England
Investment Companies, Inc. ("NEIC Inc."); Chairman of the Board and Director,
NEF Corporation; Chairman of the Board and Director, BBAI; formerly, Director,
New England Life Insurance Company ("NELICO"); Group Executive Vice President,
Bank of America (Los Angeles); Group Head of International Banking, Trading and
Securities, Security Pacific National Bank and Chief Executive Officer, Security
Pacific Investment Group.
PENDELTON P. WHITE -- Trustee (66); 6 Breckenridge Lane, Savannah, Georgia
31411; Retired; formerly, President and Chairman of the Executive Committee,
Studwell Associates (executive search consultants); formerly, Trustee, The
Faulkner Corporation (community hospital corporation).
Officers
Officers of the Trust, in addition to Messrs. Schmelzer and Voss, and
their ages (in parentheses) and principal occupations during the past five years
are as follows:
BRUCE R. SPECA -- Vice President (41); Executive Vice President, NEF
Corporation; Executive Vice President, New England Funds, L.P.; Executive Vice
President, NEFM.
FRANK NESVET -- Treasurer (54); Senior Vice President and Chief Financial
Officer, NEF Corporation; Senior Vice President and Chief Financial Officer, New
England Funds, L.P.; Senior Vice President and Chief Financial Officer, NEFM;
formerly, Executive Vice President, SuperShare Services Corporation (mutual fund
and unit investment trust sponsor).
JOHN PELLETIER-- Secretary and Clerk (33); 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,
Senior Vice President and General Counsel, Fund Distributor, Inc.; Counsel, The
Boston Company Advisors, Inc.; Associate, Ropes and Gray.
Previous positions during the past five years with NELICO or
Metropolitan Life Insurance Company ("MetLife"), New England Funds, L.P. or NEFM
are omitted, if not materially different from a trustee's or officer's current
position with such entity. Each of the Trusts' trustees is also a trustee of
certain other investment companies for which New England Funds, L.P. acts as
principal underwriter. Except as indicated above, the address of each trustee
and officer of the Trust is 399 Boylston Street, Boston, Massachusetts 02116.
Trustees Fees
The Trust pays no compensation to its officers or to its trustees who
are interested persons thereof.
Each trustee who is not an interested person of the Trust receives, in
the aggregate for serving on the boards of the Trust and New England Funds Trust
I, New England Funds Trust II, New England Cash Management Trust and New England
Tax Exempt Money Market Trust (all five trusts collectively, the "New England
Funds Trusts"), comprising as of ______ a total of [ ] mutual fund portfolios, a
retainer fee at the annual rate of [$ ] and meeting attendance fees of
$[ ] for each meeting of the boards he or she attends and $[ ] for each
meeting he or she attends of a committee of the board of which he or she is a
member. Each committee chairman receives an additional retainer fee at the
annual rate of $2,500. These fees are allocated among the Fund and the [ ]
other mutual fund portfolios in the New England Funds Trusts based on a formula
that takes into account, among other factors, the net assets of each fund.
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<PAGE> 61
During the fiscal year ended December 31, 1997 the persons who were
then trustees of the Trust received the amounts set forth in the following table
for serving as a trustee of the Trust and for also serving on the governing
boards of the other New England Funds Trusts.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued as Part Estimated Compensation
of Fund Annual Benefits from the New
Expenses Upon England Funds
Name of Trustee in 1997 Retirement Trusts
- --------------- ------- ---------- ------
<S> <C> <C> <C>
Graham T. Allison, Jr. $0 $0 $
Daniel M. Cain $0 $0 $
Kenneth J. Cowan $0 $0 $
Richard Darman $0 $0 $
Sandra O. Moose $0 $0 $
John A. Shane $0 $0 $
Pendelton P. White $0 $0 $
</TABLE>
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 each of the funds in the Trust on the normal payment date
for such fees. As a result of this method of calculating the deferred payments,
the Fund, upon making the deferred payments, will be in the same financial
position as if the fees had been paid on the normal payment dates.
As of December 1, 1997, the officers and trustees of the Trust as a
group owned less than 1% of the outstanding shares of the Trust.
Advisory and Subadvisory Agreements
The Fund's advisory agreement provides that NEFM will furnish or pay
the expenses of the Fund for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain administrative services.
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 the 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 NEFM
for certain legal and accounting services provided to the Fund by NEFM.
The advisory agreement and the sub-advisory agreement between NEFM and
Jurika & Voyles provides that it will continue in effect for two years from its
date of execution and thereafter from year to year if its continuance is
approved at least annually (i) by the board of trustees of the Trust or by vote
of a majority of the outstanding voting securities of the Fund and (ii) by vote
of a majority of the trustees who are not "interested persons" 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 the advisory agreement or
the sub-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 Trust's board of
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<PAGE> 62
trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon 60 days' written notice, or by NEFM upon 90 days' written notice, and
each terminates automatically in the event of its assignment. The sub-advisory
agreement also may be terminated by Jurika & Voyles upon 90 days' notice and is
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 New England Funds, L.P. (the
"Distributor") to eliminate all reference to the words "New England" or the
letters "TNE" in the name of the Trust, 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 NEFM.
The advisory agreement and sub-advisory agreement each 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, formed in 1995, is a limited partnership whose sole general
partner, NEF Corporation, is a wholly-owned subsidiary of NEIC Holdings, Inc.
("NEIC Holdings"), which is a wholly-owned subsidiary of NEIC. NEF Corporation
is also the sole general partner of New England Funds, L.P., the distributor of
the Funds. NEIC owns the entire limited partnership interest in each of NEFM and
New England Funds, L.P.
Jurika & Voyles is a California limited partnership whose sole general
partner, Jurika & Voyles, Incorporated is a wholly-owned subsidiary of NEIC
Holdings. As of February 15, 1998, Jurika & Voyles had discretionary management
authority for approximately $ billion of assets.
NEIC's sole general partner, NEIC, Inc, is a wholly-owned subsidiary of
MetLife New England Holdings, Inc., which in turn is a wholly-owned subsidiary
of MetLife. MetLife owns a majority limited partnership interest in NEIC. NEIC
and its 13 subsidiary or affiliated asset management firms, collectively, have
more than $100 billion of assets under management.
Certain officers and employees of Jurika & Voyles have responsibility
for portfolio management of other advisory accounts and clients (including other
registered investment companies and accounts of affiliates of Jurika & Voyles)
that may invest in securities in which the Fund may invest. Where Jurika &
Voyles determines that an investment purchase or sale opportunity is appropriate
and desirable for more than one advisory account, purchase and sale orders may
be executed separately or may be combined and, to the extent practicable,
allocated by Jurika & Voyles to the participating accounts. Where advisory
accounts have competing interests in a limited investment opportunity, Jurika &
Voyles will allocate investment opportunities based on numerous considerations,
including the time the competing accounts have had funds available for
investment, and the relative amounts of available funds, an account's cash
requirements and the time the competing accounts have had investments available
for sale. It is Jurika & Voyles' policy to allocate, to the extent practicable,
investment opportunities to each client over a period of time on a fair and
equitable basis relative to its other clients.
It is believed that the ability of the Fund to participate in larger
volume transactions in this manner will in some cases produce better executions
for the Fund. However, in some cases, this procedure could have a detrimental
effect on the price and amount of a security available to the Fund or the price
at which a security may be sold. The trustees are of the view that the benefits
of retaining Jurika & Voyles as investment manager outweigh the disadvantages,
if any, that might result from participating in such transactions.
Distribution Agreement and Rule 12b-1 Plans. Under an agreement with
the Fund (the "Distribution Agreement"), New England Funds, L.P. serves as the
general distributor of each class of
9
<PAGE> 63
shares of the Fund. Under this 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 the Distribution 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
and distribution fees described in the prospectus.
As described in the Prospectus, the Fund has adopted Rule 12b-1 plans
(the "Plans") for its Class A, Class B and Class C shares 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 1940
Act, each Plan was approved by the shareholders of the Fund, and (together with
the Distribution Agreement) by the board of trustees of the Trust, 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").
Each 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
relevant class of shares of the Fund. Each 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 any Plan that would materially
increase the fees payable thereunder by the relevant class of shares of the Fund
requires approval of the holders of such shares. The trustees of the Trust
review quarterly written reports of such costs and the purposes for which such
costs have been incurred. For so long as a 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 has entered into selling agreements with investment
dealers, including 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 Distributor may at
its expense pay an amount not to exceed 0.50% of the amount invested to dealers
who have selling agreements with the Distributor. Class Y shares of the Fund may
be offered by registered representatives of New England Securities who are also
employees of New England Investment Associates, Inc. ("NEIA"), an indirect,
wholly-owned subsidiary of NEIC. NEIA may receive compensation from NEFM with
respect to sales of Class Y shares.
The Distribution Agreement 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 Plans 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 of the Trust cast in
person at a meeting called for that purpose or by a vote of a majority of the
outstanding securities of Fund (or the relevant class, in the case of the
Plans).
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 Plans or any related
agreement.
Benefits to the Fund and its shareholders resulting from the Plans are
believed to include (1) enhanced shareholder service, (2) asset retention, (3)
enhanced bargaining position with third
10
<PAGE> 64
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
distributor, New England Funds Trust III or the Fund may be required to change
their names and delete these words or letters. New England Funds, L.P. also acts
as general distributor for New England Cash Management Trust, New England Tax
Exempt Money Market Trust, New England Funds Trust I, New England Funds Trust II
and the other series of the Trust besides the Fund.
Custodial Arrangements. State Street Bank and Trust Company ("State
Street Bank"), 225 Franklin Street, Boston, Massachusetts 02110, 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 Price
Waterhouse LLP, 160 Federal Street, Boston, MA 02109. The independent
accountants of the Trust conduct an annual audit of that Trust's financial
statements, assist in the preparation of federal and state income tax returns
and consult with the Trust as to matters of accounting and federal and state
income taxation.
Other Arrangements
Pursuant to a contract between the Fund and New England Funds Service
Corporation, New England Funds Service Corporation, 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 Service Corporation, for these services in the amount of $17.25.
New England Funds Service Corporation, 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 Service Corporation, pays BFDS a per account fee of $9.40.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of portfolio securities for
the Fund, Jurika & Voyles always seeks best execution, subject to the
considerations set forth below. Transactions in unlisted securities are carried
out through broker-dealers who make the market for such securities unless, in
the judgment of Jurika & Voyles, a more favorable execution can be obtained by
carrying out such transactions through other brokers or dealers.
Jurika & Voyles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best execution for the transaction. This does not necessarily mean that the
lowest available brokerage commission will be paid. However, the commissions are
believed to be competitive with generally prevailing rates. Jurika & Voyles 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.
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In making such evaluation, all factors affecting liquidity and execution of the
order, as well as the amount of the capital commitment by the broker in
connection with the order, are taken into account.
Receipt of brokerage or research services from brokers may sometimes be
a factor in selecting a broker which Jurika & Voyles believes will provide best
execution for a transaction. These services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce Jurika & Voyles' expenses. Such services may be used by Jurika &
Voyles in servicing other client accounts and in some cases may not be used with
respect to the Fund. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
Jurika & Voyles may, however, consider purchases of shares of the Fund by
customers of broker-dealers as a factor in the selection of broker-dealers to
execute the Fund's securities transactions.
Jurika & Voyles may cause the Fund to pay a broker-dealer that provides
brokerage and research services to Jurika & Voyles an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. Jurika & Voyles
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or Jurika
& Voyles' overall responsibilities to the Fund and its other clients. Jurika &
Voyles' authority to cause the Fund to pay such greater commissions is also
subject to such policies as the trustees of the Trust may adopt from time to
time.
Subject to 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, NEFM or Jurika & Voyles. Any such transactions will comply
with Rule 17e-1 under the 1940 Act.
Portfolio turnover is not a limiting factor with respect to investment
decisions. The Fund anticipates that their portfolio turnover rates will vary
significantly from time to time depending on the volatility of economic and
market conditions.
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 Fund'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
New England Funds Trust III was organized as a Massachusetts business
trust pursuant to a Declaration of Trust dated August 22, 1995. The Trust has
two separate portfolios (the New England Equity Income Fund and the Fund) each
currently offering four classes of shares, Classes A, B, C and Y.
The Agreement and Declaration of Trust of the Trust (the "Declaration
of Trust") currently permits the Trust's trustees to issue an unlimited number
of full and fractional shares of each series.
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The Fund is represented by a series of shares of the Trust. 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 of
each class of the Fund are entitled to share pro rata in the net assets
attributable to that class of shares of 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 shares of the Fund are divided into four classes, Classes A, B, C
and Y. The Fund currently offers Classes A, B and C [and Y] shares. Class Y
shares are [not currently] available for purchase [but may be offered at a later
date] to certain eligible institutional investors, with higher minimum purchase
requirements than Classes A, B and C. All expenses of the Fund (excluding
transfer agency fees and expenses of printing and mailing prospectuses to
shareholders ["Other Expenses"]) are borne by its Class A, B, C and Y shares on
a pro rata basis, except for 12b-1 fees, which are borne only by Classes A, B
and C and may be charged at a separate rate to each of such classes. Other
Expenses of Classes A, B and C are borne by such classes on a pro rata basis,
but Other Expenses relating to the Class Y shares may be allocated separately to
the Class Y shares.
The assets received by each class of 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 creditors, are allocated to, and constitute the
underlying assets of, that class. The underlying assets of each class of the
Fund are segregated and are charged with the expenses with respect to that class
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 a particular class
of a fund in the Trust 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 each
fund in the Trust, certain expenses may be legally chargeable against the assets
of all classes of the funds in the Trust.
The Declaration of Trust also permits the trustees of the Trust,
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 or any fund of the Trust, however, may be terminated at any
time by vote of at least two-thirds of the outstanding shares of each fund
affected. Similarly, any class within a fund may be terminated by vote of at
least two-thirds of the outstanding shares of such class. While the Declaration
of Trust further provides that the board of trustees may also terminate the
Trust upon written notice to its shareholders, the 1940 Act requires that the
Trust receive the authorization of a majority of its outstanding shares in order
to change the nature of its business so as to cease to be an investment company.
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 the 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
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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 the 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 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
and sub-advisory agreements 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 be filled only 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 the 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. Shareholder 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 one of its series' name or to cure technical problems
in the Declaration of Trust, (ii) to establish and designate new series or
classes of Trust shares and (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
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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 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 fifth business
day after the order is made.
Shares may also be purchased either in writing, by phone or, in the
case of Class A, B and C shares, 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 the Distributor.
The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of the Fund's Class A, B or C shares. Payment must be
received by the Distributor within five business days following the transaction
date or the order will be subject to cancellation. Telephone orders must be
placed through the Distributor 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 each class of shares of the Fund (the
excess of the assets of the Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the New York Stock Exchange
is open for trading. The weekdays that the New York Stock Exchange is expected
to be closed are New Year's Day, Martin Luther King 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 of the Trust, although the actual calculations may be made by persons
acting pursuant to the direction of the board.
Generally, trading in equity securities in markets outside the United
States, as well as trading in foreign government securities and other
fixed-income securities, is substantially completed each day at various times
prior to the close of the New York Stock Exchange. Securities traded on a
non-U.S. exchange will be valued at their last sale price (or the last reported
bid price, if there is no
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reported sale during the day), on the exchange on which they principally trade,
as of the close of regular trading on such exchange. The value of other
securities principally traded outside the United States will be computed as of
the completion of substantial trading for the day on the markets on which such
securities principally trade. Securities principally traded outside the United
States will generally be valued several hours before the close of regular
trading on the New York Stock Exchange, generally 4:00 p.m. Eastern time, at
which time the Fund computes the net asset value of its shares. Occasionally,
events affecting the value of securities principally traded outside the United
States may occur between the completion of substantial trading of such
securities for the day and the close of the New York Stock Exchange. 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 a class of the Fund's shares is
computed by dividing the number of shares outstanding into the total net asset
value attributable to such class. The public offering price of a Class 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. The public
offering price of a Class B, C or Y share of the Fund is the next-determined net
asset value.
REDUCED SALES CHARGES
Class A Shares Only
Special purchase plans are enumerated in the text of the prospectus.
Cumulative Purchase Discount. A Fund shareholder making an additional
purchase of Class A shares may be entitled to a discount on the sales charge
payable on that purchase. (This discount will not be available to purchases of
Fund shares during the Fund's Initial Subscription Period described in the
supplement dated March 31, 1998 to the prospectus.) 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 "Buying Fund Shares -
Sales Charges" 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 New England Funds
Trusts I, II and the Trust (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
funds in 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 another 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.
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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 either Trust 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 includes the value at the current public offering price of any
shares of series and classes of the Trusts that the shareholder owns (which
includes shares of New England Cash Management Trust and New England Tax Exempt
Money Market Trust [the "Money Market Funds"] if such shares were purchased by
exchanging shares of any of the Trusts). Shares owned by persons described in
the preceding paragraph may also be included.
Unit Holders of Unit Investment Trusts. Unit investment trust
distributions of less than $1 million may be invested in Class A shares of 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 Sub-advisers. No sales charge or contingent
deferred sales charge applies to investments of $25,000 or more in Class A
shares of the Fund by (1) clients of an adviser or sub-adviser to the Trusts;
any director, officer or partner of a client of an adviser or sub-adviser to 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 sub-adviser to 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 sub-adviser to the Trusts. Any
investor eligible for this arrangement should so indicate in writing at the time
of the purchase.
Offering to Employees of MetLife and Associated Entities. There is no
sales charge, CDSC or initial investment minimum related to investments in Class
A shares of the Fund by current and
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retired employees of the Trusts' investment advisers or sub-advisers, New
England Funds, L.P., NELICO or MetLife or any other company affiliated with
NELICO or MetLife; current and former directors and trustees of the Trusts,
NELICO or MetLife or their predecessor companies; agents and general agents of
NELICO or MetLife and their 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, in-laws, grandparents or grandchildren of
the persons listed above and any trust, pension, profit sharing or other benefit
plan for any of the foregoing persons and any separate account of NELICO or
MetLife or any insurance company affiliated with NELICO or MetLife.
Eligible Governmental Authorities. There is no sales charge or
contingent deferred sales charge related to investments in Class A shares of the
Fund 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.
Investment Advisory Accounts. Shares of the Fund may be purchased at
net asset value by investment advisers, financial planners or other
intermediaries who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services;
clients of such investment advisers, financial planners or other intermediaries
who place trades for their own accounts if the accounts are linked to the master
account of such investment adviser, financial planner or other intermediary on
the books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b), 401(k) and 457 of the Code
and "rabbi trusts". Investors may be charged a fee if they effect transactions
through a broker or agent.
Bank Trust Departments. Shares of the Fund are available at net asset
value for investments by non-discretionary and non-retirement accounts of bank
trust departments or trust companies, but are unavailable if the trust
department or institution is part of an organization not principally engaged in
banking or trust activities.
Certain Broker-Dealers and Financial Services Organizations. Shares of
the Fund also may be purchased at net asset value through certain broker-dealers
and/or financial services organizations without any transaction fee. Such
organizations may receive compensation, in an amount of up to 0.35% annually of
the average value of the Fund shares held by their customers. This compensation
may be paid by NEFM and/or Jurika & Voyles out of their own assets, or may be
paid indirectly by the Fund in the form of servicing, distribution or transfer
agent fees.
Shareholders of Reich and Tang Government Securities Trust.
Shareholders of Reich and Tang Government Securities Trust may exchange their
shares of that fund for Class A shares of the Fund at net asset value and
without imposition of a sales charge.
The reduction or elimination of the sales charge in connection with sales
described above reflects the absence or reduction of sales expenses associated
with such sales.
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
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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 Fund
and no direct charges are made to shareholders. Although the Fund 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 (Class A, B and C Shares)
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 $100 or more and thereafter regular monthly checks of $100 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 by New England Funds,
L.P. upon notice to existing plan participants.
The Investment Builder Program plan may be discontinued at any time by
the investor 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 you 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 (Class A, B and C Shares)
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
investments in the Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs, and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for 401(k), SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement
plans. 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
19
<PAGE> 73
Security Act of 1974 and as to the eligibility requirements for a specific plan
and its state as well as federal tax aspects.
Certain retirement plans may also be eligible to purchase Class Y
shares. See the Prospectus relating to Class Y shares.
Systematic Withdrawal Plans (Class A, B and C Shares)
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 (a
"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 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 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 with respect to which you
are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in your account are
insufficient to cover Plan payments, as redemptions from the earliest purchased
shares in your account. 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 in the case of Class A shares) 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 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 Class A shares by a shareholder who has
a 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.
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<PAGE> 74
Exchange Privilege
A shareholder may exchange the shares of any fund in the Trusts (except
for shares of New England Adjustable Rate U.S. Government Fund (the "Adjustable
Rate Fund") and, in the case of Class A shares of New England Intermediate Term
Tax Free Fund of California and New England Intermediate Term Tax Free Fund of
New York, only if such shares have been held for at least six months) for shares
of the same class of any other fund of the Trusts (subject to the investor
eligibility requirements, if any, of the fund 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. In the case of Class A shares of the Adjustable Rate
Fund, if exchanged for shares of any other fund that has a higher sales charge,
shareholders will pay the difference between any sales charge already paid on
their Adjustable Rate Fund shares and the higher sales charge of the fund into
which they are exchanging, at the time of the exchange. When an exchange is made
from Class B shares of one fund to Class B shares of another fund, the shares
received by the shareholder in exchange will have the same age characteristics
as the shares exchanged by the shareholder. The age of the shares determines the
expiration of the CDSC and the conversion date. If you own Class A or Class B
shares, you may also elect to exchange your shares of any Fund for shares of the
same class of the Money Market Funds. Class C shares may also be exchanged for
Class A shares of the Money Market Funds. On all exchanges of Class A shares
subject to a CDSC and Class B shares into the Money Market Funds, the exchange
stops the aging period relating to the CDSC and, for Class B shares only, the
aging period relating to conversion to Class A shares. The aging period resumes
only when an exchange is made back into Class B shares of a Fund. If you own
Class Y shares, you may exchange those shares for Class Y shares of other funds
or for Class A shares of the Money Market Funds. 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
1-800-225-5478 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 fund before an exchange for that fund can be effected. The
minimum amount for an exchange is $1,000.
The investment objectives of the other funds (besides the Fund) in the Trusts
and the Money Market Funds are as follows:
STOCK FUNDS:
NEW ENGLAND GROWTH FUND seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
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-term 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 growth of capital.
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<PAGE> 75
NEW ENGLAND STAR WORLDWIDE FUND seeks long-term growth of capital.
NEW ENGLAND STAR SMALL CAP FUND seeks capital appreciation.
NEW ENGLAND EQUITY-INCOME FUND seeks current income and growth of
capital.
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 and
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 MUNICIPAL INCOME FUND seeks as high a level of current
income exempt from federal income taxes as is consistent with reasonable risk
and protection of shareholders' capital. The Municipal Income Fund invests
primarily in debt securities of municipal issuers, the interest of which is
exempt from federal income tax but may be subject to the federal alternative
minimum tax, 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, the Fund's sub-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 FUND 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 -- seeks maximum current income consistent with
preservation of capital and liquidity.
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<PAGE> 76
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST seeks current income exempt
from federal income taxes consistent with preservation of capital and liquidity.
As of February 15, 1998, the net assets of the funds in the Trusts and
the Money Market Funds totaled over $ 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 (Class A, B and C Shares)
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 shares of the same
class of one or more of the other funds 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 $100 or more. 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 a Fund are summarized in the
prospectus. As described in the Prospectus, a contingent deferred sales charge
(a "CDSC") may be imposed on certain purchases of Class A shares and on
purchases of Class B shares. For purposes of the CDSC, an exchange of shares
from the Fund 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
sale and a purchase and, therefore, would be considered a taxable event on which
you may recognize a gain or loss. In determining whether a CDSC is applicable to
a redemption of Class B shares, the calculation will be determined in the manner
that results in the lowest rate being charged. Therefore, it will be assumed
that the redemption is first of any Class A shares in the shareholder's Fund
account, second of shares held for over six years, third of shares issued in
connection with dividend reinvestment and fourth of shares held longest during
the six-year period. The charge will not be applied to dollar amounts
representing an increase in the net asset value of shares since the time of
purchase or reinvested distributions associated with such shares. Unless you
request otherwise at the time of redemption, the CDSC is deducted from the
redemption, not the amount remaining in the account.
To illustrate, assume an investor purchased 100 shares at $10 per share
(at a cost of $1,000) and in the second year after purchase, the net asset value
per share is $12 and, during such time, the investor has acquired 10 additional
shares under dividend reinvestment. If at such time the investor makes his or
her first redemption of 50 shares (proceeds of $600), 10 shares will not be
subject to the CDSC because of dividend reinvestment. With respect to the
remaining 40 shares, the CDSC is applied only to the original cost of $10 per
share and not to the increase in the asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase).
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 New York Stock Exchange. Requests made after that time or on a day when
the New York Stock Exchange is not open for business cannot be accepted and a
new request on a
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<PAGE> 77
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
Federal Reserve 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 on the next business day; however the Fund reserves the right
to delay payment for up to seven days. However, in the event of a request to
redeem shares for which the Fund 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 CDSC may be waived on redemptions made from IRA accounts due to
attainment of age 59-1/2 for IRA shareholders who established accounts prior to
January 3, 1995. The CDSC may also be waived on redemptions made from IRA
accounts due to death, disability, return of excess contribution, required
minimum distributions at age 70-1/2 (waivers apply only to amounts necessary to
meet the required minimum amount), certain withdrawals pursuant to a Systematic
Withdrawal Plan, not to exceed 10% annually of the value of the account, and
redemptions made from the account to pay custodial fees.
The CDSC may be waived on redemptions made from 403(b)(7) custodial
accounts due to attainment of age 59-1/2 for shareholders who established
custodial accounts prior to January 3, 1995.
The CDSC may also be waived on redemptions necessary to pay plan
participants or beneficiaries from qualified retirement plans under Section 401
of the Code, including profit sharing plans, money purchase plans, 401(k) and
custodial accounts under Section 403(b)(7) of the Code. Distributions necessary
to pay plan participants and beneficiaries include payments made due to death,
disability, separation from service, normal or early retirement as defined in
the plan document, loans from the plan and hardship withdrawals, return of
excess contributions, required minimum distributions at age 70-1/2 (waivers only
apply to amounts necessary to meet the required minimum amount), certain
withdrawals pursuant to a Systematic Withdrawal Plan, not to exceed 10% annually
of the value of your account, and redemptions made from qualified retirement
accounts or Section 403(b)(7) custodial accounts necessary to pay custodial
fees.
A CDSC will apply in the event of plan level transfers, including
transfers due to changes in investment where assets are transferred outside of
New England Funds, including IRA and 403(b)(7) participant-directed transfers of
assets to other custodians (except for the reasons given above) or qualified
transfers of assets due to trustee-directed movement of plan assets due to
merger, acquisition or addition of additional funds to the plan.
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
trustees of the Trust determine 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
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<PAGE> 78
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 (Class A shares only)
The Prospectus describes redeeming shareholders' reinstatement
privileges for Class A shares. 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 the Fund 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
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 same class 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 of the particular
class 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 of the relevant class
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
Total Return. Total returns will generally be higher for Class A shares
than for Class B and C shares of the Fund, because of the higher levels of
expenses borne by the Class B and C shares. Because of its lower operating
expenses, Class Y shares of the Fund can be expected to achieve a higher total
return than the Fund's Class A, B and C shares. The Fund may from time to time
include 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
25
<PAGE> 79
relative to the base period 1941-43. The S&P 500 is composed almost entirely of
common stocks of companies listed on the New York Stock 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 New York
Stock Exchange.
The Salomon Brothers World Government Bond Index includes a broad range
of institutionally-traded fixed-rate government securities issued by the
national governments of the nine countries whose securities are most actively
traded. The index generally excludes floating-or variable-rate bonds, securities
aimed principally at non-institutional investors (such as U.S. Saving Bonds) and
private-placement type securities.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rated
agency.
The Lehman Brothers Municipal Bond Index is a composite measure of the
total return performance of the municipal bond market. This index is computed
from prices on approximate 1800 bonds.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
The Merrill Lynch High Yield Index includes over 750 issues and
represents public debt greater than $10 million (original issuance rated BBB/BB
and below), and the First Boston High Yield Index includes over 350 issues and
represents all public debt greater than $100 million (original issuance and
rated BBB/BB and below).
The Salomon Brothers Broad Investment Grade Bond Index is a price
composite of a broad range of institutionally based U.S. Government
mortgage-backed and corporate debt securities of investment outstanding of at
least $1 million and with a remaining period to maturity of at least one year.
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. Lipper's Mutual Fund Performance
Analysis, Small Cap Company Analysis and Mutual Fund Indices measure total
return and average current yield for the mutual fund industry. Rankings of
individual mutual fund performance over specified time periods assume
reinvestment of all distributions, exclusive of sales charges.
The Russell 2000 Index represents the top 2,000 stocks traded on the
New York Stock Exchange, American Stock Exchange and National Association of
Securities Dealers Automated Quotations, by market capitalizations.
The Morgan Stanley Capital International Europe, Australasia and Far
East Index (the "EAFE Index") is a market-value weighted and unmanaged index of
common stocks traded outside the U.S. The stocks in the index are selected with
reference to national and industry representation and weighted in the EAFE Index
according to their relative market value (market price per share times the
number of shares outstanding).
The Morgan Stanley Capital International Europe, Australasia and Far
East (Gross Domestic Product) Index (the "EAFE [GDP] Index") is a market-value
weighted and unmanaged index of common stocks traded outside the U.S. The stocks
in the index are selected with reference to national and industry representation
and weighted in the EAFE (GDP) Index according to their relative market values.
The relative market value of each country is further weighted with reference to
the country's relative gross domestic product.
The Fund may compare its performance to the Salomon-Russell Broad
Market Index Global X-US and to universes of similarly managed investment pools
compiled by Frank Russell Company and Intersec Research Corporation.
Articles and releases, developed by the Fund and other parties, about
the Fund regarding performance, rankings, statistics and analyses of the Fund's
and the fund group's asset levels and sales volumes, numbers of shareholders by
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, including, but not limited
to, those publications listed in Appendix A to this Statement and on various
computer networks, for example, the Internet. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including, but not limited to, Lipper Analytical Services and
Morning Star. References to these rankings or reviews or reprints of such
articles may be used in the Funds' 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. For
additional information about the Fund's advertising and promotional literature,
see Appendix B.
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<PAGE> 80
The Fund may use the accumulation charts below in their advertisements
to demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.
INVESTMENTS AT 8% RATE OF RETURN
<TABLE>
<CAPTION>
5 yrs. 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
Investments At 10% Rate of Return
<TABLE>
<CAPTION>
5 yrs. 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
The Fund's advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
any of the New England Funds. For example, the advertising and sales literature
of any of the New England Funds, but particularly that of New England Bullseye
Fund, New England Star Worldwide Fund and New England International Equity Fund,
may discuss all of the above international developments, including but not
limited to, international developments involving Europe, North and South
America, Asia, the Middle East and Africa, as well as events and issues
affecting specific countries that directly or indirectly may have had
consequences for the New England Funds or may have influenced past performance
or may influence current or prospective performance of the New England Funds.
The Fund's advertising and sales literature may also 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 Trusts, with respect to investing in
shares 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.
New England Funds, L.P. will make reference in its advertising and
sales literature to awards, citations and honors bestowed on it by industry
organizations and other observers and raters including, but not limited to,
Dalbar's Quality Tested Service Seal and Key Honors Award. Such references may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and New
England Funds, L.P.'s selection including, but not limited to, the scores and
categories in which New England Funds, L.P. excelled, the names of funds and
fund companies that have previously won the award and comparative information
and data about those against whom New England Funds, L.P. competed for the
award, honor or citation.
New England Funds, L.P. may publish, allude to or incorporate in its
advertising and sales literature testimonials from shareholders, clients,
brokers who sell or own shares, broker-dealers, industry organizations and
officials and other members of the public, including, but not limited to, fund
performance, features and attributes, or service and assistance provided by
departments within the organization, employees or associates of New England
Funds, L.P.
27
<PAGE> 81
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. the
S&P 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 agreements with banks exempted from
broker-dealer 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 long-term 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 relevant class of the Fund based upon the net asset
value determined as of the close of the New York Stock 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 the 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) distribute
at least 90% of its dividend, interest and certain other taxable income each
year; and (iii) diversify its holdings so that at the end of each fiscal
quarter, (a) at least 50% of the value of its total assets consists of cash,
U.S. government securities, securities of other regulated investment companies,
and other securities limited generally, with respect to each issuer, to no more
than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value 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 or businesses. So long as it qualifies for treatment as a
regulated investment company, a fund
28
<PAGE> 82
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 and payable 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
designated by the Fund as deriving from net gains on securities held for more
than one year but not more than 18 months ("28% Rate Gain") and from net gains
on securities held for more than 18 months ("20% Rate Gain") will be taxable to
shareholders as such, without regard to how long a shareholder has held shares
of the Fund. A loss on the sale of shares held for 6 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 own shares in certain foreign investment entities,
referred to as "passive foreign investment companies." In order to avoid U.S.
federal income tax, and an additional charge on a portion of any "excess
distribution" from such companies or gain from the disposition of such shares,
the Fund may elect to "mark to market" annually its investments in such entities
and to distribute any resulting net gain to shareholders. The Fund may also
elect to treat the passive foreign investment company as a "qualified electing
fund." As a result, the Fund may be required to sell securities it would have
otherwise continued to hold in order to make distributions to shareholders to
avoid any Fund-level tax.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
In general, any gain realized upon a taxable disposition of shares will be
treated as 28% Rate Gain if the shares have been held for more than one year
but not more than 18 months, and as 20% Rate Gain if the shares have been held
for more than 18 months. Otherwise the gain on the sale, exchange or redemption
of Fund shares will be treated as short-term capital gain.
29
<PAGE> 83
Furthermore, no loss will be allowed on the sale of Fund shares to the extent
the shareholder acquired other shares of the 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).
30
<PAGE> 84
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
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
Bank Investment Marketing
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
Fee Adviser
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
31
<PAGE> 85
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
Mutual Funds Magazine
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
32
<PAGE> 86
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
World Wide Web
Worth Magazine
WRKO
33
<PAGE> 87
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in New England Funds' advertising and
promotional literature to NEIC and its affiliates that perform advisory and
subadvisory functions for New England Funds including, but not limited to: Back
Bay Advisors, Harris Associates L.P., Loomis Sayles, CGM and Westpeak. Reference
also may be made to the funds of their respective fund groups, namely, Loomis
Sayles Fund and the Oakmark Funds.
References may be included in New England Funds' advertising and
promotional literature to other NEIC affiliates including, but not limited to,
New England Investment Associates, L. P., AEW Capital Management, L.P.,
Marlborough Capital Advisors, L.P., Reich & Tang Capital Management, Reich and
Tang Mutual Funds Group and Jurika & Voyles and their fund group.
References to sub-advisers unaffiliated with NEIC that perform
subadvisory functions on behalf of New England Funds and their respective fund
groups may be contained in New England Funds' advertising and promotional
literature including, but not limited to, Berger, Janus Capital, Founders,
Montgomery and Robertson Stephens.
New England Funds' advertising and promotional material will include,
but is not limited to, discussions of the following information about both
affiliated and unaffiliated entities:
- - Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the New
England Funds
- - Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
- - Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
- - Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;
- - The corporate histories, founding dates and names of founders of the
entities;
- - Awards, honors and recognition given to the entities;
- - The names of those with ownership interest and the percentage of ownership
interest;
- - The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;
- - Current capitalizations, levels of profitability and other financial and
statistical information;
- - Identification of portfolio managers, researchers, economists, principals
and other staff members and employees; and
- - The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors.
34
<PAGE> 88
- - Current and historical statistics regarding:
-total dollar amount of assets managed
-New England Funds' assets managed in total and by fund
-the growth of assets
-asset types managed
-numbers of principal parties and employees, and the length of their tenure,
including officers, portfolio managers, researchers, economists, technicians
and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the adviser
or sub-adviser
- - The general and specific strategies applied by the advisers in the
management of New England Funds portfolios including, but not limited to:
-the pursuit of growth, value, income oriented, risk management or other
strategies
-the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
-the types and characteristics of investments sought and specific portfolio
holdings
-the actual or potential impact and result from strategy implementation
-through its own areas of expertise and operations, the value added by
sub-advisers to the management process
-the disciplines it employs, e.g., in the case of Loomis Sayles, the strict
buy/sell guidelines and focus on sound value it employs, and goals and
benchmarks that it establishes in management, e.g., CGM pursues growth 50%
above the S&P 500
-the systems utilized in management, the features and characteristics of
those systems and the intended results from such computer analysis, e.g.,
Westpeak's efforts to identify overvalued and undervalued issues.
- - Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than New England Funds, and those
families of funds, other than New England Funds. Any such references will
indicate that New England Funds and the other funds of the managers differ
as to performance, objectives, investment restrictions and limitations,
portfolio composition, asset size and other characteristics, including fees
and expenses. References may also be made to industry rankings and ratings
of the Funds and other funds managed by the Funds' advisers and
sub-advisers, including, but not limited to, those provided by Morningstar,
Lipper Analytical Services, Forbes and Worth.
In addition, communications and materials developed by New England
Funds will make reference to the following information about NEIC and its
affiliates:
NEIC is one of the largest publicly traded managers in the U.S. listed
on the New York Stock Exchange. NEIC maintains over $100 billion in assets under
management. In addition, promotional materials may include:
- Specific and general references to New England Funds multi-manager
approach through NEIC affiliates and outside firms including, but not
limited to, the following:
-that each adviser/manager operates independently on a day-to-day basis and
maintains an image and identity separate from NEIC and the other investment
managers
-other fund companies are limited to a "one size fits all" approach but New
England Funds draws upon the talents of multiple managers whose expertise
best matches the fund objective
-in this and other contexts reference may be made to New England Funds
slogan "Where The Best Minds Meet"(R) and that New England Funds ability to
match the talent to the task is one more reason it is becoming known as
"Where The Best Minds Meet."
35
<PAGE> 89
Financial Adviser Services ("FAS"), a division of NEIC, may be
referenced in Fund advertising and promotional literature concerning the
marketing services it provides to NEIC-affiliated fund groups including: New
England Funds, Loomis Sayles Funds, Oakmark Funds and Reich & Tang Funds.
FAS will provide marketing support to NEIC affiliated fund groups
targeting financial advisers, financial intermediaries and institutional clients
who may transact purchases and other fund-related business directly with these
fund groups. Communications will contain information including, but not limited
to: descriptions of clients and the marketplaces to which it directs its
efforts; the mission and goals of FAS and the types of services it provides
which may include: seminars; its 1-800 number, web site, Internet or other
electronic facilities; qualitative information about the funds' investment
methodologies; information about specific strategies and management techniques;
performance data and features of the funds; institutional oriented research and
portfolio manager insight and commentary. Additional information contained in
advertising and promotional literature may include: rankings and ratings of the
funds including, but not limited to, those of Morningstar and Lipper Analytical
Services; statistics about the advisers', fund groups' or a specific fund's
assets under management; the histories of the advisers and biographical
references to portfolio managers and other staff including, but not limited to,
background, credentials, honors, awards and recognition received by the advisers
and their personnel; and commentary about the advisers, their funds and their
personnel from third-party sources including newspapers, magazines, periodicals,
radio, television or other electronic media.
References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:
- - Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs with whom New England Funds may or may not have a relationship.
- - Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the New England Funds
as a 401(k) or retirement plan funding vehicle produced by, including, but
not limited to, Access Research, Dalbar, Investment Company Institute and
other industry authorities, research organizations and publications.
- - Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:
- - past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting standards,
minimum distribution notices, Form 5500, Form 1099R and other relevant
forms and documents, Department of Labor rules and standards and other
regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;
- - information about the history, status and future trends of Social Security
and similar government benefit programs including, but not limited to,
eligibility and participation, availability, operations and administration,
structure and design, features, provisions, benefits and costs; and
- - current and prospective ERISA regulation and requirements.
36
<PAGE> 90
- - Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data, about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited to,
videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.
- - Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and, in particular, New England Funds and
investing in its 401(k) and retirement plans, including, but not limited to:
-the significant economies of scale experienced by mutual fund companies in
the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including, but not limited to, trustee
services and tax reporting
-the services of DST and BFDS, including, but not limited to, mutual fund
processing support, participant 800 numbers and participant 401(k)
statements
-the services of Trust Consultants Inc. (TCI), including, but not limited
to, sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.
- - Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.
37
<PAGE> 91
NEW ENGLAND FUNDS TRUST III
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Statements of Per share income and capital changes for all
Series of the Registrant other than New England Bullseye Fund
are included in the prospectuses filed in Part A of
Post-Effective Amendment No. 3. The following financial
statements are incorporated in Part II of the statement of
additional information filed in Part B hereof by reference to
the annual reports to shareholders of New England Equity
Income Fund for the fiscal year ended December 31, 1996, which
was filed with the Commission on March 10, 1997.
New England Equity Income Fund
(i) Portfolio Composition
(ii) Statement of Assets & Liabilities
(iii) Statement of Operations
(iv) Statement of Changes in Net Assets
(v) Per Share Data and Ratios
(b) Exhibits:
1. The Registrant's Agreement and Declaration of Trust
is incorporated herein by reference to the
Registration Statement on Form N-1A (File No.
33-62061), filed on August 23, 1995.
2. By-Laws of the Registrant are incorporated herein by
reference to the Registration Statement on Form N-1A
(File No. 33-62061), filed on August 23, 1995.
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 incorporated herein
by reference to the Registration Statement on Form
N-1A (File No. 33-62061), filed on August 23, 1995.
(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
incorporated herein by reference to the Registration
Statement on Form N-1A (File No. 33-62061), filed on
August 23, 1995.
(C) Form of Advisory Agreement between the Registrant, on
behalf of its New England Bullseye Fund, and New
England Funds Management, L.P. is filed herewith.
(D) Form of Subadvisory Agreement for New England
Bullseye Fund between New England Funds Management,
L.P. and Jurika & Voyles, L.P. is filed herewith.
6.(A) 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 incorporated herein by reference to
the Registration Statement on Form N-1A (File No.
33-62061), filed on August 23, 1995.
1
<PAGE> 92
(B) Form of Distribution Agreement between the
Registrant, on behalf of its New England Bullseye
Fund, Class B, and New England Funds, L.P. (the
"Distributor") is filed herewith.
7. Not applicable.
8. Form of Custodian Agreement between the Registrant
and State Street Bank and Trust Company is
incorporated herein by reference to Pre-Effective
Amendment No. 2 to the Registration Statement on Form
N-1A (File No. 33-62061), filed on October 30, 1995.
9.(A) Form of Transfer Agency Agreement between the
Registrant and New England Funds, L.P. is
incorporated herein by reference to Pre-Effective
Amendment No. 2 to the Registration Statement on Form
N-1A (File No. 33-62061), filed on October 30, 1995.
(B) Form of Dealer Agreement of New England Funds, L.P.,
the Trust's Distributor, is incorporated herein by
reference to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No.
33-62061), filed on October 30, 1995.
(C) Powers of Attorney for Trustees are filed herein.
10. Opinion of Ropes & Gray with respect to New England
Equity Income Fund is incorporated herein by
reference to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No.
33-62061), filed on November 22, 1995.
11. Consent of Price Waterhouse is incorporated herein by
reference to Post- Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No.
33-62061), filed on June 10, 1997.
12. Not applicable.
13. Investment Letter of Loomis Sayles Funded Pension
Plan and Trust is incorporated herein by reference to
Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-62061), filed on
November 22, 1995.
14. Not applicable.
15.(A) Form of Rule 12b-1 Plan relating to Class A shares of
New England Equity Income Fund is incorporated herein
by reference to the Registration Statement on Form
N-1A (File No. 33-62061) filed on August 23, 1995.
(B) Form of Rule 12b-1 Plan relating to Class B shares of
New England Equity Income Fund is incorporated herein
by reference to Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No.
33-62061), filed on June 10, 1997.
(C) Form of Rule 12b-1 Plan relating to Class C shares of
New England Equity Income Fund is incorporated herein
by reference to Post-Effective Amendment
2
<PAGE> 93
No. 3 to the Registration Statement on Form N-1A
(File No. 33-62061), filed on June 10, 1997.
(D) Form of Rule 12b-1 Plan relating to Class A shares of
New England Bullseye Fund is filed herewith.
2
(E) Form of Rule 12b-1 Plan relating to Class B shares of
New England Bullseye Fund is filed herewith.
(F) Form of Rule 12b-1 Plan relating to Class C shares of
New England Bullseye Fund is filed herewith.
16. Not applicable.
17. Financial data schedule is incorporated herein by
reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 33-
62061), filed on April 30, 1997.
18.(A) Plan pursuant to Rule 18f-3(d) under the Investment
Company Act of 1940 with respect to New England Funds
Trusts I, II, III & IV is filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of
each class of securities of the Registrant as of November 28,
1997:
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
Class A Class B Class C Class Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
New England Equity Income Fund 527 505 50 -
</TABLE>
3
<PAGE> 94
Item 27. Indemnification
See Article 4 of the Registrant's By-Laws filed as Exhibit 2
incorporated by reference herein.
In addition, Metropolitan Life Insurance Company, the parent
company of the Registrant'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 Registrant 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 Bullseye 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):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------ ----------
<S> <C> <C>
NEF Corporation None None
General Partner
Henry L.P. Schmelzer, New England Funds, L.P. President and CEO
President and Chief Executive 399 Boylston Street
Officer Boston, MA 02116
NEF Corporation President and CEO
399 Boylston Street
Boston, MA 02116
Back Bay Advisors, Inc. Director
399 Boylston Street
Boston, MA 02116
New England Securities Director
Corporation*
399 Boylston Street
Boston, MA 02116
Frank Nesvet, New England Funds, L.P. Senior Vice President, CFO and
Senior Vice President, CFO and 399 Boylston Street Treasurer
Treasurer Boston, MA 02116
NEF Corporation Senior Vice President, CFO and
399 Boylston Street Treasurer
Boston, MA 02116
Robert E. O'Hare, NEF Corporation Vice President, Senior Counsel,
Vice President, Senior Counsel, 399 Boylston Street Assistant Secretary and
Assistant Secretary and Boston, MA 02116 Assistant Clerk
Assistant Clerk
</TABLE>
4
<PAGE> 95
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
NEFM Other Affiliations Connection
---- ------------------ ----------
<S> <C> <C>
New England Funds, L.P. Vice President, Senior Counsel
399 Boylston Street Assistant Secretary and
Boston, MA 02116 Assistant Clerk
John E. Pelletier, NEF Corporation Senior Vice President, General
Senior Vice President, General 399 Boylston Street Counsel, Secretary and Clerk
Counsel, Secretary and Clerk Boston, MA 02116
New England Funds, L.P. Senior Vice President, General
399 Boylston Street Counsel, Secretary and Clerk
Boston, MA 02116
Bruce R. Speca, NEF Corporation Executive Vice President
Executive Vice President 399 Boylston Street
Boston, MA 02116
New England Funds, L.P. Executive Vice President
399 Boylston Street
Boston, MA 02116
Ralph M. Greggs, NEF Corporation Senior Vice President
Senior Vice President 399 Boylston Street
Boston, MA 02116
New England Funds, L.P. Senior Vice President
399 Boylston Street
Boston, MA 02116
Peter H. Duffy, NEF Corporation Vice President
Vice President 399 Boylston Street
Boston, MA 02116
New England Funds, L.P. Vice President
399 Boylston Street
Boston, MA 02116
Martin G. Dyer, NEF Corporation Vice President and Assistant
Vice President and Assistant 399 Boylston Street Secretary
Secretary Boston, MA 02116
New England Funds, L.P. Vice President and Assistant
399 Boylston Street Secretary
Boston, MA 02116
</TABLE>
(b) Jurika & Voyles, L.P. ("Jurika & Voyles"), the subadviser to
New England Bullseye Fund, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.+
Such subadviser's directors and officers have been engaged
during the past two years in the following other businesses,
vocations or employments of a substantial nature (former
affiliations are marked with an asterisk):
5
<PAGE> 96
+ Jurika & Voyles succeeded Jurika & Voyles, Inc. in January 1997.
6
<PAGE> 97
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Jurika & Voyles Other Affiliations Connection
--------------- ------------------ ----------
<S> <C> <C>
Jurika & Voyles, Incorporated None None
General Partner
Glenn C. Voyles None None
Chairman and Portfolio
Manager
William K. Jurika None None
President and Portfolio Manager
Karl-Olof Mills None None
Executive Vice President
Sandra C. Ribble None None
Secretary and Treasurer
G. Neal Ryland NEIC Executive Vice President,
Director 399 Boylston Street CFO & Treasurer
Boston, MA 02116
New England Investment Executive Vice President,
Companies, Inc. CFO & Treasurer
399 Boylston Street
Boston, MA 02116
Peter S. Voss Investment Company Institute Member of the Board of
Director 1401 H Street, NW Governors
Washington, DC 20005
NEIC President and Chief
399 Boylston Street Executive Officer
Boston, MA 02116
James R. Christensen None None
Senior Vice President
Candace M. Tom None None
Senior Vice President
</TABLE>
7
<PAGE> 98
<TABLE>
<CAPTION>
<S> <C> <C>
Christopher L. Bittman None None
Senior Vice President and
Director
</TABLE>
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 Funds Trust IV
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:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- --------------------- ---------------
<S> <C> <C>
NEF Corporation General Partner None
Henry L.P. Schmelzer President and Chief Executive President and Trustee
Officer
Bruce R. Speca Executive Vice President Executive Vice President
John E. Pelletier Senior Vice President, General Secretary
Counsel, Secretary and Clerk
Frank Nesvet Senior Vice President, Chief Treasurer
Financial Officer and Treasurer
James H. Davis Senior Vice President None
Ralph M. Greggs Senior Vice President None
Caren I. Leedom Senior Vice President None
Frank Maselli Senior Vice President None
Raymond K. Girouard Senior Vice President, Assistant None
Treasurer and Comptroller
Robert E. O'Hare Vice President, Senior Counsel, Assistant Secretary
Secretary and Assistant Clerk
Rayona T. Bennett Vice President None
Elizabeth P. Burns Vice President None
</TABLE>
8
<PAGE> 99
<TABLE>
<CAPTION>
<S> <C> <C>
Peter H. Duffy Vice President Assistant Treasurer
Martin G. Dyer Vice President and Assistant None
Secretary
Tracy A. Fagan Vice President None
Philip J. Graham Vice President None
Lynne H. Johnson Vice President None
David Kaplan Vice President None
Marie G. McKenzie Vice President None
Lynda A. Nelson Vice President None
Kristine E. Swanson Vice President None
Beatriz A. Pina Smith Vice President None
Sharon M. Wratchford Vice President None
</TABLE>
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) Jurika & Voyles, L.P.
Lake Merritt Plaza, 1999 Harrison, Suite 700 Oakland,
CA 94612 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)
9
<PAGE> 100
Item 31. Management Services
None.
Item 32. Undertakings
(a) The Registrant undertakes to provide a copy of the annual
report of any of its series to any person who receives a
prospectus for such series and who requests the annual report.
(b) 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.
(c) The Registrant hereby undertakes to file a post-effective
amendment using Financial Statements relating to its New
England Bullseye Fund within four to six months from the
effective date of this Post-Effective Amendment.
10
<PAGE> 101
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 Post-Effective Amendment No. 4 to its 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 31st day of December, 1997.
New England Funds Trust III
By: PETER S. VOSS*
------------------------------------
Peter S. Voss
Chief Executive Officer
*By: /s/JOHN E. PELLETIER
----------------------------------
John E. Pelletier
Attorney-In-Fact
11
<PAGE> 102
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PETER S. VOSS* Chairman of the Board;
Chief December 31, 1997
- ------------------------ Executive Officer; Principal
Peter S. Voss Executive Officer; Trustee
/s/FRANK NESVET Treasurer December 31, 1997
- ------------------------
Frank Nesvet
GRAHAM T. ALLISON, JR.* Trustee December 31, 1997
- ------------------------
Graham T. Allison, Jr.
DANIEL M. CAIN* Trustee December 31, 1997
- ------------------------
Daniel M. Cain
KENNETH J. COWAN* Trustee December 31, 1997
- ------------------------
Kenneth J. Cowan
RICHARD DARMAN* Trustee December 31, 1997
- ------------------------
Richard Darman
SANDRA O. MOOSE* Trustee December 31, 1997
- ------------------------
Sandra O. Moose
HENRY L. P. SCHMELZER* Trustee December 31, 1997
- ------------------------
Henry L. P. Schmelzer
JOHN A. SHANE* Trustee December 31, 1997
- ------------------------
John A. Shane
PENDELTON P. WHITE* Trustee December 31, 1997
- ------------------------
PENDELTON P. White
</TABLE>
*By:/s/JOHN E. PELLETIER
----------------------
John E. Pelletier
Attorney-In-Fact
December 31, 1997
12
<PAGE> 103
N-1A EXHIBITS ITEM 24(b)
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
-------------- -------
<S> <C> <C>
EX-99.b5(C) Form of Advisory Agreement for New England Bullseye
Fund
EX-99.b5(D) Form of Subadvisory Agreement for New England Bullseye
Fund
EX-99.b6(B) Form of Distribution Agreement for New England Bullseye
Fund
EX-99.b9(C) Powers of Attorney
EX-99.b15(D) Form of Rule 12b-1 Plan relating to Class A shares for New
England Bullseye Fund
EX-99.b15(E) Form of Rule 12b-1 Plan relating to Class B shares for New
England Bullseye Fund
EX-99.b15(F) Form of Rule 12b-1 Plan relating to Class C shares for New
England Bullseye Fund
EX-99.b18(A) Rule 18f-3(d) Plan for New England Funds Trusts I, II, III &
IV
</TABLE>
13
<PAGE> 1
EX-99.b5(C)
FORM OF ADVISORY AGREEMENT
14
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
FORM OF
ADVISORY AGREEMENT
AGREEMENT made this [ ] day of March 1998 by and between NEW ENGLAND
FUNDS TRUST III, a Massachusetts business trust (the "Fund"), with respect to
its New England Bullseye 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:
1. (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.
(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.
1
<PAGE> 3
2. 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.
3. 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
Series' 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.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(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;
-2-
<PAGE> 4
(d) registration, filing and other fees in connection with
requirements of 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.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
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.
6. 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.
7. 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 0.95% of the first $200 million of the
average daily net assets of the Series, 0.90% of the next $300 million of such
assets and 0.85% of such assets in excess of $500 million (or such lesser
amount as the Manager may
-3-
<PAGE> 5
from time to time agree to receive). 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.
8. If the total of all ordinary business expenses of the Series 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 Fund and the Series 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.
9. 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.
10. 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 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;
(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
-4-
<PAGE> 6
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.
11. 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.
12. 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 Fund shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. 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 Series or to any other person, firm or
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
on behalf of its New England Bullseye Fund series
By:
Name:
Title:
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/HENRY L.P. SCHMELZER
------------------------------
Name: Henry L.P. Schmelzer
Title: President
-5-
<PAGE> 7
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 Bullseye 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.
-6-
<PAGE> 1
EX-99.b5(D)
FORM OF SUBADVISORY AGREEMENT
15
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
FORM OF
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement (this "Agreement") is entered into as of
March 15, 1998 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Jurika & Voyles, L.P., a Delaware
limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated March
15, 1998 (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 Bullseye Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of 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, 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
-1-
<PAGE> 3
by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the Trustees of
the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
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.
3. 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
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.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark Jurika & Voyles, L.P. and
that all use of any designation consisting in whole or part of Jurika & Voyles
L.P.(a "Jurika & Voyles Mark") under this Agreement shall inure to the benefit
of the Sub-Adviser. The Manager on its own behalf and on behalf of the Series
agrees not to use any Jurika & Voyles Mark in any advertisement or sales
literature or other materials promoting the Series, except with the prior
written consent of the Sub-Adviser. Without the prior written consent of the
Sub-Adviser, the Manager shall not, and the Manager shall use its best efforts
to cause the Series not to, make representations regarding the Sub-Adviser in
any disclosure document, advertisement or sales literature or other materials
relating to the Series. Upon termination of this Agreement for any reason, the
Manager shall cease, and the Manager shall use its best efforts to cause the
Series to cease, all use of any Jurika & Voyles Mark as soon as reasonably
practicable.
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<PAGE> 4
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. 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.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.570% of the first $200 million of the average daily net assets of the
Series, 0.50% of the next $300 million of such assets and 0.430% 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.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The
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<PAGE> 5
Manager and the Series recognize and agree that the Sub-Adviser may provide
advice to or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be identical
to advice given or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be deemed to be an independent contractor and
shall, unless otherwise provided or authorized, have no authority to act for or
represent the Series or the Manager in any way or otherwise be deemed an agent
of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, 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. 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.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
(d) this Agreement may be terminated by the Sub-Adviser on
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 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
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<PAGE> 6
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By: ______________________________
Name: _________________________
Title: ________________________
Jurika & Voyles, L.P.
By: ______________________________
Name: _________________________
Title: ________________________
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<PAGE> 1
EX-99.b6(B)
FORM OF DISTRIBUTION AGREEMENT
16
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
FORM OF
DISTRIBUTION AGREEMENT
AGREEMENT made this 15th of March, 1998 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:
WHEREAS, this Agreement has been approved by the Trustees of the Trust
in contemplation of the transfer by the Distributor of its rights to receive the
Class [ ] Distribution Fee (as defined in the Class [ ] Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the
Trust of the Distributor being able to obtain financing with which to pay
commissions on Class [ ] shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing
financing to the Distributor the financing party enables the Distributor to
provide valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the
best interests of the Series and its shareholders at the time of and in
preparation for any vote, consent or other action that the Trustees of the Trust
may from time to time take relating to the continued receipt by the Distributor
(and/or the financing party) of the Distribution Fee, intend to consider the
effect on the Distributor and any financing party of any such vote, consent or
action.
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's NEW ENGLAND BULLSEYE 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.
2. 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.
3. Fees. For its services as general distributor of the Class [ ] Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class [ ] Distribution Fee at the
rate and upon the terms and conditions set forth in the Class [ ]
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to
<PAGE> 3
time, and the Distributor shall also be entitled to receive any
contingent deferred sales charges that may be payable upon redemption
or repurchase of Class [ ] Series shares. The Class [ ] Distribution
Fee shall be accrued daily and paid monthly to the Distributor (or, at
its direction, to its designee or transferee) as soon as practicable
after the end of the calendar month in which it accrues, but in any
event within five business days following the last day of the month. So
long as this agreement and the Class [ ] Distribution and Service Plan
have not been terminated in accordance with their respective terms, the
Series' obligation to pay the Class [ ] Distribution Fee to the
Distributor shall be absolute and unconditional and shall not be
subject to any dispute, offset, counterclaim or defense whatsoever (it
being understood that nothing in this sentence shall be deemed a waiver
by the Trust or the Series of its right separately to pursue any claims
it may have against the Distributor and to enforce such claims against
any assets (other than its rights to be paid the Class [ ] Distribution
Fee and to be paid contingent deferred sales charges with respect to
Class [ ] Series shares) of the Distributor).
4. 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 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 1000/935 of such net asset
value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% 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.
5. 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 or by delivery of a share certificate. 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.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or 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 redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class [ ]
shares) upon the terms and conditions set forth in the then current
prospectus of the Trust. The Trust will also remit to the Distributor
(or its designee or transferee), in addition to the Class [ ]
Distribution Fee, any contingent deferred sales charges imposed on
redemptions or repurchases of Class [ ] shares, in accordance with the
Remittance Agreement attached hereto as Exhibit B.
7. 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.
8. Compliance. The Distributor shall conform to the Rules of Fair Practice
of 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
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<PAGE> 4
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.
9. 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.
10. 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.
11. 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.
12. 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.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization 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 NEIC to give
such consent as provided herein. The Distributor consents to the use by
the Series of the name "New England Bullseye 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 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
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<PAGE> 5
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.
14. 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 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.
(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 (excluding for this purpose any assignment
of rights to payment described in the recitals and in Section
19 of the Agreement which are hereby ratified and approved).
(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.
15. 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.
16. 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.
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<PAGE> 6
17. 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.
18. 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.
19. Payments to Distributor's Transferees. The Distributor may transfer its
rights to payments hereunder with respect to Class [ ] shares (but not
its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class [ ] shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class [ ] Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class [ ] shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class [ ] Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class
[ ] shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class [ ] Distribution Fee
which is calculated by reference to the "Distributor's Shares" (nor
shall it pay a Distribution Fee calculated by reference to Class [ ]
shares ("Other Class [ ] Shares") other than the Distributor's Shares
at a rate exceeding 0.75% per annum of the net assets attributable to
Other Class [ ] Shares) to any person other than the Distributor (or
its designee or transferee) without the written consent of the
Distributor. "Distributor's Shares" shall mean (i) Class [ ] shares of
the Series that were sold by the Distributor, plus (ii) Class [ ]
shares of the Series issued in connection with the exchange, for Class
[ ] shares of the Series, of Class [ ] shares of another fund in the
New England fund group that were sold by the Distributor, plus (iii)
Class [ ] shares of the Series issued in connection with the exchange,
for Class [ ] shares of the Series, of Class [ ] shares of another fund
in the New England fund group issued in respect of the automatic
reinvestment of dividends or capital gain distributions in respect of
Class [ ] shares of such other fund that were sold by the Distributor,
plus (iv) Class [ ] shares of the Series issued in respect of the
automatic reinvestment of dividends or capital gain distributions in
respect of Class [ ] shares of the Series described in clauses (i),
(ii) and (iii). To the extent permitted under the 1940 Act, the terms
of this Section 21 shall survive the termination of this Agreement.
22. Limitation on Reduction of Class [ ] Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class [ ] shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class [ ] Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the Distributor.
To the extent permitted under the 1940 Act, the terms of this Section
22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
By:
NEW ENGLAND FUNDS TRUST III, Name:
on behalf of its New England Bullseye series Title:
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<PAGE> 7
NEW ENGLAND FUNDS, L.P. By:
Name:
By: NEF Corporation, its general partner Title:
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<PAGE> 8
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 Bullseye 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.
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<PAGE> 1
EX-99.b9(C)
POWERS OF ATTORNEY
17
<PAGE> 2
POWER OF ATTORNEY
We, the undersigned, hereby constitute Edward A. Benjamin, Frank
Nesvet, Henry L.P. Schmelzer and John E. Pelletier, each of them singly, our
true and lawful attorneys, with full power to them and each of them to sign for
us, and in our names in the capacity indicated below, any and all registration
statements and any and all amendments thereto to be filed with the Securities
and Exchange Commission for the purpose of registering from time to time
investment companies of which we are now or hereafter a Director or Trustee and
to register the shares of such companies and generally to do all such things in
our names and on our behalf to enable such registered investment companies to
comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as it may be signed by our said attorneys and any and all
registration statements and amendments thereto.
Witness our hands on the 31st day of October, 1997.
/s/ GRAHAM T. ALLISON /s/ /s/ SANDRA O. MOOSE /s/
- ----------------------------- -----------------------------------
Graham T. Allison - Trustee Sandra O. Moose - Trustee
/s/ DANIEL M. CAIN /s/ /s/ JOHN A. SHANE /s/
- ----------------------------- -----------------------------------
Daniel M. Cain - Trustee John A. Shane
/s/ KENNETH J. COWAN /s/ /s/ PETER S. VOSS /s/
- ----------------------------- -----------------------------------
Kenneth J. Cowan - Trustee Peter S. Voss - Trustee
/s/ RICHARD DARMAN /s/ /s/ PENDELTON P. WHITE /s/
- ----------------------------- -----------------------------------
Richard Darman - Trustee Pendelton P. White - Trustee
<PAGE> 3
POWER OF ATTORNEY
I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet
and John E. Pelletier, each of them singly, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name in the
capacity indicated below, any and all registration statements and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time investment companies of which I am
now or hereafter a Director or Trustee and to register the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.
Witness my hand on the 31st day of October, 1997.
/s/ HENRY L.P. SHCMELZER
------------------------------------
Henry L.P. Schmelzer - Trustee
<PAGE> 1
EX-99.b15(D)
FORM OF RULE 12b-1 PLAN RELATING TO CLASS A SHARES
18
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
CLASS A SERVICE PLAN
This Plan (the "Plan") entered into on March 15, 1998 constitutes the
Service Plan relating to the Class A shares of New England Bullseye Fund (the
"Series"), a series of New England Funds Trust III, a Massachusetts business
trust (the "Trust").
Section 1. 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 0.25% 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 2. 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, 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 3. This Plan shall continue in effect for a period of more than
one year after March 15, 2000 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
voting on this Plan or such agreement.
Section 4. 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 5. 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 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
-1-
<PAGE> 3
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 7. 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 8. 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, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder, and 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.
2
<PAGE> 1
EX-99.b15(E)
FORM OF RULE 12b-1 PLAN RELATING TO CLASS B SHARES
19
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
CLASS B DISTRIBUTION AND SERVICE PLAN
This Plan (the "Plan") entered into on March 15, 1998 constitutes the
Distribution and Service Plan relating to the Class B shares of NEW ENGLAND
BULLSEYE FUND (the "Series"), a series of New England Funds Trust III, a
Massachusetts business trust (the "Trust").
Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
New England Funds, L.P. ("NEF"), 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") at an annual rate not to exceed 0.25%
of the Series' average daily net assets attributable to the Class B 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; provided, however, that no
Service Fee or other fee that is a "service fee" as defined in Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(or any successor provision thereto) as in effect from time to time (the "NASD
Rule") shall be paid, with respect to Class B shares of the Series, to NEF (or
to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class B shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF), under this Plan or otherwise, if the Distribution
Fee is terminated or is reduced below the rate set forth in Section 2. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. The Distributor may pay all or any portion of
the Service Fee to securities dealers or other organizations (including, but not
limited to, any affiliate of the Distributor) as service fees pursuant to
agreements with such organizations for providing personal services to investors
in Class B shares of the Series and/or the maintenance of shareholder accounts,
and may retain all or any portion of the Service Fee as compensation for
providing personal services to investors in Class B shares of the Series and/or
the maintenance of shareholder accounts. All payments under this Section 1 are
intended to qualify as "service fees" as defined in the NASD Rule.
Section 2. Distribution Fee. In addition to the Service Fee, the Trust,
on behalf of the Series, will pay to the Distributor a fee (the "Distribution
Fee") at an annual rate of 0.75% (unless reduced as contemplated by and
permitted pursuant to the next sentence hereof) of the Series' average daily net
assets attributable to the Class B shares in consideration of the services
rendered in connection with the sale of such shares by the Distributor. The
Trust will not terminate the Distribution Fee in respect of Series assets
attributable to Class B shares, or pay such fee at an annual rate of less than
0.75% of the Series' average daily net assets attributable to the Class B
shares, unless it has ceased, and not resumed, paying the Service Fee (or any
other fee that constitutes a "service fee" as defined in the NASD Rule) to NEF
(or to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class B shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF). Subject to such restriction and subject to the
provisions of Section 7 hereof, the Distribution 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 Distribution Fee shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
The obligation of the Series to pay the Distribution Fee shall
terminate upon the termination of this Plan or the relevant distribution
agreement between the Distributor and the Trust relating to the Series, in
accordance with the terms hereof or thereof, but until any such termination
shall not be
-1-
<PAGE> 3
subject to any dispute, offset, counterclaim or defense whatsoever (it being
understood that nothing in this sentence shall be deemed a waiver by the Trust
or the Series of its right separately to pursue any claims it may have against
the Distributor and enforce such claims against any assets of the Distributor
(other than its right to be paid the Distribution Fee and to be paid contingent
deferred sales charges)).
The right of NEF to receive the Distribution Fee (but not the relevant
distribution agreement or NEF's obligations thereunder) may be transferred by
NEF in order to raise funds which may be useful or necessary to perform its
duties as principal underwriter, and any such transfer shall be effective upon
written notice from NEF to the Trust. In connection with the foregoing, the
Series is authorized to pay all or part of the Distribution Fee directly to such
transferee as directed by NEF.
The Distributor may pay all or any portion of the Distribution Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as commissions, asset-based sales charges or other
compensation with respect to the sale of Class B shares of the Series, and may
retain all or any portion of the Distribution Fee as compensation for the
Distributor's services as principal underwriter of the Class B shares of the
Series. All payments under this Section 2 are intended to qualify as
"asset-based sales charges" as defined in the NASD Rule.
Section 3. This Plan shall continue in effect for a period of more than
one year after March 15, 2000 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
voting on this Plan or such agreement.
Section 4. 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 5. 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 B shares of the Series.
Section 6. 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 B 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 7. This Plan may not be amended to increase materially the
amount of expenses permitted pursuant to Sections 1 or 2 hereof without approval
by a vote of at least a majority of the outstanding Class B 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 8. 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
-2-
<PAGE> 4
in the operation of this Plan or any agreements related to it, and (b) the terms
"assignment" and "interested person" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, and the term
"majority of the outstanding Class B 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.
-3-
<PAGE> 1
EX-99.b15(F)
FORM OF RULE 12b-1 PLAN RELATING TO CLASS C SHARES
20
<PAGE> 2
NEW ENGLAND BULLSEYE FUND
CLASS C DISTRIBUTION AND SERVICE PLAN
This Plan (the "Plan") entered into on March 15, 1997 constitutes the
Distribution and Service Plan relating to the Class C shares of NEW ENGLAND
BULLSEYE FUND (the "Series"), a series of New England Funds Trust III, a
Massachusetts business trust (the "Trust").
Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
New England Funds, L.P. ("NEF"), 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") at an annual rate not to exceed 0.25%
of the Series' average daily net assets attributable to the Class C 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; provided, however, that no
Service Fee or other fee that is a "service fee" as defined in Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(or any successor provision thereto) as in effect from time to time (the "NASD
Rule") shall be paid, with respect to Class C shares of the Series, to NEF (or
to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class C shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF), under this Plan or otherwise, if the Distribution
Fee is terminated or is reduced below the rate set forth in Section 2. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. The Distributor may pay all or any portion of
the Service Fee to securities dealers or other organizations (including, but not
limited to, any affiliate of the Distributor) as service fees pursuant to
agreements with such organizations for providing personal services to investors
in Class C shares of the Series and/or the maintenance of shareholder accounts,
and may retain all or any portion of the Service Fee as compensation for
providing personal services to investors in Class C shares of the Series and/or
the maintenance of shareholder accounts. All payments under this Section 1 are
intended to qualify as "service fees" as defined in the NASD Rule.
Section 2. Distribution Fee. In addition to the Service Fee, the Trust,
on behalf of the Series, will pay to the Distributor a fee (the "Distribution
Fee") at an annual rate of 0.75% (unless reduced as contemplated by and
permitted pursuant to the next sentence hereof) of the Series' average daily net
assets attributable to the Class C shares in consideration of the services
rendered in connection with the sale of such shares by the Distributor. The
Trust will not terminate the Distribution Fee in respect of Series assets
attributable to Class C shares, or pay such fee at an annual rate of less than
0.75% of the Series' average daily net assets attributable to the Class C
shares, unless it has ceased, and not resumed, paying the Service Fee (or any
other fee that constitutes a "service fee" as defined in the NASD Rule) to NEF
(or to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class C shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF). Subject to such restriction and subject to the
provisions of Section 7 hereof, the Distribution 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 Distribution Fee shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
The obligation of the Series to pay the Distribution Fee shall
terminate upon the termination of this Plan or the relevant distribution
agreement between the Distributor and the Trust relating to the Series, in
accordance with the terms hereof or thereof, but until any such termination
shall not be
-1-
<PAGE> 3
subject to any dispute, offset, counterclaim or defense whatsoever (it being
understood that nothing in this sentence shall be deemed a waiver by the Trust
or the Series of its right separately to pursue any claims it may have against
the Distributor and enforce such claims against any assets of the Distributor
(other than its right to be paid the Distribution Fee and to be paid contingent
deferred sales charges)).
The right of NEF to receive the Distribution Fee (but not the relevant
distribution agreement or NEF's obligations thereunder) may be transferred by
NEF in order to raise funds which may be useful or necessary to perform its
duties as principal underwriter, and any such transfer shall be effective upon
written notice from NEF to the Trust. In connection with the foregoing, the
Series is authorized to pay all or part of the Distribution Fee directly to such
transferee as directed by NEF.
The Distributor may pay all or any portion of the Distribution Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as commissions, asset-based sales charges or other
compensation with respect to the sale of Class C shares of the Series, and may
retain all or any portion of the Distribution Fee as compensation for the
Distributor's services as principal underwriter of the Class C shares of the
Series. All payments under this Section 2 are intended to qualify as
"asset-based sales charges" as defined in the NASD Rule.
Section 3. This Plan shall continue in effect for a period of more than
one year after March 15, 2000 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
voting on this Plan or such agreement.
Section 4. 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 5. 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 C shares of the Series.
Section 6. 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 C 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 7. This Plan may not be amended to increase materially the
amount of expenses permitted pursuant to Sections 1 or 2 hereof without approval
by a vote of at least a majority of the outstanding Class C 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 8. 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
-2-
<PAGE> 4
in the operation of this Plan or any agreements related to it, and (b) the terms
"assignment" and "interested person" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, and the term
"majority of the outstanding Class C 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.
-3-
<PAGE> 1
EX-99.b18(A)
RULE 18F-3(d) PLAN FOR NEW ENGLAND FUNDS TRUST I, II, III & IV
21
<PAGE> 2
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND FUNDS TRUST IV
Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940
As amended effective November 15, 1997
Each series ("Fund") of New England Funds Trust I, New England Funds Trust II,
New England Funds Trust III and New England Funds Trust IV (the "Trusts") may
from time to time issue one or more of the following classes of shares: Class A
shares, Class B shares, Class C shares and Class Y shares. Each class is subject
to such investment minimums and other conditions of eligibility as are set forth
in the Funds' prospectuses as from time to time in effect. The differences in
expenses among these classes of shares, and the conversion and exchange features
of each class of shares, are set forth below in this Plan, which is subject to
change, to the extent permitted by law and by the Declaration of Trust and
By-Laws of each Trust, by action of the Board of Trustees of each Trust.
Initial Sales Charge
Class A shares are offered at a public offering price that is equal to their net
asset value ("NAV") plus a sales charge of up to 6.50% of the public offering
price (which maximum may be less for certain Funds, as described in the Funds'
prospectus as from time to time in effect). The sales charges on Class A shares
are subject to reduction or waiver as permitted by Rule 22d-1 under the
Investment Company Act of 1940 (the "1940 Act") and as described in the Funds'
prospectuses as from time to time in effect.
Class B, Class C and Class Y shares are offered at their NAV, without an initial
sales charge.
Contingent Deferred Sales Charge
Purchases of Class A shares of $1 million or more , or purchases by certain
retirement plans as described in the Funds prospectuses, that are redeemed
within one year from purchase are subject to a contingent deferred sales charge
(a "CDSC") of 1% of either the purchase price or the NAV of the shares redeemed,
whichever is less. Class A shares are not otherwise subject to a CDSC.
Class B shares that are redeemed within 6 years from purchase are subject to a
CDSC of up to 5% (4% for shares purchased prior to May 1, 1997) of either the
purchase price or the NAV of the shares redeemed, whichever is less; such
percentage declines the longer the shares are held, as described in the Funds'
prospectuses as from time to time in effect. Class B shares purchased with
reinvested dividends or capital gain distributions are not subject to a CDSC.
The CDSC on Class A and Class B shares is subject to reduction or waiver in
certain circumstances, as permitted by Rule 6c-10 under the 1940 Act and as
described in the Funds' prospectuses as from time to time in effect.
Class C and Class Y shares are not subject to any CDSC.
Service, Administration and Distribution Fees
Class A, Class B and Class C shares pay distribution and service fees pursuant
to plans adopted pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans")
for such classes. There is no 12b-1 Plan for Class Y shares.
Class A, Class B and Class C shares each pay, pursuant to the 12b-1 Plans, a
service fee of up to .25% per annum of the average daily net assets attributable
to such class.
-1-
<PAGE> 3
Class A shares do not pay a distribution fee, with the exception that the Class
A shares of New England Massachusetts Tax Free Income Fund and New England
Limited Term U. S. Government Fund pay, pursuant to the 12b-1 Plans, a
distribution fee of up to .10% per annum of the average daily net assets of such
Fund attributable to Class A shares.
Class B and Class C shares pay, pursuant to the 12b-1 Plans, a distribution fee
of up to .75% per annum of the average daily net assets of such Fund
attributable to such class of shares.
Conversion and Exchange Features
Class B shares automatically convert to Class A shares of the same Fund eight
years after purchase, except that Class B shares purchased through the
reinvestment of dividends and other distributions on Class B shares convert to
Class A shares at the same time as the shares with respect to which they were
purchased are converted. Class Y shares of a Fund purchased through wrap fee
programs offered by certain broker-dealers will, upon termination of the
holder's participation in the wrap fee program and at the discretion of the
broker-dealer, be converted to Class A shares of the same Fund. Class A, Class C
and Class Y shares do not convert to any other class of shares.
Class A shares of any Fund may be exchanged, at the holder's option, for Class A
shares of another Fund without the payment of a sales charge, except that if
Class A shares of New England Adjustable Rate U.S. Government Fund are exchanged
for shares of a Fund with a higher sales charge, then the difference in sales
charges must be paid on the exchange; and except that Class A shares of New
England Intermediate Term Tax Free Fund of New York and New England Intermediate
Term Tax Free Fund of California must have been held for at least six months
before the exchange privilege applies to such shares. The holding period for
determining any CDSC will include the holding period of the shares exchanged.
Class A shares may also be exchanged for Class A shares or Class Y shares of New
England Cash Management Trust or New England Tax Exempt Money Market Trust (the
"Money Market Funds"), in which case the holding period for purposes of
determining the expiration of the CDSC on such shares, if any, will stop and
will resume only when an exchange is made back into Class A shares of a Fund. If
such Money Market Fund shares are subsequently redeemed for cash, they will be
subject to a CDSC to the same extent that the shares exchanged would have been
subject to a CDSC at the time of the exchange into the Money Market Fund. Class
A or Class Y shares of a Money Market Fund so purchased may be exchanged for
Class A shares of a Fund without sales charge or CDSC to the same extent as the
Class A or Class Y shares exchanged for the Money Market Fund Class A or Class Y
shares could have been so exchanged. The holding period for determining any CDSC
for the acquired Fund shares will not include the period during which the Money
Market Fund shares were held, but will include the holding period for the Class
A Fund shares that were exchanged for the Money Market Fund shares.
Class A shares of a Fund acquired in connection with certain deferred
compensation plans offered by New England Life Insurance Company ("NELICO") and
its affiliates to any of their directors, senior officers, agents or general
agents may be exchanged, at the holder's option and with the consent of NELICO,
for Class Y shares of the same Fund or for Class Y shares of any other Fund that
offers Class Y shares.
Class B shares of any Fund may be exchanged, at the holder's option, for Class B
shares of another Fund, without the payment of a CDSC. The holding period for
determining the CDSC and the conversion to Class A shares will include the
holding period of the shares exchanged. Class B shares of any Fund may also be
exchanged for Class B shares of a Money Market Fund, without the payment of a
CDSC. If such Money Market Fund shares are subsequently redeemed for cash, they
will be subject to a CDSC to the same extent that the shares exchanged would
have been subject to a CDSC at the time of the exchange into the Money Market
Fund. If such Money Market Fund shares are exchanged for Class B shares of a
Fund, no CDSC will apply to the exchange, and the holding period for the
acquired shares will include the holding period of the shares that were
exchanged for the Money Market Fund shares (but not the period during which the
Money Market Fund shares were held).
Class C shares of any Fund may be exchanged, at the holder's option, for Class C
shares of any other Fund that offers Class C shares, or for Class A shares of a
Money Market Fund.
-2-
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Class Y shares of any Fund may be exchanged, at the holder's option, for Class Y
shares of any other Fund that offers Class Y shares to the general public, or
for Class A shares of a Money Market Fund or of any other Fund which does not
offer Class Y shares to the general public.
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