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[logo](R)
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
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New England
EQUITY INCOME FUND
[Graphic Omitted]
PROSPECTUS
July 27, 1999
WHAT'S INSIDE
[Graphic Omitted] GOALS, STRATEGIES & RISKS
PAGE 2
[Graphic Omitted] FUND FEES & EXPENSES
PAGE 4
[Graphic Omitted] MANAGEMENT TEAM
PAGE 6
[Graphic Omitted] FUND SERVICES
PAGE 7
[Graphic Omitted] FUND PERFORMANCE
PAGE 19
The Securities and Exchange Commission has not approved the Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Fund or any of its services and for assistance in
opening an account, contact your financial representative or call New England
Funds.
New England Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
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Table of Contents
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GOALS, STRATEGIES & RISKS
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New England Equity Income Fund .......................................... 2
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FUND FEES & EXPENSES
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Fund Fees & Expenses .................................................... 4
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MORE ABOUT RISK
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More About Risk ......................................................... 5
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MANAGEMENT TEAM
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Meet the Fund's Investment Adviser and Subadviser ....................... 6
Meet the Fund's Portfolio Managers ...................................... 6
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FUND SERVICES
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Investing in the Fund ................................................... 7
How Sales Charges are Calculated ........................................ 8
Ways to Reduce or Eliminate Sales Charges ............................... 9
It's Easy to Open an Account ............................................ 10
Buying Shares ........................................................... 11
Selling Shares .......................................................... 12
Selling Shares in Writing ............................................... 13
Exchanging Shares ....................................................... 14
How Fund Shares Are Priced .............................................. 15
Dividends and Distributions ............................................. 16
Tax Consequences ........................................................ 16
Compensation to Securities Dealers ...................................... 17
Additional Investor Services ............................................ 18
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FUND PERFORMANCE
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New England Equity Income Fund .......................................... 19
Glossary of Terms ....................................................... 20
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Fund may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
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[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NEW ENGLAND EQUITY INCOME FUND -----------------------
High X
--------- ------ ------
ADVISER: New England Funds Management, L.P. Mod. X X
("NEFM") --------- ------ ------
Low
SUBADVISER: Vaughan, Nelson, Scarborough &
McCullough, L.P. ("VNSM")
MANAGERS: Margaret M. Buescher and Jean Malo
TICKER SYMBOL: CLASS A CLASS B CLASS C
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NEEIX NEBIX NECEX
INVESTMENT GOAL
The Fund seeks current income and capital growth.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in dividend-paying common stock of medium to large capitalization
companies. VNSM uses rigorous fundamental research and active management to
analyze a broad selection of company or industry sectors and to seek companies
with the following characteristics, although not all of the companies selected
will have these attributes:
x Higher dividend yields compared to the Standard & Poor's Composite Index of
500 Stocks ("S&P 500")
x Higher profitability (return-on-equity) than the market
x Strong and growing cash flows and dividends-to-cash flow ratio
x Low price-to-sales ratio
In selecting investments for the Fund, VNSM employs the following strategy:
o It uses a value-driven investment philosophy that selects stocks selling at a
relatively low value based primarily on its dividend yield over time. It
selects companies that VNSM believes are out-of-favor or misunderstood and
that may provide a growing stream of dividends.
o VNSM starts with an investment universe of 5,000 securities. VNSM then uses
value-driven quantitative screens to seek those companies that generally have
a market capitalization in excess of $2 billion and relative dividend yields
above their 10 year average. These screens create a research universe of 300
to 400 companies.
o VNSM then uses fundamental analysis to build a portfolio of 40 to 50
securities consisting of quality companies in the opinion of VNSM. This
fundamental analysis focuses on the strength of a company's balance sheet,
cash flow growth, dividend coverage and management.
o VNSM will generally sell a stock when its absolute yield falls below 80% of
the S&P 500 yield, when its relative yield falls below its 10-year average,
when the company shows a deteriorating financial condition, or when it has
repeated negative earnings surprises.
The Fund may also invest in:
o Convertible and non-convertible preferred stock.
o Convertible and non-convertible investment grade bonds.
o Foreign securities including American Depository Receipts ("ADRs"), which are
foreign investments issued by a U.S. bank.
o Money market or high quality debt securities for temporary defensive purposes
in response to adverse market, economic or political conditions. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods
of below-average performance in a given stock or in the stock market as a
whole.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a security's value as a result of
changes in interest rates. Generally, the value of fixed-income securities
rises when prevailing interest rates fall and falls when interest rates rise.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in New England Equity Income Fund. The Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The Fund's current
subadviser assumed that function on June 1, 1999. This chart and table reflect
results achieved by the previous subadviser under different investment policies
for periods prior to June 1, 1999.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
[Total Return for Class A Shares]
1996 26.6%
1997 22.6%
1998 2.7%
/\ Highest Quarterly Return: Second Quarter 1997, up 11.7%
\/ Lowest Quarterly Return: Third Quarter 1998, down 13.1%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Russell 1000 Value Index,
an unmanaged subset of stocks from the larger Russell 1000 Index, selected for
their greater value orientation, and the S&P 500, a market value-weighted,
unmanaged index of common stock prices for 500 selected stocks. The Fund changed
its benchmark to the Russell 1000 Value Index to better reflect the Fund's goal
and strategy since VNSM began managing the Fund. The returns are also compared
to the Lipper Equity Income and Morningstar Large Value Averages, each an
average of the total returns of all mutual funds with an investment style
similar to that of the Fund as calculated by Lipper, Inc. and Morningstar, Inc.
You may not invest directly in an index. The Fund's total returns reflect its
expenses and the maximum sales charges you may pay when you buy or redeem the
Fund's shares. The S&P 500 and Russell 1000 Value Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Lipper Equity Income Average
and Morningstar Large Value Average returns have been adjusted for these
expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
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Average Annual Total Returns
(for the periods ended December 31, 1998) Since Class A Since Class B and C
Past 1 Year Inception Inception
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<S> <C> <C> <C>
New England Equity Income Fund:
Class A (inception 11/28/95) -3.2% 15.3%
Class B (inception 9/15/97) -3.0% 1.3%
Class C (inception 9/15/97) 1.0% 4.5%
Russell 1000 Value Index 15.6% 24.2% 16.3%
S&P 500 28.5% 28.1% 27.2%
Lipper Equity Income Average 10.9% 18.9%* 10.6%*
Morningstar Large Value Average 12.3% 19.9%* 10.3%*
* The Lipper and Morningstar Averages were calculated from November 30, 1995 for Class A Shares and September 30,
1997 for Class B and C Shares.
For actual past expenses of Class A, B and C shares, see the section entitled, "Fund Fees & Expenses."
</TABLE>
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[graphic omitted] FUND FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
<TABLE>
<CAPTION>
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CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)(1)(2) 5.75% None None
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Maximum deferred sales charge (load)
(as a percentage of original purchase price
or redemption proceeds, as applicable)(2) (3) 5.00% 1.00%
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Redemption fees None* None* None*
(1) A reduced sales charge on Class A shares applies in some cases. See "Ways to Reduce or Eliminate Sales Charges."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to 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 "How Sales Charges are Calculated."
* Generally, a transaction fee will be charged for expedited payment of redemption proceeds such as by wire or
overnight delivery.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
<CAPTION>
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CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
Management fees 0.70% 0.70% 0.70%
Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%*
Other expenses 0.97% 0.97% 0.97%
Total annual fund operating expenses 1.92% 2.67% 2.67%
Fee waiver and/or expense reimbursement 0.42%** 0.42%** 0.42%**
Net expenses 1.50% 2.25% 2.25%
* 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 National Association of Securities Dealers, Inc.
** NEFM has given a binding undertaking to the Fund to limit the amount of the Fund's total annual fund operating
expenses to 1.50%, 2.25% and 2.25% of the Fund's average daily net assets for Class A, B and C shares, respectively.
This undertaking will be in effect for the life of this Prospectus.
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
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CLASS A CLASS B CLASS C
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(1) (2) (1) (2)
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1 year $ 719 $ 728 $ 228 $ 328 $ 228
3 years $1,022 $1,003 $ 703 $ 703 $ 703
5 years $1,346 $1,405 $1,205 $1,205 $1,205
10 years* $2,263 $2,396 $2,396 $2,585 $2,585
(1) Assumes redemption at end of period
(2) Assumes no redemption at end of period
* Class B shares automatically convert to Class A shares after 8 years;
therefore, Class B amounts are calculated using Class A expenses in years
9 and 10.
<PAGE>
MORE ABOUT RISK
The Fund has principal investment strategies that come with inherent risks. The
following is a list of risks to which the Fund may be subject by investing in
various types of securities or engaging in various practices.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably based upon change in a company's financial
condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES These companies carry special risks,
including narrower markets, limited financial and management resources, less
liquidity and greater volatility than large company stocks.
MANAGEMENT RISK The risk that a strategy used by the Fund's portfolio management
may fail to produce the intended result.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS These transactions are subject to
changes in the underlying security on which such transactions are based. It is
important to note that even a small investment in these types of derivative
securities can have a significant impact on the Fund's exposure to stock market
values, interest rates or the currency exchange rate. These types of
transactions will be used primarily for hedging purposes.
LEVERAGE RISK The risk associated with securities or practices (e.g. borrowing)
that multiply small index or market movements into large changes in value. When
a derivative security (a security whose value is based on another security or
index) is used as a hedge against an offsetting position that the Fund also
holds, any loss generated by the derivative security should be substantially
offset by gains on the hedged instrument, and vice versa. To the extent that a
derivative security is not used as a hedge, the Fund is directly exposed to the
risks of that derivative security and any loss generated by the derivative
security will not be offset by a gain.
INTEREST RATE RISK The risk of market losses attributable to changes in interest
rates. In general, the prices of fixed-income securities rise when interest
rates fall, and fall when interest rates rise.
INFORMATION RISK The risk that key information about a security is inaccurate or
unavailable.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less profitable
investments.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and at the price that the seller would like. This may result
in a loss or may be costly to the Fund.
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged.
VALUATION RISK The risk that a Fund has valued certain securities at a higher
price than it can sell them for.
PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value of mortgage- or asset-backed securities, or real estate investment trusts.
POLITICAL RISK The risk of losses directly attributable to government or
political actions.
YEAR 2000 Many computer systems today cannot distinguish between the year 1900
and the year 2000. New England Funds does not currently anticipate that computer
problems related to the year 2000 will have a material effect on any Fund.
However, there can be no assurances in this area, including the possibility that
year 2000 computer problems could negatively affect communication systems,
investment markets including investments by the Fund or the economy in general.
EURO CONVERSION Many European countries have adopted a single European currency,
the "euro." The consequences of this conversion for foreign exchange rates,
interest rates and the value of European securities are unclear presently. Such
consequences may decrease the value and/or increase the volatility of securities
held by the Fund.
<PAGE>
[graphic omitted] MANAGEMENT TEAM
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MEET THE FUND'S INVESTMENT ADVISER
AND SUBADVISER
The New England Funds family includes mutual 22 funds with a total of over $7
billion in assets under management as of June 30, 1999. New England Funds are
distributed through New England Funds, L.P. (the "Distributor"). This Prospectus
covers New England Equity Income Fund ("the Fund"), which along with the other
New England Stock Funds, New England Bond Funds, New England Star Funds and New
England State Tax-Free Funds, constitute the "New England Funds." New England
Cash Management Trust Money Market Series and New England Tax Exempt Money
Market Trust constitute the "Money Market Funds."
NEW ENGLAND FUNDS MANAGEMENT, L.P.
NEFM, located at 399 Boylston Street, Boston, Massachusetts 02116, serves as the
adviser to the Fund. NEFM is a subsidiary of Nvest Companies, L.P. ("Nvest
Companies"), which is part of an affiliated group including Nvest, L.P., a
publicly-traded company listed on the New York Stock Exchange. Nvest Companies'
14 principal subsidiary or affiliated asset management firms, collectively, had
more than $136 billion in assets under management as of June 30, 1999. NEFM
oversees, evaluates and monitors the subadvisory services provided to the Fund.
It also provides general business management and administration to the Fund.
VNSM makes the Fund's investment decisions.
The combined advisory and subadvisory fees paid by the Fund in 1998 as a
percentage of the Fund's average daily net assets, after waiver or
reimbursement, was 0.41%.
SUBADVISER
VNSM, located at 6300 Chase Tower, Houston, Texas 77002, serves as subadviser to
the Fund. VNSM is a subsidiary of Nvest Companies. Originally incorporated in
1970, VNSM focuses primarily on managing equity and fixed-income funds for
clients who consist of foundations, university endowments and corporate
retirement and family/individual core funds. As of June 30, 1999, VNSM had
approximately $4.25 billion in assets under management.
SUBADVISORY AGREEMENTS
The Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC") which permits NEFM to amend or continue existing
subadvisory agreements when approved by the Fund's Board of Trustees, without
shareholder approval. The exemption also permits NEFM to enter into new
subadvisory agreements with subadvisers that are not affiliated with NEFM, if
approved by the Fund's Board of Trustees. Shareholders will be notified of any
subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, NEFM or VNSM may use brokerage firms that market
the Fund's shares or are affiliated with Nvest Companies, NEFM or VNSM. In
placing trades, VNSM will seek to obtain the best combination of price and
execution, which involves a number of judgmental factors. Such portfolio trades
are subject to applicable regulatory restrictions and related procedures adopted
by the Fund's Board of Trustees.
MEET THE FUND'S PORTFOLIO MANAGERS [graphic omitted]
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the Fund since June 1999. Ms. Buescher,
Principal of VNSM, joined the company in 1994. From 1980 to 1994, she was a
Managing Director and Senior Portfolio Manager for the Texas Commerce Investment
Management Company. Ms. Buescher is also a Chartered Financial Analyst. She
received a B.A. from Vanderbilt University and has over 23 years of investment
experience.
JEAN MALO
Jean Malo has co-managed the Fund since June 1999. Mr. Malo is Chief Investment
Officer and a Principal of VNSM. Previously, he was a Senior Vice President at
Daniel Breen & Co., which was bought by VNSM in 1997. Mr. Malo joined Daniel
Breen & Co. in 1989. He is also a Chartered Financial Analyst. Mr. Malo received
his M.B.A. from ESSEC in Paris, France and has over 21 years of investment
experience.
<PAGE>
[graphic omitted] FUND SERVICES
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INVESTING IN THE FUND
CHOOSING A SHARE CLASS
The Fund offers Class A, Class B and Class C shares to the public. Each class
has different costs associated with buying, selling and holding Fund shares,
which allow you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of shares
is most appropriate for you.
CLASS A SHARES
o You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."
o You pay lower annual expenses than Class B and Class C shares, giving you the
potential for higher returns per share.
o You do not pay a sales charge on orders of $1 million or more, but you may
pay a charge on redemption if you redeem these shares within 1 year of
purchase.
CLASS B SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money
goes to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 6 years
of purchase, as described in the section "How Sales Charges are Calculated."
o Your Class B shares will automatically convert into Class A shares after 8
years, which reduces your annual expenses.
o We will not accept an order for $1 million or more of Class B shares. You
may, however, purchase $1 million or more of Class A shares, which will have
no sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
CLASS C SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money
goes to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 1 year of
purchase.
o Your Class C shares will not automatically convert into Class A shares. If
you hold your shares for longer than 8 years, you'll pay higher expenses than
other classes.
o We will not accept an order for $1 million or more of Class C shares. You
may, however, purchase $1 million or more of Class A shares, which will have
no sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
FUND SERVICES
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HOW SALES CHARGES ARE CALCULATED [graphic omitted]
CLASS A SHARES
The price that you pay when you buy Class A shares ("offering price") is their
net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
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CLASS A SALES CHARGES
YOUR INVESTMENT AS A % OF OFFERING PRICE AS A % OF YOUR INVESTMENT
Less than $ 50,000 5.75% 6.10%
$ 50,000 - $ 99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 or more* 0.00% 0.00%
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*For purchases of Class A shares of the Fund of $1 million or more or purchases
by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Internal
Revenue Code with investments of $1 million or more or that have 100 or more
eligible employees), there is no front-end sales charge, but a contingent
deferred sales charge of 1.00% may apply to redemptions of your shares within
one year of the date of purchase. See the section entitled "Ways to Reduce or
Eliminate Sales Charges."
CLASS B SHARES
The offering price of Class B shares is their net asset value, without a
front-end sales charge. However, there is a contingent deferred sales charge
("CDSC") on shares that you sell within 6 years of buying them. The amount of
the CDSC, if any, declines each year that you own your shares. 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 New
England Fund. The CDSC equals the following percentages of the dollar amounts
subject to the charge:
- ---------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 5.00%
2nd 4.00%
3rd 3.00%
4th 3.00%
5th 2.00%
6th 1.00%
thereafter 0.00%
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CLASS C SHARES
The offering price of Class C shares is their net asset value, without a front-
end sales charge. However, Class C shares are subject to a CDSC of 1.00% on
redemptions made within one year of the date of purchase. The holding period for
determining the CDSC will continue to run after an exchange to Class C shares of
another New England Fund.
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CLASS C CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 1.00%
thereafter 0.00%
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HOW THE CDSC IS APPLIED TO YOUR SHARES
The CDSC is a sales charge you pay when you redeem certain Fund shares.
The CDSC:
o is calculated based on the number of shares you are selling;
o is based on either your original purchase price or the current net asset
value of the shares being sold, whichever is lower;
o is deducted from the proceeds of the redemption, not from the amount
remaining in your account; and
o for year one applies to redemptions through the day one year after the date
on which your purchase was accepted, and so on for subsequent years.
A CDSC WILL NOT BE CHARGED ON:
o increases in net asset value above the purchase price; or
o shares you acquired by reinvesting your dividends or capital gains
distributions.
To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.
EXCHANGES INTO SHARES OF A MONEY MARKET FUND
If you exchange shares of the Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion to Class A
shares stops until you exchange back into shares of another New England Fund. If
you choose to redeem those Money Market Fund shares, a CDSC may apply.
<PAGE>
[graphic omitted] FUND SERVICES
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WAYS TO REDUCE OR ELIMINATE SALES CHARGES
CLASS A SHARES
REDUCING SALES CHARGES
There are several ways you can lower your sales charge, including:
o LETTER OF INTENT -- allows you to purchase Class A shares of any New England
Fund over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest $50,000
or more over 13 months. Purchases in Class B and Class C shares may be used
toward meeting the letter of intent.
o COMBINING ACCOUNTS -- allows you to combine shares of multiple New England
Funds and classes for purposes of calculating your sales charge. You may
combine your purchases with those of qualified accounts of a spouse, parents,
children, siblings, grandparents, grandchildren, in-laws, individual
fiduciary accounts, sole proprietorships, single trust estates and any other
group of individuals acceptable to the Distributor.
These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another New England Fund.
ELIMINATING SALES CHARGES AND CDSC
Class A shares may be offered without front-end sales charges or a CDSC to the
following individuals and institutions:
o Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
o Selling brokers, sales representatives or other intermediaries;
o Fund trustees and other individuals who are affiliated with any New England
Fund or Money Market Fund (this also applies to any spouse, parents,
children, siblings, grandparents, grandchildren and in-laws of those
mentioned);
o Participants in certain Retirement Plans with at least 100 members (one-year
CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in the New England Funds or Money Market Funds
by clients of an adviser or subadviser to any New England Fund or Money
Market Fund.
REPURCHASING FUND SHARES
You may apply proceeds from redeeming Class A shares of the Fund without paying
a sales charge to repurchase Class A shares of any New England Fund. To qualify,
you must reinvest some or all of the proceeds within 120 days after your
redemption and notify New England Funds or your financial representative at the
time of reinvestment that you are taking advantage of this privilege. You may
reinvest your proceeds either by returning the redemption check or by sending a
new 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 for how a
redemption would affect you. If you repurchase Class A shares of $1 million or
more within 30 days after you redeem such shares, the Distributor will rebate
the amount of the CDSC charged on the redemption.
CLASS A, B OR C SHARES
ELIMINATING THE CDSC
As long as we are notified at the time you sell, the CDSC for any share class
will generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total
plan redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or New England Funds.
<PAGE>
FUND SERVICES
-------------
IT'S EASY TO OPEN AN ACCOUNT [graphic omitted]
TO OPEN AN ACCOUNT WITH NEW ENGLAND FUNDS:
1. Read this Prospectus carefully.
2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MINIMUM TO OPEN AN
MINIMUM TO ACCOUNT USING MINIMUM FOR
TYPE OF ACCOUNT OPEN AN ACCOUNT INVESTMENT BUILDER EXISTING ACCOUNTS
<S> <C> <C> <C>
Any account other than those listed below $2,500 $100 $100
Accounts registered under the Uniform
Gifts to Minors Act or the Uniform $2,000 $100 $100
Transfers to Minors Act
Individual Retirement Accounts (IRAs) $ 500 $100 $100
Retirement plans with tax benefits such
as corporate pension, profit sharing and Keogh plans $ 250 $100 $100
Payroll Deduction Investment Programs
for 401(k), SARSEP, SEP, SIMPLE, $ 25 N/A $ 25
403(b)(7) and certain other retirement plans
- --------------------------------------------------------------------------------------------------------
</TABLE>
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or New England Funds at 800-225-5478. For more
information on New England Funds' investment programs, refer to the section
entitled "Additional Investor Services" in this Prospectus.
4. Use the following sections as your guide for purchasing shares.
SELF-SERVICING YOUR ACCOUNT
Buying or selling shares is easy with the services described below:
NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) ("PAL")
800-225-5478, Press 1
NEW ENGLAND FUNDS WEB SITE
www.mutualfunds.com
You have access to your account 24 hours a day by calling PAL from a touch-tone
telephone or by visiting us online.
By using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);
o review your account balance, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
THROUGH YOUR
INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information information
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars for the o Make out a check in U.S. dollars for the
investment amount, payable to "New England investment amount, payable to "New
Funds." Third party checks will generally England Funds." Third party checks will
not be accepted. generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment slip
application to New England Funds, P.O. Box from an account statement. If no slip is
8551, Boston, MA 02266-8551. available, include with the check a
letter specifying the Fund name, your
class of shares, your account number and
the registered account name(s). To make
investing even easier, you can order more
investment slips by calling 800-225-5478.
BY EXCHANGE
[graphic omitted]
o The exchange must be for a minimum of $1,000 o The exchange must be for a minimum of
or for all of your shares. $1,000 or for all of your shares.
o Obtain a current prospectus for the Fund o Call your investment dealer or New
into which you are exchanging by calling England Funds at 800-225-5478 to request
your investment dealer or New England an exchange.
Funds at 800-225-5478.
o See the section entitled "Exchanging
o Call your investment dealer or New England Shares."
Funds to request an exchange.
o See the section entitled "Exchanging
Shares."
BY WIRE
[graphic omitted]
o Call New England Funds at 800-225-5478 to o Instruct your bank to transfer funds to
obtain an account number and wire transfer State Street Bank & Trust Company, ABA#
instructions. Your bank may charge you for 011000028, DDA# 99011538.
such a transfer.
o Specify the Fund name, your class of
shares, your account number and the
registered account name(s). Your bank may
charge you for such a transfer.
AUTOMATIC INVESTING THROUGH INVESTMENT BUILDER
[graphic omitted]
o Indicate on your application that you o Please call New England Funds at
would like to begin an automatic 800-225-5478 for a Service Options Form.
investment plan through Investment Builder A signature guarantee may be required to
and the amount of the monthly investment add this privilege.
($100 minimum).
o Send a check marked "Void" or a deposit o See the section entitled "Additional
slip from your bank account along with Investor Services."
your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union whether it o Call New England Funds at 800-225-5478 to
is a member of the ACH system. add shares to your account through ACH.
o Complete the "Telephone Withdrawal and o If you have not signed up for the ACH
Exchange" and "Bank Information" sections system, please call New England Funds for
on your account application. a Service Options Form. A signature
guarantee may be required to add this
o Mail your completed application to New privilege.
England Funds, P.O. Box 8551, Boston, MA
02266-8551.
</TABLE>
<PAGE>
FUND SERVICES
-------------
SELLING SHARES [graphic omitted]
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See section entitled "Restrictions on Buying,
Selling and Exchanging Shares."
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for information.
BY MAIL
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, the
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to New England Funds, P.O. Box 8551, Boston, MA
02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method
chosen in your letter. If you choose to have your proceeds delivered by
mail, they will generally be mailed to you on the business day after the
request is received. You may also choose to redeem by wire or through ACH
(see below).
BY EXCHANGE
[graphic omitted]
o Obtain a current prospectus for the Fund into which you are exchanging by
calling your investment dealer or New England Funds at 800-225-5478.
o Call New England Funds to request an exchange.
o See the section entitled "Exchanging Shares" for more details.
BY WIRE
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call New England Funds at 800-225-5478 or indicate in your redemption
request letter (see above) that you wish to have your proceeds wired to your
bank.
o Proceeds (less any applicable CDSC) will generally be wired on the next
business day. A wire fee (currently $5.00) will be deducted from the
proceeds.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union whether it is a member of the ACH system.
o Complete the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o If you have not signed up for the ACH system on your application, please
call New England Funds at 800-225-5478 for a Service Options Form.
o Call New England Funds to request a redemption through this system.
o Proceeds (less any applicable CDSC) will generally arrive at your bank
within three business days.
BY SYSTEMATIC WITHDRAWAL PLAN
[graphic omitted]
o Please refer to the section entitled "Additional Investor Services" or call
New England Funds at 800-225-5478 or your financial representative for
information.
o Because withdrawal payments may have tax consequences, you should consult
your tax adviser before establishing such a plan.
By Telephone
[graphic omitted]
o You may receive your proceeds by mail, by wire or through ACH (see above).
o Call New England Funds at 800-225-5478 to choose the method you wish to use
to redeem your shares.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting
the proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the
address of record or not payable to the registered owner(s).
A notary public cannot provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The table shows situations in which additional documentation may be necessary.
Please call your financial representative or New England Funds regarding
requirements for other account types.
SELLER (ACCOUNT TYPE) REQUIREMENTS FOR WRITTEN REQUESTS
- ------------------------------------------------------------------------------
INDIVIDUAL, JOINT, SOLE PROPRIETORSHIP, o The signatures on the letter
UGMA/UTMA (MINOR ACCOUNTS) must include all persons
authorized to sign, including
title, if applicable.
o Signature guarantee, if
applicable (see above).
CORPORATE OR ASSOCIATION ACCOUNTS o The signatures on the letter
must include all persons
authorized to sign, including
title.
OWNERS OR TRUSTEES OF TRUST ACCOUNTS o The signature on the letter
must include all trustees
authorized to sign, including
title.
o If the names of the trustees
are not registered on the
account, please provide a copy
of the trust document
certified within the past 60
days.
o Signature guarantee, if
applicable (see above).
JOINT TENANCY WHOSE CO-TENANTS o The signatures on the letter
ARE DECEASED must include all surviving
tenants of the account.
o Copy of the death certificate.
o Signature guarantee if
proceeds check is issued to
other than the surviving
tenants.
POWER OF ATTORNEY (POA) o The signatures on the letter
must include the
attorney-in-fact, indicating
such title.
o A signature guarantee.
o Certified copy of the POA
document stating it is still
in full force and effect,
specifying the exact Fund and
account number, and certified
within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT PLANS o The signature on the letter
(EXCEPT NEW ENGLAND FUNDS PROTOTYPE must include all signatures of
DOCUMENTS) those authorized to sign,
including title.
o Signature guarantee, if
applicable (see above).
EXECUTORS OF ESTATES, ADMINISTRATORS, o The signature on the letter
GUARDIANS, CONSERVATORS must include those authorized
to sign, including capacity.
o A signature guarantee.
o Certified copy of court
document where signer derives
authority, e.g.: Letters of
Administration,
Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) o Additional documentation and
distribution forms are
required.
* Certification may be made on court documents by the court, usually certified
by the clerk of the court. POA certification may be made by a commercial
bank, broker/member of a domestic stock exchange or a practicing attorney.
<PAGE>
FUND SERVICES
-------------
EXCHANGING SHARES [graphic omitted]
In general, you may exchange shares of your Fund for shares of the same class of
another New England Fund without paying a sales charge or a CDSC (see the
sections entitled "Buying Shares" and "Selling Shares"). The exchange must be
for a minimum of $1,000 (or the total net asset value of your account, whichever
is less), or $100 if made under the Automatic Exchange Plan (see the section
entitled "Additional Investor Services"). All exchanges are subject to the
eligibility requirements of the New England Fund or Money Market Fund into which
you are exchanging. The exchange privilege may be exercised only in those states
where shares of the Fund may be legally sold. For federal income tax purposes,
an exchange of Fund shares for shares of another New England Fund or Money
Market Fund is treated as a sale on which gain or loss may be recognized. Please
refer to the Statement of Additional Information (the "SAI") for more detailed
information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Fund does not anticipate doing so, it reserves the right to suspend
or change the terms of purchasing or exchanging shares. The Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Fund and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of the Fund:
Restriction Situation
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed
(other than a
weekend/holiday)
o During an emergency
o Any other period
permitted by the SEC
The Fund reserves the right to suspend account o With a notice of a
services or refuse transaction requests: dispute between
registered owners
o With suspicion/evidence
of a fraudulent act
The Fund may pay the redemption price in whole or o When it is detrimental
part by a distribution in kind of readily for the Fund to make cash
marketable securities in lieu of cash or may take payments as determined
up to 7 days to pay a redemption request in order in the sole discretion
to raise capital: of the adviser or
subadviser
The Fund may close your account and send you the o When the Fund account
proceeds. You will have 60 days after being falls below a set
notified of the Fund's intention to close your minimum (currently
account to increase the account to the set $1,000 as set by the
minimum. This does not apply to certain qualified Fund's Board of
retirement plans, automatic investment plans or Trustees)
accounts that have fallen below the minimum solely
because of fluctuations in the Fund's net asset
value per share:
The Fund may withhold redemption proceeds until o When redemptions are
the check or funds have cleared: made within 10 calendar
days of purchase by
check or ACH of the
shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
If you hold certificates representing your shares, they must be sent with your
request for it to be honored. The Fund recommends that certificates be sent by
registered mail.
<PAGE>
FUND SERVICES
- -------------
HOW FUND SHARES ARE PRICED [graphic omitted]
"Net asset value" is the price of one share of the Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
New York Stock Exchange (the "Exchange") on the days the Exchange is open for
trading. This is normally 4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 pm, but not later than 8:00 pm
Generally, during times of substantial economic or market change, it
may be difficult to place your order by phone. During these times, you may
deliver your order in person to the Distributor or send your order by mail as
described in "Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (other than short-term obligations) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (remaining maturity of less than 60 days) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current 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 Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may priced by another method that the Fund's Board of
Trustees believes actually reflects fair value.
<PAGE>
FUND SERVICES
-------------
DIVIDENDS AND DISTRIBUTIONS [graphic omitted]
The Fund generally distributes most or all of its net investment income (other
than capital gains) in the form of dividends. The Fund expects to distribute
dividends quarterly. The Fund distributes all net realized long- and short-term
capital gains annually, after applying any available capital loss carryovers.
The Fund's Board of Trustees may adopt a different schedule as long as payments
are made at least annually.
Depending on your investment goals and priorities, you may choose to:
o participate in the Dividend Diversification Program, which allows you to have
all dividends and distributions automatically invested at net asset value in
shares of the same class of another New England Fund registered in your name.
Certain investment minimums and restrictions may apply. For more information
about this program, see the section entitled "Additional Investor Services."
o 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 in the same class of another New England Fund.
o receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in shares of the same class of the Fund at net asset value.
For more information or to change your distribution option, contact New England
Funds in writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a non-retirement plan
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
The Fund intends to meet all requirements of the Internal Revenue Code necessary
to qualify as a "regulated investment company" and thus does not expect to pay
any federal income tax on income and capital gains distributed to shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in the Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that the Fund owned for more than one
year that are designated by the Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another New England Fund or Money Market
Fund is treated as a sale, and any resulting gain or loss may be subject to
federal income tax. If you purchase shares of the Fund shortly before it
declares a capital gain distribution or a dividend, a portion of the purchase
price may be returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
COMPENSATION TO SECURITIES DEALERS
As part of its business strategy, the Fund pays securities dealers that sell
its shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares). Class C shares are subject to a distribution fee of 0.75%
of their average daily net assets. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basis. The Distributor retains the first year
of such fees for Class C shares. Because these distribution fees are paid out of
the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.
The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of the New
England Funds over prior periods, and certain other factors. See the SAI for
more details.
<PAGE>
FUND SERVICES [graphic omitted]
-------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
New England Funds offers a range of retirement plans, including IRAs, SEPs,
SARSEPs, SIMPLEs, 401(k) plans, 403(b) plans and other pension and profit
sharing plans. Refer to the section entitled "It's Easy to Open an Account" for
investment minimums. For more information about our Retirement Plans, call us at
800-225-5478.
INVESTMENT BUILDER PROGRAM
This 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. To join the
Investment Builder Program, please refer to the section entitled "Buying
Shares."
DIVIDEND DIVERSIFICATION PROGRAM
This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of another New England Fund
or Money Market Fund, subject to the 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 front-end sales charge or CDSC on the
dividend record date. Before establishing a Dividend Diversification Program
into any other New England Fund or Money Market Fund, please read its Prospectus
carefully.
AUTOMATIC EXCHANGE PLAN
New England Funds has an automatic exchange plan under which shares of a class
of a Fund are automatically exchanged each month for shares of the same class of
other New England Funds or Money Market Funds. There is no fee for exchanges
made under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage
that you specify in the plan may not exceed, on an annualized basis, 10% of the
value of your Fund account based upon the value of your Fund account on the day
you establish your plan. To establish a Systematic Withdrawal Plan, please refer
to the section entitled "Selling Shares."
NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) ("PAL")
This automated customer service system allows you to have access to your account
24 hours a day by calling 800-225-5478, Press 1. With a touch-tone telephone,
you can obtain information about your current account balance, recent
transactions, Fund prices and recent performance. You may also use PAL to
purchase, exchange or redeem shares in any of your existing accounts. Certain
restrictions may apply.
NEW ENGLAND FUNDS WEB SITE
Visit us at www.mutualfunds.com to review your account balance and recent
transactions, to view daily prices and performance information or to order
duplicate account statements and tax information. You may also go online to
purchase, exchange or redeem shares in any of your existing accounts. Certain
restrictions may apply.
<PAGE>
[graphic omitted] FUND PERFORMANCE
----------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the return that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report, along with the Fund's financial
statements, are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
NEW ENGLAND EQUITY INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
NOV. 15(a) SEPTEMBER 15(a) SEPTEMBER 15(a)
THROUGH THROUGH YEAR ENDED THROUGH YEAR ENDED
DEC. 31, YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1998 1997 1998 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.50 $12.86 $15.15 $17.59 $17.06 $17.59 $17.06 $17.59
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.31 0.25 0.26(b) 0.03 0.13(b) 0.03 0.13(b)
Net Realized and Unrealized Gains
on Investments 0.36 3.11 3.15 0.20(c) 0.60 0.20(c) 0.60 0.21(c)
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations 0.40 3.42 3.40 0.46 0.63 0.33 0.63 0.34
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.04) (0.30) (0.26) (0.26) (0.04) (0.13) (0.04) (0.13)
Distributions From Net Realized
Capital Gains 0.00 (0.83) (0.70) (0.17) (0.06) (0.17) (0.06) (0.17)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.04) (1.13) (0.96) (0.43) (0.10) (0.30) (0.10) (0.30)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $12.86 $15.15 $17.59 $17.62 $17.59 $17.62 $17.59 $17.63
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (d) 3.2 26.6 22.6 2.7 3.7 2.0 3.7 2.0
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets (%)(e) 1.50(f) 1.50 1.50 1.50 2.25(f) 2.25 2.25(f) 2.25
Ratio of Net Investment Income to
Average Net Assets (%) 3.58(f) 2.06 1.76 1.48 1.01(f) 0.73 1.01(f) 0.73
Portfolio Turnover Rate (%) 0 45 33 61 33 61 33 61
Net assets, end of Period (000) $2,064 $2,613 $14,681 $17,839 $9,375 $16,623 $1,596 $2,101
(a) Commencement of Operations.
(b) Per share net investment income has been calculated using the average shares outstanding during the year.
(c) The amount shown for a share outstanding does not correspond with the aggregate net gain/loss on investments for the period
ended December 31, 1998, due the timing of purchases and redemptions of Fund shares in relation to fluctuating market values
of the investments of the Fund.
(d) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations. Periods of
less than one year are not annualized.
(e) The ratio of operating expenses to average net assets without giving effect to the expense limitation in effect would have
been (%):
5.97(f) 3.67 3.10 1.92 3.85(f) 2.67 3.85(f) 2.67
(f) Computed on an annualized basis.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- the price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP APPROACH -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
CAPITAL GAIN DISTRIBUTIONS -- Payments to the Fund's shareholders of profits
earned from selling securities in the Fund's portfolio. Capital gain
distributions are usually paid once a year.
CREDIT RATING -- Independent evaluation of a bond's creditworthiness. This
measurement is usually calculated through an index compiled by companies such as
Standard & Poor's or Moody's. Bonds with a credit rating of BBB or higher by S&P
or Baa or higher by Moody's are generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance is based on the
value and performance of another security or financial instrument.
DISCOUNTED PRICE -- The difference between a bond's current market price and its
face or redemption value.
DIVERSIFICATION -- The strategy of investing in a wide range of companies or
industries to reduce the risk if an individual company or sector of the market
suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price inversely fluctuates with
changes in prevailing interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysts consider past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, these analysts assess
whether a particular stock or group of stocks is undervalued or overvalued at
its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to the Fund's shareholders resulting from the
net interest or dividend income earned by the Fund's portfolio.
INFLATION -- A general increase in prices coinciding with a fall in the real
value of money, as measured by the Consumer Price Index.
INTEREST RATE -- Rate of interest charged for the use of money, usually
expressed at an annual rate.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalization figures may
vary depending upon the index being used and/or the guidelines set by the
portfolio manager.
MATURITY -- The final date on which the payment of a debt instrument (e.g.
bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds
generally have maturities of up to 5 years; intermediate-term bonds between 5
and 15 years; and long-term bonds over 15 years.
NET ASSET VALUE (NAV) -- The market value of one share of the Fund on any given
day without a front-end sales charge or CDSC. It is determined by dividing the
Fund's total net assets by the number of shares outstanding.
PRICE-TO-BOOK RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation (i.e. earnings-to-price
ratio).
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing net
income for the period after preferred stock dividends but before common stock
dividends by the common stock equity (net worth) average for the accounting
period. This tells common shareholders how effectively their money is being
employed.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, selects attractive industries and then companies that
should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in the Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of the Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
YIELD-TO-MATURITY -- The concept used to determine the rate of return an
investor will receive if a long-term, interest-bearing investment, such as a
bond, is held to its maturity date. It takes into account purchase price,
redemption value, time to maturity, coupon yield (the interest rate on a debt
security the issuer promises to pay to the holder until maturity, expressed as
an annual percentage of face value) and the time between interest payments.
<PAGE>
<TABLE>
[GRAPHIC OMITTED]
<S> <C>
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FUND, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE
UPON REQUEST:
ANNUAL AND SEMIANNUAL REPORTS -- Provide
additional information about the Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) --
Provides more detailed information about the
Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this NEW ENGLAND EQUITY INCOME FUND
Prospectus by reference.
TO ORDER A FREE COPY OF THE FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUND AT:
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 800-225-5478
Internet: www.mutualfunds.com
Your financial representative or New England Funds
will also be happy to answer your questions or to
provide any additional information that you may
require.
You can review the Fund's reports and SAI at the
Public Reference Room of the Securities and
Exchange Commission. Text-only copies are
available free from the Commission's Web site at:
www.sec.gov.
Copies of these publications are also available
for a fee by writing or calling the Public
Reference Room of the SEC,
Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
New England Funds, L.P., and other firms selling
shares of New England Funds are members of the
National Association of Securities Dealers, Inc.
(NASD). As a service to investors, the NASD has
asked that we inform you of the availability of a
brochure on its Public Disclosure Program. The
program provides access to information about
securities firms and their representatives.
Investors may obtain a copy by contacting the NASD
at 800-289-9999 or by visiting their Web site at
www.NASDR.com.
(Investment Company Act File No. 811-7345)
XEI51-0799
</TABLE>
<PAGE>
Supplement dated July 27, 1999 to
New England Stock Funds
Statement of Additional Information - Part I dated May 3, 1999
NEW ENGLAND EQUITY INCOME FUND
At a special shareholder meeting held on July 27, 1999, Vaughan, Nelson,
Scarborough & McCullough ("VNSM") was approved as the subadviser for Equity
Income Fund, pursuant to a Subadvisory Agreement dated July 27, 1999. VNSM had
been acting as interim subadviser since June 1, 1999, pursuant to an Interim
Subadvisory Agreement dated June 1, 1999. The annual subadvisory fee rates
payable by the Fund to VNSM and the services provided to the Fund by VNSM under
the Interim Subadvisory Agreement and the Final Subadvisory Agreement are
identical to those fees previously paid to and those services previously
provided by Loomis Sayles to manage the portfolio of the Fund. In addition, VNSM
agreed to voluntarily waive its subadvisory fee under the Interim Agreement
until June 30, 1999.
Effective June 1, 1999, NEFM and VNSM each agreed to continue the binding
undertaking that was currently in effect to limit the amount of the Fund's total
annual fund operating expenses to 1.50%, 2.25% and 2.25% of the average daily
net assets of the Fund's Class A, B and C shares, respectively ("Expense Caps").
Beginning July 1, 1999, VNSM and NEFM split any fee waivers required in
proportion to the management and subadvisory fees collected. NEFM also bears any
additional expense reimbursement above the fee waivers required for the Fund to
meet the relevant Expense Cap.
NEW ENGLAND GROWTH FUND
The first paragraph in the section entitled "MANAGEMENT FEES" on page viii is
revised to read as follows:
Pursuant to an advisory agreement dated August 30, 1996, as amended June 1,
1999, Capital Growth Management Limited Partnership ("CGM") has agreed to manage
the investment and reinvestment of the assets of the Growth Fund, subject to the
supervision of the Board of Trustees of New England Funds Trust I. Under the
advisory agreement, the Fund pays CGM an advisory fee at the annual rate of
0.75% of the first $200 million of the Fund's average daily net assets, 0.70% of
the next $300 million of such assets, 0.65% of such assets in excess of $500
million and 0.60% of such assets in excess of $2 billion. Prior to June 1, 1999,
CGM served as adviser to the Growth Fund pursuant to an advisory agreement
providing for an advisory fee at the annual rate of 0.75% of the first $200
million of the Fund's average daily net assets, 0.70% of the next $300 million
of such assets and 0.65% of such assets in excess of $500 million. Prior to
August 30, 1996, CGM served as adviser to the Growth Fund pursuant to an
advisory agreement providing for an advisory fee at the same rate as that in
effect prior to June 1, 1999.
SP89-0799
<PAGE>
<TABLE>
Supplement dated July 27, 1999 to
New England Funds
Statement of Additional Information - Part II dated May 3, 1999
The section entitled "MISCELLANEOUS INVESTMENT PRACTICES" is amended for the Funds listed below as follows:
<CAPTION>
STRATEGIC INCOME FUND BOND INCOME FUND
- --------------------- ----------------
<S> <C>
Equity Securities Equity Securities
When-issued Securities Mortgage-backed Securities
Asset-backed Securities Asset-backed Securities
Collateralized Mortgage Obligations Collateralized Mortgage Obligations
Repurchase Agreements When-issued Securities
When-issued Securities Convertible Securities
Foreign Currency Hedging Transactions Securities of Emerging Markets
Investments in Closed-End Investment Companies Foreign Currency Hedging Transactions
Futures, Options and Swap Contracts Illiquid Securities (including Rule 144A Securities)
Short Sales Loans of Portfolio Securities
Illiquid Securities (including Rule 144A Securities) Short-term Investments
Loans of Portfolio Securities Money Market Instruments
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
BULLSEYE FUND INTERNATIONAL EQUITY FUND
- ------------- -------------------------
Equity Securities U.S. Equity Securities
U.S. Government Securities U.S. Government Securities
Repurchase Agreements U.S. Corporate Fixed Income Securities
When-issued Securities Lower-quality U.S. Fixed Income Securities
Foreign Securities (Global Markets, Supranational agencies) Repurchase Agreements
Securities of Emerging Markets Zero Coupon Securities
Foreign Currency Hedging Transactions When-issued Securities
Futures, Options and Swap Contracts Foreign Securities (Depository Receipts)
Short Sales Against the Box Foreign Currency Hedging Transactions
Illiquid Securities (including Rule 144A Securities) Investments in Other Investment Companies
Loans of Portfolio Securities Futures, Options and Swap Contracts
Borrowing/Reverse Repurchase Agreements Short Sales Against the Box
Short Term Investments Illiquid Securities (including Rule 144A Securities)
Money Market Instruments Loans of Portfolio Securities
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
GROWTH FUND GROWTH AND INCOME FUND
- ----------- ----------------------
Equity Securities Equity Securities
Corporate Fixed Income Securities (investment grade) Corporate Fixed Income Securities (investment grade)
U.S. Government Securities U.S. Government Securities
Repurchase Agreements Zero Coupon Securities
Zero Coupon Securities Repurchase Agreements
Convertible Securities Convertible Securities
Futures, Options and Swap Contracts Foreign Securities (Global Markets, Supranational agencies)
Short Sales Against the Box Foreign Currency Hedging Transactions
Illiquid Securities (including Rule 144A Securities) Investments in Other Investment Companies
Borrowing/Reverse Repurchase Agreements Futures, Options and Swap Contracts
Short-term Investments Short Sales Against the Box
Money Market Instruments Illiquid Securities (including Rule 144A Securities)
Loans of Portfolio Securities
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
CAPITAL GROWTH FUND BALANCED FUND
- ------------------- -------------
Equity Securities Equity Securities
Corporate Fixed Income Securities (investment grade) Non-Convertible Preferred Stock
U.S. Government Securities Lower Quality Corporate Fixed Income Securities
Repurchase Agreements Repurchase Agreements
Zero Coupon Securities Convertible Securities
Convertible Securities Investments in Other Investment Companies
Foreign Securities (Global Markets, Supranational agencies, Foreign Currency Hedging Transactions
Depository receipts) Futures, Options, and Swap Contracts
Foreign Currency Hedging Transactions Short Sales Against the Box
Investments in Other Investment Companies Illiquid Securities (including Rule 144A Securities)
Futures, Options, and Swap Contracts Loans of Portfolio Securities
Short Sales Against the Box Borrowing/Reverse Repurchase Agreements
Illiquid Securities (including Rule 144A Securities) Short-term Investments
Loans of Portfolio Securities Money Market Instruments
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
VALUE FUND EQUITY INCOME FUND
- ---------- ------------------
Equity Securities Equity Securities
Corporate Fixed Income Securities (investment grade) Corporate Fixed Income Securities (investment grade)
U.S. Government Securities Lower Quality Corporate Fixed Income Securities
Repurchase Agreements U.S. Government Securities
Zero Coupon Securities Zero Coupon Securities
Convertible Securities Convertible Bonds
Foreign Currency Hedging Transactions Foreign Securities (Global Markets)
Investments in Other Investment Companies Securities of Emerging Markets
Futures, Options, and Swap Contracts Foreign Currency Hedging Transactions
Short Sales Against the Box Investments in Other Investment Companies
Illiquid Securities (including Rule 144A Securities) Futures, Options and Swap Contracts
Loans of Portfolio Securities Short Sales Against the Box
Borrowing/ Reverse Repurchase Agreements Illiquid Securities (including Rule 144A Securities)
Short-term Investments Loans of Portfolio Securities
Money Market Instruments Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
</TABLE>
SP90-0799
