-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LqN25ugQhoKkMfRWhuPVLt0kHRdVN9ytEcXnkmtO83X8O6e7YYGNNBwkTJbQ5F6/ SUQrckQxs3z3Yomx0j/3xA== 0000052136-95-000019.txt : 19950901 0000052136-95-000019.hdr.sgml : 19950901 ACCESSION NUMBER: 0000052136-95-000019 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950830 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-11101 FILM NUMBER: 95569144 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 4TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8002831155 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 4TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: INVESTMENT TRUST OF BOSTON FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WORLD INVESTMENT TRUST DATE OF NAME CHANGE: 19680529 497 1 NEW ENGLAND FUNDS TRUST II [LOGO] NEW ENGLAND FUNDS - ------------------------------------------------------------------------------ NEW ENGLAND CAPITAL GROWTH FUND NEW ENGLAND BALANCED FUND NEW ENGLAND GROWTH FUND NEW ENGLAND INTERNATIONAL EQUITY FUND NEW ENGLAND STAR ADVISERS FUND NEW ENGLAND VALUE FUND NEW ENGLAND GROWTH OPPORTUNITIES FUND PROSPECTUS AND APPLICATION FOR GENERAL INFORMATION ON THE FUNDS OR ANY OF THEIR SERVICES AND FOR ASSISTANCE IN OPENING AN ACCOUNT, CONTACT YOUR INVESTMENT DEALER OR CALL THE DISTRIBUTOR TOLL FREE AT 1-800-225-5478. MAY 1, 1995 as Revised August 21, 1995 New England Capital Growth Fund, New England Balanced Fund, New England Growth Fund, New England International Equity Fund, New England Star Advisers Fund and New England Value Fund, series of New England Funds Trust I, and New England Growth Opportunities Fund, a series of New England Funds Trust II, are separate mutual funds (the "Funds" and each a "Fund"). New England Funds Trust I and New England Funds Trust II are referred to in this prospectus as the "Trusts." Each Fund offers three classes of shares to the general public (Classes A, B and C) except that New England Growth Fund offers one class of shares (Class A), to the general public. 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 share purchases. A contingent deferred sales charge ("CDSC"), however, is imposed upon certain redemptions of Class B shares. Class B shares automatically convert to Class A shares eight years after purchase. No initial sales charge or CDSC applies to purchases or redemptions of Class C shares which 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, New England Capital Growth Fund, New England Balanced Fund, New England International Equity Fund, New England Star Advisers Fund, New England Value Fund and New England Growth Opportunities Fund also offer Class Y shares to certain institutional investors. This prospectus sets forth information you should know before investing in the Funds. Please read it carefully and keep it for future reference. A statement of additional information in two parts (the "Statement") about the Funds dated May 1, 1995 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, MA 02116 or call toll free at 1-800-225-5478. The Statement contains more detailed information about the Funds and is incorporated into this prospectus by reference. SHARES OF THE FUNDS 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 OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
Page NEW ENGLAND FUNDS 1 Investment Objectives The investment goal for each Fund. 1 New England Investment Companies and the Funds' Advisers and Subadvisers - ----------------------------------------------------------------------------------------------------------------- FUND EXPENSES AND FINANCIAL INFORMATION 2 Schedule of Fees Sales charges, yearly operating expenses. 4 Financial Highlights Historical information on the Funds' performance. - ----------------------------------------------------------------------------------------------------------------- INVESTMENT STRATEGY 11 How the Funds Pursue Their Objectives 11 Fund Investments - ----------------------------------------------------------------------------------------------------------------- 15 INVESTMENT RISKS It is important to understand the risks inherent in a Fund before you invest. - ----------------------------------------------------------------------------------------------------------------- 20 FUND MANAGEMENT - ----------------------------------------------------------------------------------------------------------------- BUYING FUND SHARES 23 Minimum Investment Everything you need to know to open and add to 23 6 Ways to Buy Fund Shares a New England Funds account. [] Through your investment dealer [] By mail [] By wire transfer [] By Investment Builder [] By electronic purchase through ACH [] By exchange from another New England Fund 24 Sales Charges 27 Reduced Sales Charges (Class A Shares Only) - ----------------------------------------------------------------------------------------------------------------- OWNING FUND SHARES 29 Exchanging Among New England Funds New England Funds offers three convenient ways to exchange Fund shares. 30 Fund Dividend Payments - ----------------------------------------------------------------------------------------------------------------- SELLING FUND SHARES 31 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 32 Repurchase Option An opportunity to reinvest your redemption proceeds (Class A Shares Only) within 120 days for no sales charge. - ----------------------------------------------------------------------------------------------------------------- FUND DETAILS 33 How Fund Share Price is Determined Additional information you may find important. 33 Income Tax Considerations 34 The Funds' Expenses 35 Performance Criteria 36 Additional Facts About the Funds 38 Glossary of Terms
NEW ENGLAND FUNDS INVESTMENT OBJECTIVES NEW ENGLAND CAPITAL GROWTH FUND NEW ENGLAND STAR ADVISERS FUND (the "Capital Growth Fund") (the "Star Advisers Fund") The Fund seeks long-term growth of The Fund seeks long-term growth capital. of capital. Adviser: Loomis, Sayles & Company, L.P. Adviser: New England Investment NEW ENGLAND BALANCED FUND Companies, L.P. (the "Balanced Fund") Subadvisers: Berger Associates, Inc. The Fund seeks a reasonable long-term Founders Asset Management, investment return from a combination of Inc. long-term capital appreciation and Janus Capital Corporation moderate current income. Loomis, Sayles & Company, Adviser: Loomis, Sayles & Company, L.P. L.P., Pasadena, CA NEW ENGLAND VALUE FUND NEW ENGLAND GROWTH FUND (the "Value Fund") (the "Growth Fund") The Fund seeks a reasonable The Fund seeks long-term growth of long-term investment return from capital through investment in equity a combination of market securities of companies whose earnings appreciation and dividend income are expected to grow at a faster rate from equity securities. than the United States economy. Shares Adviser: Loomis, Sayles & of the Growth Fund are currently Company, L.P. offered for sale only to certain Pasadena, CA eligible investors. See "Growth Fund NEW ENGLAND GROWTH Eligibility" on page 24. OPPORTUNITIES FUND Adviser: Capital Growth Management, (the "Growth Opportunities Limited Partnership Fund") NEW ENGLAND INTERNATIONAL EQUITY FUND The Fund seeks opportunities for (the "International Equity Fund") long-term growth of capital and The Fund seeks total return from long- income. term growth of capital and dividend Adviser: New England Funds income, primarily through investment in Management, L.P. international equity securities. Subadviser: Westpeak Investment Adviser: Draycott Partners, Ltd. Advisors, L.P. NEW ENGLAND INVESTMENT COMPANIES AND THE FUNDS' ADVISERS AND SUBADVISERS The investment advisers of each of the Funds, except the Star Advisers Fund, are independently-operated subsidiaries of New England Investment Companies, L.P. ("NEIC"), the fifth-largest publicly traded investment management firm in the United States. NEIC is listed on the New York Stock Exchange and through its subsidiaries or an affiliate manages over $60 billion in assets for individuals and institutions. Each adviser and subadviser operates independently and is staffed by experienced investment professionals. All the advisers and subadvisers apply specialized knowledge and careful analysis to the pursuit of each Fund's objectives. LOOMIS, SAYLES & COMPANY, L.P. ("Loomis Sayles"), with over $35 billion of assets under management, manages portfolios for institutional investors, individuals and mutual funds. Loomis Sayles serves as investment adviser to the Capital Growth, Balanced and Value Funds. DRAYCOTT PARTNERS, LTD. ("Draycott"), a London-based firm, manages the International Equity Fund as well as other international equity portfolios. CAPITAL GROWTH MANAGEMENT, LIMITED PARTNERSHIP ("CGM"), manager of the Growth Fund, has $4.7 billion of assets under management. CGM specializes in managing aggressive growth-oriented equity portfolios for mutual funds and other institutions. NEW ENGLAND INVESTMENT COMPANIES, L.P. ("NEIC") serves as investment adviser to the Star Advisers Fund. BERGER ASSOCIATES, INC. ("Berger") subadvises the Star Advisers Fund, as well as other mutual funds, pension and profit sharing plans and other institutional and private investors. FOUNDERS ASSET MANAGEMENT, INC. ("Founders"), a subadviser of the Star Advisers Fund, has acted as an investment adviser since 1938. JANUS CAPITAL CORPORATION ("Janus Capital") subadvises the Star Advisers Fund and has managed mutual funds since 1969. Janus Capital also advises individual, corporate, charitable and retirement accounts. LOOMIS SAYLES also serves as a subadviser to the Star Advisers Fund. NEW ENGLAND FUNDS MANAGEMENT, L.P. ("NEFM"), investment adviser of the Growth Opportunities Fund, is a newly-organized investment adviser. WESTPEAK INVESTMENT ADVISORS, L.P. ("Westpeak") subadvises the Growth Opportunities Fund and also provides investment management services to other mutual funds and institutional clients, including accounts of New England Mutual Life Insurance Company ("The New England"). FUND EXPENSES AND FINANCIAL INFORMATION SCHEDULE OF FEES Expenses are one of several factors to consider when you invest in the Funds. The following table summarizes your maximum transaction costs from investing in the Funds and estimated annual expenses for each class of the Funds' shares. The Example on the following page shows the cumulative expenses attributable to a hypothetical $1,000 investment in each class of shares of the Funds for the periods specified. SHAREHOLDER TRANSACTION EXPENSES -- PAID DIRECTLY BY SHAREHOLDERS ALL FUNDS NEW ENGLAND (EXCEPT NEW ENGLAND GROWTH FUND) GROWTH FUND -------------------------------- ----------- CLASS A CLASS B CLASS C ------- ------- ------- Maximum Initial Sales Charge Imposed on a Purchase (as a percentage of offering price)(1)(2) ................. 5.75% None None 6.50% Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable)(2) .. (3) 4.00% None (3) Deferred Sales Charge .......... None None None None Redemption Fee ................. None None None None Exchange Fee ................... None None None None (1) A reduced sales charge on Class A shares applies in some cases. (2) Does not apply to reinvested distributions. (3) A 1.00% contingent deferred sales charge applies with respect to any portion of certain purchases of Class A shares greater than $1,000,000 redeemed within approximately 1 year after purchase. See "Sales Charges." ANNUAL OPERATING EXPENSES -- PAID DIRECTLY BY THE FUND, AND INDIRECTLY BY ITS SHAREHOLDERS (as a percentage of net assets)
NEW ENGLAND NEW ENGLAND NEW ENGLAND NEW ENGLAND INTERNATIONAL CAPITAL GROWTH FUND BALANCED FUND GROWTH FUND EQUITY FUND ------------------------- ------------------------- ------------ ----------------------------------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C ------- ------- ------- ------- ------- ------- ------- ------- ------- Management Fees ...... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.68% 0.75% 0.75% 0.75% 12b-1 Fees ........... 0.25 1.00 1.00 0.25 1.00 1.00 0.25 0.25 1.00 1.00 Administrative Services Fees ........ None None None None None None None 0.09 0.09 0.09 Other Expenses ....... 0.63 0.63 0.63 0.40 0.40 0.40 0.26 0.66 0.66 0.66 Total Expenses ....... 1.63 2.38 2.38 1.40 2.15 2.15 1.19 1.75 2.50 2.50 NEW ENGLAND NEW ENGLAND NEW ENGLAND STAR ADVISERS FUND VALUE FUND GROWTH OPPORTUNITIES FUND ------------------------------------- ------------------------------- ---------------------------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C ------- ------- ------- ------- ------- ------- ------- ------- ------- Management Fees ......... 1.05% 1.05% 1.05% 0.75% 0.75% 0.75% 0.70% 0.70% 0.70% 12b-1 Fees .............. 0.25 1.00 1.00 0.25 1.00 1.00 0.25 1.00 1.00 Administrative Services Fees .................... None None None None None None None None None Other Expenses .......... 0.44 0.44 0.44 0.37 0.37 0.37 0.43 0.43 0.43 Total Expenses .......... 1.74 2.49 2.49 1.37 2.12 2.12 1.38 2.13 2.13 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. After fee waiver and expense reduction by the Fund's adviser and/or the Distributor. Without the voluntary limitations, Management Fees would be 0.80%; and Total Expenses would be 1.80% for Class A shares, 2.55% for Class B shares and 2.55% for Class C shares. Other Expenses are based on estimated amounts for the current fiscal year.
The adviser of the International Equity Fund and the Distributor have agreed voluntarily, until further notice to the Fund, to waive certain fees and expenses in order to limit expenses to the following annual rates: 1.75% for Class A shares, 2.50% for the Class B shares and 2.50% for the Class C shares. The Fund's adviser and the Distributor may terminate the voluntary agreements at any time. In that event, the Fund would supplement its prospectus. EXAMPLE You would pay the following expenses on a $1,000 investment assuming (1) a 5% annual return and (2) unless otherwise noted, redemption at period end. The 5% return and expenses in the Example should not be considered indicative of actual or expected Fund performance or expenses, both of which will vary.
NEW ENGLAND NEW ENGLAND NEW ENGLAND NEW ENGLAND INTERNATIONAL CAPITAL GROWTH BALANCED FUND GROWTH FUND EQUITY FUND -------------- ------------- ----------- ----------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C (1) (2) (1) (2) (1) (2) - ----------------------------------------------------------------------------------------------------------------------------------- 1 year .............. $ 73 $ 64 $ 24 $ 24 $ 71 $ 62 $ 22 $ 22 $ 76 $ 74 $ 65 $ 25 $ 25 - ----------------------------------------------------------------------------------------------------------------------------------- 3 years ............. $106 $104 $ 74 $ 74 $ 99 $ 97 $ 67 $ 67 $100 $109 $108 $ 78 $ 78 - ----------------------------------------------------------------------------------------------------------------------------------- 5 years ............. $141 $137 $127 $127 $130 $125 $115 $115 $126 $147 $143 $133 $133 - ----------------------------------------------------------------------------------------------------------------------------------- 10 years......... $240 $253 $253 $272 $216 $229 $229 $248 $200 $252 $265 $265 $284 NEW ENGLAND NEW ENGLAND NEW ENGLAND STAR ADVISERS FUND VALUE FUND GROWTH OPPORTUNITIES ------------------ ---------- -------------------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C (1) (2) (1) (2) (1) (2) - ----------------------------------------------------------------------------------------------------------------------------------- 1 year .................. $ 74 $ 65 $ 25 $ 25 $ 71 $ 62 $ 22 $ 22 $ 71 $ 62 $ 22 $ 22 - ----------------------------------------------------------------------------------------------------------------------------------- 3 years ................. $109 $108 $ 78 $ 78 $ 98 $ 96 $ 66 $ 66 $ 99 $ 97 $ 67 $ 67 - ----------------------------------------------------------------------------------------------------------------------------------- 5 years ................. $128 $124 $114 $114 $129 $124 $114 $114 - ----------------------------------------------------------------------------------------------------------------------------------- 10 years............. $213 $226 $226 $245 $214 $227 $227 $246 (1)Assumes redemption at end of period. (2) Assumes no redemption. 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. New England Star Advisers Fund is a recently organized fund. Federal regulations require that examples for this Fund include information for 1 and 3 years only.
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 Funds. For information about the expenses of the Capital Growth, Balanced, International Equity, Star Advisers, Value and Growth Opportunities Funds' Class Y shares, which differ from the expenses of the Class A, Class B and Class C shares, see "Additional Facts about the Funds." To obtain more information about Class Y shares, please call the Distributor toll-free at 1- 800-225-5478. For additional information about the Funds' fees and other expenses, please see "Fund Management," "Additional Facts about the Funds" and "The Funds" Expenses." A wire fee (currently $5.00) will be deducted from your proceeds if you elect to transfer redemption proceeds by wire. Please keep in mind that the Example shown above is hypothetical. The information above should not be considered a representation of past or future return or expenses; actual return or expenses may be more or less than those shown. FINANCIAL HIGHLIGHTS (For Class A and B shares (and Class C shares in the case of New England Star Advisers Fund) of each Fund outstanding throughout the indicated periods.) The Financial Highlights presented on pages 4 through 10 have been included in financial statements for the Funds. The financial statements for New England Capital Growth, New England Balanced, New England International Equity, New England Star Advisers and New England Value Funds' Class A and B shares (and Class C shares in the case of New England Star Advisers Fund) and for the Class A shares of New England Growth Fund (which has only one class) have been examined by Price Waterhouse LLP, independent accountants. The financial statements for New England Growth Opportunities Fund's Class A shares for the years ended May 31, 1985, 1986, 1987 and 1988, the seven month period ended December 31, 1988 and the years ended December 31, 1989, 1990, 1991, 1992, 1993 and 1994 and the Fund's Class B shares for the period from September 13, 1993 through December 31, 1993 and the year ended December 31, 1994 have been examined by Coopers & Lybrand LLP, independent accountants. The Financial Highlights should be read in conjunction with the financial statements and the notes thereto incorporated by reference in Part II of the Statement. NEW ENGLAND CAPITAL GROWTH FUND
CLASS A CLASS B ----------------------------------------- ----------------------- AUGUST 3(A) SEPT. 13(A) YEAR THROUGH YEAR ENDED THROUGH ENDED DEC. 31, DECEMBER 31, DEC. 31 DEC. 31, ------------- -------------------------- ------------ --------- 1992 1993 1994 1993 1994 - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.50 $14.23 $15.27 $14.79 $15.24 - --------------------------------------------------------------------------------------------------------- Income from investment operations - --------------------------------------------------------------------------------------------------------- Net investment income 0.02 0.00 (0.08) 0.00 (0.08) Net gains or losses on investments (both realized and unrealized) 1.84 1.12 (0.17) 0.53 (0.27) - --------------------------------------------------------------------------------------------------------- Total income from investment operations 1.86 1.12 (0.25) 0.53 (0.35) - --------------------------------------------------------------------------------------------------------- Less distributions Distributions (from net investment income) (0.02) 0.00 0.00 0.00 0.00 Distributions (from net realized capital gains) (0.11) (0.08) 0.00 (0.08) 0.00 - --------------------------------------------------------------------------------------------------------- Total distributions (0.13) (0.08) 0.00 (0.08) 0.00 - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $14.23 $15.27 $15.02 $15.24 $14.89 ========================================================================================================= Total return (%) 14.9 7.9 (1.6) 3.6 (2.3) Ratios/Supplemental data Net assets, end of period (000) $34,772 $98,735 $95,803 $ 6,748 $15,390 Ratio of operating expenses to average net assets (%) 1.00 1.23 1.63 2.29 2.38 Ratio of net investment income (loss) to average net assets (%) 0.74 (0.03) (0.45) (1.15) (1.20) Portfolio turnover rate (%) 15 77 82 77 82 The Fund commenced operations on August 3, 1992. Class B shares were first offered on September 13, 1993. Computed on an annualized basis. A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized. The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitations in effect from August 3, 1992 through September 30, 1993 would have been: (%) 2.20(b) 1.58 2.97(b)
NEW ENGLAND BALANCED FUND CLASS A CLASS B ------------------------------------------------------------------------------------------------------------- SEPT. 13 YEAR YEAR ENDED DECEMBER 31, THROUGH ENDED ---------------------------------------------------------------------------------- DEC. 31, DEC. 31, 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1993 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.34 $10.97 $10.30 $8.94 $9.50 $9.47 $ 8.11 $10.15 $11.16 $12.13 $12.16 $12.11 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income 0.43 0.34 0.23 0.39 0.34 0.35 0.30 0.30 0.31 0.33 0.16 0.26 Net gains or losses on investments (both realized and unrealized) 1.68 1.87 (0.11) 0.50 0.65 (1.34) 2.05 1.10 1.26 (0.65) 0.24 (0.66) - ----------------------------------------------------------------------------------------------------------------------------------- Total income from investment operation 2.11 2.21 0.12 0.89 0.99 (0.99) 2.35 1.40 1.57 (0.32) 0.40 (0.40) - ----------------------------------------------------------------------------------------------------------------------------------- Less distributions - ----------------------------------------------------------------------------------------------------------------------------------- Distributions (from net investment income) (0.48) (0.37) (0.39) (0.33) (0.41) (0.35) (0.30) (0.30) (0.31) (0.33) (0.16) (0.26) Distributions (from net realized capital gains) 0.00 (2.51) (1.09) 0.00 (0.61) 0.00 0.00 (0.09) (0.29) (0.21) (0.29) (0.21) Distributions (from paid-in capital) 0.00 0.00 0.00 0.00 0.00 (0.02) (0.01) 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.48) (2.88) (1.48) (0.33) (1.02) (0.37) (0.31) (0.39) (0.60) (0.54) (0.45) (0.47) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value end of period $10.97 $10.30 $ 8.94 $9.50 $9.47 $8.11 $10.15 $11.16 $12.13 $11.27 $12.11 $11.24 =================================================================================================================================== Total return(%) 23.1 22.1 0.8 10.0 10.4 (10.6) 29.2 13.9 14.2 (2.7) 3.3 (3.4) - ----------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $24,076 $33,332 $46,632 $51,902 $59,405 $52,134 $67,467 $90,527 $158,308 $158,332 $4,691 $21,607 Ratio of operating expenses to average net assets(%) 1.15 1.19 1.52 1.52 1.52 1.58 1.53 1.48 1.40 1.40 2.36 2.15 Ratio of net investment income to average net assets(%) 4.37 3.25 2.33 4.19 3.35 4.00 3.18 2.84 2.66 2.91 1.92 2.16 Portfolio turnover rate(%) 99 91 63 58 111 68 51 38 50 36 50 36 The Fund was changed from an "equity income" fund to a "balanced" fund on March 1, 1990. Results for periods prior to March 1, 1990 reflect former investment policies and are not necessarily representative of results that would have been achieved had the Fund's current investment policies then been in effect. Commencement of offering of Class B shares. Computed on an annualized basis. A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized. In 1987, the Fund's adviser and principal underwriter voluntarily agreed to waive a portion of their fees in order to limit the Fund's expenses (exclusive of trustees' fees) to 1.50% of the Fund's average daily net assets. The ratio of expenses to average net assets without giving effect to the voluntary expense limitation would have been 1.64%.
NEW ENGLAND GROWTH FUND YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------------ 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $6.58 $8.77 $8.88 $7.59 $7.46 $8.49 $ 8.85 $11.19 $10.08 $10.44 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 0.07 0.05 (0.01) 0.28 0.09 0.07 0.10 0.09 0.02 0.11 Net gains or losses on investments (both realized and unrealized) 2.20 1.45 1.62 (0.17) 1.56 0.38 4.92 (0.83) 1.12 (0.84) - ------------------------------------------------------------------------------------------------------------------------------------ Total income from investment operations 2.27 1.50 1.61 0.11 1.65 0.45 5.02 (0.74) 1.14 (0.73) - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions - ------------------------------------------------------------------------------------------------------------------------------------ Distributions (from net investment income) (0.08) (0.07) (0.05) (0.24) (0.11) (0.09) (0.10) (0.09) (0.01) (0.11) Distributions (from net realized capital gains) 0.00 (1.32) (2.85) 0.00 (0.46) 0.00 (2.57) (0.28) (0.77) (0.73) Distributions (from paid-in capital) 0.00 0.00 0.00 0.00 (0.05) 0.00 (0.01) 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (0.08) (1.39) (2.90) (0.24) (0.62) (0.09) (2.68) (0.37) (0.78) (0.84) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.77 $8.88 $7.59 $7.46 $8.49 $8.85 $11.19 $10.08 $10.44 $8.87 ==================================================================================================================================== Total return (%) 34.9 18.6 18.5 1.5 22.3 5.1 56.7 (6.6) 11.3 (7.1) - ------------------------------------------------------------------------------------------------------------------------------------ Ratios/Supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (000) $236,317 $304,381 $440,851 $462,495 $555,659 $614,018 $996,813 $1,173,948 $1,200,515 $988,430 Ratio of operating expenses to average net assets (%) 0.84 0.84 1.29 1.26 1.22 1.23 1.14 1.15 1.18 1.19 Ratio of net investment income to average net assets (%) 0.96 0.62 (0.06) 3.64 1.19 0.77 0.89 0.89 0.16 1.05 Portfolio turnover rate (%) 203 153 154 283 203 185 186 218 145 141 Net investment income per share has been calculated based upon the averages of monthly shares outstanding. A sales charge was not reflected in total return calculations.
NEW ENGLAND INTERNATIONAL EQUITY FUND CLASS A CLASS B ------------------------------------------ --------------------------- MAY 21 YEAR ENDED SEPT. 13 YEAR THROUGH DECEMBER 31, THROUGH ENDED DEC. 31, -------------------------- DEC. 31, DEC. 31, 1992 1993 1994 1993 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.50 $11.80 $14.85 $15.19 $14.81 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income 0.01 0.11 0.00 0.12 0.00 Net gains or losses on investments (both realized and unrealized) (0.63) 3.37 1.19 (0.06) 1.08 - ----------------------------------------------------------------------------------------------------------------------------------- Total income from investment operations (0.62) 3.48 1.19 0.06 1.08 - ----------------------------------------------------------------------------------------------------------------------------------- Less distributions Distributions (from net investment income) (0.01) (0.11) 0.00 (0.12) 0.00 Distributions (from net realized capital gains) 0.00 (0.32) (0.53) (0.32) (0.53) Distributions (from paid-in capital) (0.07) 0.00 (0.01) 0.00 (0.01) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.08) (0.43) (0.54) (0.44) (0.54) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.80 $14.85 $15.50 $14.81 $15.35 =================================================================================================================================== Total return(%) (5.0) 29.4 8.1 0.3 7.3 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $21,731 $80,937 $142,917 $ 9,176 $41,601 Ratio of operating expenses to average net assets(%) 1.50 1.60 1.75 2.50 2.50 Ratio of net investment income to average net assets(%) 0.10 0.24 0.01 (1.69) (0.74) Portfolio turnover rate(%) 62 101 123 101 123 The Fund commenced operations on May 21, 1992. Class B shares were first offered on September 13, 1993. Computed on an annualized basis. A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized. The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitations would have been: (%) 2.89 2.16 1.79 3.36 2.54 Not computed on an annualized basis.
NEW ENGLAND STAR ADVISERS FUND JULY 7, 1994 (a) THROUGH DECEMBER 31 1994 ------------------------------------------- CLASS A CLASS B CLASS C SHARES SHARES SHARES - ------------------------------------------------------------------------------ Net asset value, beginning of period $12.50 $12.50 $12.50 - ------------------------------------------------------------------------------ Income from investment operations - ------------------------------------------------------------------------------ Net investment income 0.05 0.02 0.02 Net gains or losses on investments (both realized and unrealized) 0.75 0.73 0.74 - ------------------------------------------------------------------------------ Total income from investment operations 0.80 0.75 0.76 - ------------------------------------------------------------------------------ Less distributions - ------------------------------------------------------------------------------ Distributions (from net investment income) (0.05) (0.02) (0.02) - ------------------------------------------------------------------------------ Total distributions (0.05) (0.02) (0.02) - ------------------------------------------------------------------------------ Net asset value, end of period $13.25 $13.23 $13.24 ============================================================================== Total return(%)(c) 6.4 6.0 6.0 - ------------------------------------------------------------------------------ Ratios/Supplemental data - ------------------------------------------------------------------------------ Net assets, end of period (000) $91,218 $72,889 $20,096 Ratio of operating expenses to average net assets(%)(d) 1.94(b) 2.69(b) 2.69(b) Ratio of net investment income to average net assets(%) 1.06(b) 0.31(b) 0.31(b) Portfolio turnover rate(%) 100 100 100 (a) Commencement of operations. (b) Computed on an annualized basis. (c) A sales charge of 5.75% (maximum) in the case of Class A shares and a contingent deferred sales charge in the case of Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized. (d) The ratio of operating expenses to average net assets (computed on an annualized basis) for Class A, B and C shares without giving effect to the voluntary expense limitations in effect from July 7, 1994 through December 31, 1994 would have been 1.98%, 2.75% and 2.75%, respectively. NEW ENGLAND VALUE FUND
CLASS A CLASS B ------------------------------------------------------------------------------------------------------------- SEPT. 13 YEAR YEAR ENDED DECEMBER 31, THROUGH ENDED ---------------------------------------------------------------------------------- DEC. 31, DEC. 31, 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1993 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $6.10 $8.06 $8.73 $6.42 $6.07 $6.51 $5.44 $6.69 $7.28 $7.87 $7.97 $7.85 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income 0.14 0.10 0.04 0.20 0.12 0.16 0.13 0.09 0.07 0.08 0.11 0.04 Net gains or losses on investments (both realized and unrealized) 2.00 1.62 0.90 (0.34) 1.25 (1.04) 1.35 1.02 1.16 (0.19) 0.39 (0.20) - ----------------------------------------------------------------------------------------------------------------------------------- Total income from investment operation 2.14 1.72 0.94 (0.14) 1.37 (0.88) 1.48 1.11 1.23 (0.11) 0.50 (0.16) - ----------------------------------------------------------------------------------------------------------------------------------- Less distributions - ----------------------------------------------------------------------------------------------------------------------------------- Distributions (from net investment income) (0.18) (0.14) (0.14) (0.21) (0.12) (0.16) (0.13) (0.09) (0.07) (0.08) (0.05) (0.05) Distributions (from net realized capital gains) 0.00 (0.91) (3.11) 0.00 (0.80) 0.00 (0.10) (0.43) (0.57) (0.41) (0.57) (0.41) Distributions (from paid-in capital) 0.00 0.00 0.00 0.00 (0.01) (0.03) 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.18) (1.05) (3.25) (0.21) (0.93) (0.19) (0.23) (0.52) (0.64) (0.49) (0.62) (0.46) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value end of period $8.06 $8.73 $6.42 $6.07 $6.51 $5.44 $6.69 $7.28 $7.87 $7.27 $7.85 $7.23 =================================================================================================================================== Total return(%) 35.8 24.2 11.6 (2.2) 22.6 (13.6) 27.1 16.6 17.0 (1.4) 6.5 (2.0) - ----------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $79,418 $104,002 $141,775 $136,443 $146,831 $139,248 $145,790 $156,240 $189,779 $190,869 $2,182 $13,830 Ratio of operating expenses to average net assets(%) 0.84 0.90 1.29 1.29 1.29 1.31 1.28 1.32 1.34 1.37 2.16 2.12 Ratio of net investment income to average net assets(%) 1.91 1.28 0.55 3.13 1.69 2.87 1.84 1.26 0.83 1.00 0.05 0.25 Portfolio turnover rate(%) 173 164 202 243 111 68 51 38 40 29 40 29 Commencement of offering of Class B shares. Computed on an annualized basis. A sales charge in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized.
NEW ENGLAND GROWTH OPPORTUNITIES FUND CLASS A CLASS B -------------------------------------------------------------------------------------------- ---------------- SEPT. 13 YEAR SEVEN THROUGH ENDED YEAR ENDED MAY 31, MONTHS YEAR ENDED DECEMBER 31, DEC. 31, DEC. 31, ------------------------------- ENDED ----------------------------------------------- ---------------- 1985 1986 1987 1988 12/31/88 1989 1990 1991 1992 1993* 1994 1993* 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Net assst value, beginning of period $ 8.58 $10.77 $12.70 $11.92 $10.37 $ 9.55 $10.88 $ 9.54 $11.79 $12.20 $12.67 $12.95 $12.66 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income income 0.30 0.35 0.35 0.33 0.19 0.29 0.30 0.26 0.23 0.21 0.22 0.06 0.16 Net gains or losses on investments (both realized and unrealized) 2.43 2.97 0.73 (1.22) 0.25 2.32 (0.76) 2.63 0.86 0.75 (0.10) 0.01 (0.09) - ----------------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 2.73 3.32 1.08 (0.89) 0.44 2.61 (0.46) 2.89 1.09 0.96 0.12 0.07 0.07 - ----------------------------------------------------------------------------------------------------------------------------------- Less distributions - ----------------------------------------------------------------------------------------------------------------------------------- Distributions (from net investment income) (0.29) (0.34) (0.34) (0.35) (0.18) (0.29) (0.30) (0.26) (0.23) (0.21) (0.21) (0.03) (0.14) - ----------------------------------------------------------------------------------------------------------------------------------- Distributions in excess of net investment income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 (0.06) 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- Distributions (from net realized capital gains) (0.25) (1.05) (1.52) (0.30) (1.08) (0.95) (0.56) (0.38) (0.45) (0.27) (0.17) (0.27) (0.17) - ----------------------------------------------------------------------------------------------------------------------------------- Distributions (from paid-in capital) 0.00 0.00 0.00 (0.01) 0.00 (0.04) (0.02) 0.00 0.00 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.54) (1.39) (1.86) (0.66) (1.26) (1.28) (0.88) (0.64) (0.68) (0.49) (0.38) (0.36) (0.31) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.77 $12.70 $11.92 $10.37 $ 9.55 $10.88 $ 9.54 $11.79 $12.20 $12.67 $12.41 $12.66 $12.42 =================================================================================================================================== Total return(%) 32.2 31.3 8.9 (7.3) 7.3 27.6 (4.3) 30.6 9.3 8.0 1.00 0.60 0.60 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $61,688 $72,862 $70,427 $58,552 $55,041 $62,688 $55,726 $70,263 $90,945 $109,168 $104,081 $1,498 $5,185 Ratio of operating expenses to average net assets(%) 0.97 1.00 1.24 1.25 1.33 1.15 1.18 1.23 1.94 1.21 1.28 2.08 1.93 Ratio of net investment income to average net assets (%) 3.08 3.01 2.65 2.90 3.10 2.68 2.92 2.28 1.18 1.70 1.75 0.71 1.10 Portfolio turnover rate (%) 26 21 25 8 83 17 6 12 10 4 6 4 6 Information shown for all years is audited. The accountants' report incorporated by reference in the Statement covers years ended May 31, 1987 through December 31, 1994. Accountants' reports for years ended May 31, 1985 through May 31, 1986 are on file with the SEC. Fiscal year end changed in 1988 from May 31 to December 31. The Fund's former adviser, Back Bay Advisors, L.P., assumed that function on July 27, 1988. Commencement of offering of Class B shares. Until May 18, 1988, the Fund's former adviser, Back Bay Advisors, L.P., voluntarily agreed to limit total Fund expenses to 1.25% of the Fund's average annual net assets. Without such limitation, Fund expenses would have been 1.31% of average net assets. Computed on an annualized basis. A sales charge of 5.75% (maximum) in the case of the Class A shares and a contingent deferred sales charge in the case of the Class B shares are not reflected in total return calculations. Unless otherwise indicated, periods of less than one year are not annualized. * As of January 1, 1993, the Fund discontinued the use of equalization accounting. The Fund's current adviser and subadviser assumed those functions on May 1, 1995. These financial highlights reflect results achieved by earlier advisers under investment policies that are no longer in effect.
INVESTMENT STRATEGY HOW THE FUNDS PURSUE THEIR OBJECTIVES Each Fund is a "diversified" mutual fund, except for the Star Advisers Fund. Investments in each Fund will be pooled with money from other investors in that Fund to invest in a managed and diversified portfolio consisting of securities appropriate to each Fund's investment objective and policies. There can be no assurance that any Fund will achieve its objective. FUND INVESTMENTS [] CAPITAL GROWTH FUND The Capital Growth Fund seeks to attain its objective by investing substantially all of its assets in 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). Investments are selected based on their growth potential; current income is not a consideration. The Fund normally will invest primarily in equity securities of companies with medium to large market capitalization (capitalization of $1 billion to $5 billion and over $5 billion, respectively), but will also invest a portion of its assets in equity securities of companies with relatively small market capitalization (under $1 billion). The Fund's adviser selects investments based upon fundamental research and analysis of individual companies and industries. The adviser selects investments for the Fund based on qualitative and quantitative criteria including, among others, industry dominance and competitive position, consistent earnings growth, a history of high profitability, the adviser's expectation of continued high profitability and overall financial strength, although not every investment will have all of these characteristics. The Fund may invest in foreign securities. [] GROWTH FUND Most of the Growth Fund's investments are normally in common stocks, although the Fund may invest in any type of equity securities. The Fund does not consider current income as a factor in selecting its investments. [] VALUE FUND Substantially all of the Value Fund's investments are normally in equity securities. In selecting investments for the Fund, the emphasis is ordinarily placed on undervalued securities. Although long-term market appreciation is ordinarily the basis for security selection, current income may be a significant consideration when yields appear to be favorable compared to overall opportunities for capital appreciation. The Fund may invest in foreign securities. [] BALANCED FUND The Balanced Fund is "flexibly managed" in that sometimes it invests more heavily in equity securities and at other times it invests more heavily in fixed-income securities, depending on management's view of the economic and investment outlook. Most of the Fund's equity investments are normally in dividend-paying common stocks of recognized investment quality that are expected to achieve growth in earnings and dividends over the long term. In selecting equity investments for the Fund, an emphasis is ordinarily placed on undervalued securities. Fixed-income securities include notes, bonds, non-convertible preferred stock and money market instruments. The Fund invests at least 25% of its assets in fixed-income senior securities and, under normal market conditions, more than 50% of its assets in equity securities. The Fund may invest in foreign securities. [] INTERNATIONAL EQUITY FUND The International Equity Fund seeks to achieve its objective by investing primarily in common stocks, although the Fund may invest in any type of equity securities. Normally the Fund will invest at least 65% of its total assets in equity securities of issuers headquartered outside the United States, and substantially all of its assets (other than cash and short-term investments) in such equity securities or equity securities of issuers (including closed-end investment companies) that derive a substantial part of their revenues or profits from countries outside the United States. Under normal conditions the Fund's portfolio will contain equity securities of issuers from at least three countries outside the United States. The Fund may also engage in certain options and futures transactions. The Fund's adviser will make investment decisions on behalf of the Fund by, first, selecting countries where it anticipates sustainable growth that will exceed current market expectations. Within the selected countries, the adviser will identify economic sectors that appear to present the most potential for risk-adjusted growth and, finally, within the chosen economic sectors, the adviser will select securities that are expected to offer the best value. [] GROWTH OPPORTUNITIES FUND It is normally the policy of the Growth Opportunities Fund to invest in a diversified portfolio of common stocks considered by Westpeak, the Fund's subadviser, to have possibilities for long-term appreciation of capital and income. Emphasis will be given to both undervalued securities ("value" style) and securities of companies with growth potential ("growth" style). The Fund will ordinarily invest substantially all of its assets in equity securities. [] STAR ADVISERS FUND The Star Advisers Fund seeks to attain its objective by investing primarily in equity securities. The Fund may also invest in other securities, as described below. Under normal market conditions, however, at least 65% of the Fund's assets will be invested in equity securities. The Fund may in the discretion of each subadviser invest without limit in securities of foreign issuers (including issuers in emerging markets) as well as in securities of U.S. issuers. For more information about investments in foreign securities, see the next section, "Investment Risks -- Foreign Securities." Capital invested in the Fund will be allocated on a substantially equal basis among four different subadvisers. Each subadviser will manage its segment of the Fund's assets in accordance with that subadviser's own investment style and strategy. NEIC, the adviser of the Star Advisers Fund, believes that a multi-adviser approach to equity investing - one that combines the varied styles of a number of subadvisers in selecting securities for the Fund's portfolio - offers a different investment opportunity than equity funds run by a single adviser using a single style. Any given management style tends to produce better returns than other styles under certain market and economic conditions, and to perform less well under other conditions. Therefore, most single-adviser funds have not consistently maintained superior performance rankings relative to their peers over long periods. The Fund's adviser believes that consistency of results, minimizing under-performance even at the cost of out-performance at times, is likely to produce higher performance over time. The Fund's adviser believes that assigning portfolio management responsi- bility for the Star Advisers Fund to four subadvisers, whose varying styles have resulted in records of success, may increase the likelihood that the Fund may produce superior long-term results for its shareholders, with less variability of return and less risk of persistent under-performance than a single-adviser fund. Of course, past results should not be considered a prediction of future performance, and there is no assurance that the Fund will in fact achieve superior results over any time period. The investment styles described below will be those applied by each of the subadvisers to the segment of the Fund's portfolio for which that subadviser is responsible. BERGER places primary emphasis on established companies which it believes have favorable growth prospects. Berger emphasizes stocks with potential for rapid earnings expansion. Berger seeks companies with the capability to perform well under varying economic conditions, including the ability to compete in the global marketplace. Berger also seeks companies with the ability to market increasing amounts of products or services, in order to increase shareholder equity at an above-average rate. Berger also places considerable emphasis on the quality of the corporate leadership of companies under consideration. Common stocks will generally constitute all or most of the segment of the Fund managed by Berger, but this segment of the portfolio may from time to time take substantial positions in securities convertible into common stocks, and may also purchase preferred stocks, government securities, zero-coupon securities and other senior securities when Berger believes it is appropriate to do so. This segment of the portfolio may also invest in Rule 144A securities (see "Investment Risks -- Miscellaneous" below) and may purchase put and call options on stock indices and futures contracts and options thereon for the purpose of hedging. FOUNDERS' segment of the portfolio will invest primarily in common stocks of well-established, high-quality growth companies with mid or high market capitalization. Founders manages its segment of the Fund's portfolio by investing primarily in established companies with above-average prospects for growth in earnings per share. This segment will invest primarily in mid-cap and large capitalization stocks. Founders believes that mid-cap companies (companies with between $1.5 billion and $3.5 billion of market capitalization) can produce returns close to those of smaller-cap companies, but with less risk because of their stronger infrastructures and performance records and more solid market positions, and that large-capitalization stocks add stability to the portfolio. These companies tend to have strong performance records, with solid continuous operating records of three years or more. Founders' approach to investment management gives greater emphasis to the fundamental financial, marketing and operating characteristics of individual companies, and is less concerned with the short-term impact of changes in macroeconomics and market conditions, than some other investment firms. This segment of the portfolio may invest in bonds, debentures and other corporate obligations when Founders believes that these investments offer opportunity for growth of capital. This segment of the portfolio may also invest in Rule 144A securities and may enter into futures contracts or options thereon for hedging purposes. JANUS CAPITAL pursues the Fund's investment objective by investing substantially all of Janus Capital's segment of the portfolio in common stocks when its portfolio manager believes that the relevant market environment favors profitable investing in such securities. Janus Capital manages its segment of the portfolio to seek long-term capital growth primarily from investing in common stocks of companies of any size, including large, well-established companies and smaller, emerging growth companies. Janus Capital's analysis and selection process focus on stocks with earnings growth potential that may not be recognized by the market. This segment of the portfolio may also invest in preferred stocks, warrants, government securities, corporate bonds and debentures or other debt securities or repurchase agreements when its portfolio manager perceives an opportunity for capital growth from such securities or to receive a return on idle cash. Janus Capital's segment may also invest in Rule 144A securities and may enter into options, futures and forward contracts. LOOMIS SAYLES manages its segment of the portfolio by investing primarily in stocks of small cap companies with good earning growth potential, that Loomis Sayles believes are undervalued by the market. Typically, such companies range in size from $100 million to $500 million in market capitalization, have better than average growth rates at below average price/earnings ratios and have strong balance sheets and cash flow. Loomis Sayles seeks to build a core small cap portfolio of solid growth companies' stock, with a smaller emphasis on speical situations and turnarounds (companies that have experienced significant business problems but with Loomis Sayles belives have favorable prospects for recovery), as well as unrecognized stocks. Under unusual market conditions as determined by any of the four subadvisers, all or any portion of the segment of the portfolio managed by that subadviser may be invested, for temporary, defensive purposes, in short-term debt instruments or in cash. In addition, under normal conditions, a portion of each segment's assets may be invested in short-term assets for liquidity purposes or pending investment in other securities. Short-term investments may include U.S. Government securities, obligations of corporate issuers rated in the top two rating categories by two major rating agencies or, if unrated, determined to be of comparable quality by the subadviser, and repurchase agreements that are fully collateralized by U.S. Government securities. [] ADDITIONAL INFORMATION 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). The Capital Growth, Growth, International Equity, Value and Growth Opportunities Funds seek to attain their objectives by normally investing substantially all of their assets in equity securities. When the particular Fund's adviser or subadviser deems it appropriate, however, the Capital Growth, Growth, Value and Growth Opportunities Funds may, for temporary defensive purposes, hold a substantial portion of their assets in cash or fixed-income investments, including U.S. Government obligations, investment grade (and comparable unrated) corporate bonds or notes, money market instruments and repurchase agreements. Corporate obligations in the lowest investment grade category (rated BBB by Standard & Poor's Corporation ["S&P"] or Baa by Moody's Investors Service, Inc. ["Moody's"]) have some speculative characteristics and may be more adversely affected by changing economic conditions than are higher grade obligations. The International Equity Fund may, for temporary purposes, hold all or any portion of its assets in cash, repurchase agreements, short- term debt obligations of U.S. or foreign corporate issuers or U.S. or foreign government obligations of any maturity rated AAA, AA, A or BBB by S&P, Aaa, Aa, A or Baa by Moody's or unrated but determined by the Fund's adviser to be of comparable quality to securities in those rating categories. No estimate can be made as to when or for how long a Fund will employ these defensive strategies. Under some market conditions, the Balanced Fund may, for temporary purposes, invest less than 50% of its assets in equity securities and the balance in cash and fixed- income investments. INVESTMENT RISKS It is important to understand the following risks inherent in a Fund before you invest. [] EQUITY SECURITIES 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 a Fund may sometimes decrease instead of increase. Each Fund may invest in equity securities of companies with relatively small market capitalization. Securities of such companies may be more volatile than the securities of larger, more established companies and the broad equity market indices. See "Small Companies" below. Each 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. Each 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 vary in some relationship with those of the underlying equity securities. The value of convertible securities that pay dividends or interest, like the value of all 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. The credit risk associated with convertible securities is generally reflected by their being rated, if at all, below investment grade by organizations such as Moody's and S&P. Less than 35% of the Star Advisers Fund's assets will be invested in convertible or debt securities rated below investment grade and unrated convertible or debt securities of comparable quality. All convertible securities purchased by any other Funds will, at the time of purchase, either be rated investment grade by at least one major rating agency or be unrated but determined to be of investment grade quality by the Fund's adviser or subadviser. [] FIXED-INCOME SECURITIES Because interest rates vary, it is impossible to predict the income of a Fund that invests in fixed-income securities for any particular period. Fluctuations in the value of a Fund's investments in fixed-income securities will cause the Fund's net asset value to increase or decrease. Fixed-income securities are subject to market and credit risk. Market risk relates to changes in a security's value as a result of changes in interest rates generally. Credit risk relates to the ability of the issuer to make payments of principal and interest. All fixed-income securities purchased by any Fund, except the Balanced Fund and the Star Advisers Fund, will, at the time of purchase either be rated investment grade by at least one major rating agency or be unrated but determined to be of investment grade quality by the Fund's adviser or subadviser. [] REPURCHASE AGREEMENTS In repurchase agreements, a Fund buys securities from a seller, usually a bank or brokerage firm, with the understanding that the seller will repurchase the securities at a higher price at a later date. Such transactions afford an opportunity for a Fund to earn a return on available cash at minimal market risk, although the Fund may be subject to various delays and risks of loss if the seller is unable to meet its obligation to repurchase. [] SHORT-TERM TRADING Although each Fund seeks long-term growth or return, each Fund may, consistent with its investment objective, engage in portfolio trading in anticipation of, or in response to, changing economic or market conditions and trends. These policies may result in higher turnover rates in the Funds' portfolios, which may produce higher transaction costs and a higher level of taxable capital gains. Portfolio turnover considerations will not limit any Fund's adviser's or subadviser's investment discretion in managing the Fund's assets. Recent portfolio turnover rates of each Fund are set forth above under "Financial Highlights." [] SMALL COMPANIES The Star Advisers Fund, in the discretion of each subadviser, may invest without limit in the securities of companies with smaller capitalization. Investments in companies with relatively small capitalization may involve greater risk than is usually associated with more established companies. These companies often have sales and earnings growth rates which exceed those of companies with larger capitalization. Such growth rates may in turn be reflected in more rapid share price appreciation. However, companies with smaller capitalization often have limited product lines, markets or financial resources and they may be dependent upon a relatively small management group. The securities may have limited marketability and may be subject to more abrupt or erratic movements in price than securities of companies with larger capitalization or the market averages in general. The net asset value of funds that invest in companies with smaller capitalization therefore may fluctuate more widely than market averages. [] LOWER QUALITY FIXED-INCOME SECURITIES (BALANCED AND STAR ADVISERS FUNDS) Fixed-income securities rated BB or lower by S&P or Ba or lower by Moody's (and comparable unrated securities) are of below "investment grade" quality. Lower quality fixed-income securities generally provide higher yields, but are subject to greater credit and market risk, than higher quality fixed-income securities. Lower quality fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to meet principal and interest payments. Achievement of the investment objective of a mutual fund investing in lower quality fixed-income securities may be more dependent on the fund's adviser's own credit analysis than for a fund investing in higher quality bonds. The market for lower quality fixed-income securities may be more severely affected than some other financial markets by economic recession or substantial interest rate increases, by changing public perceptions of this market or by legislation that limits the ability of certain categories of financial institutions to invest in these securities. In addition, the secondary market may be less liquid for lower rated fixed-income securities. This lack of liquidity at certain times may affect the valuation of these securities and may make the valuation and sale of these securities more difficult. During the fiscal year ended December 31, 1994, the Balanced Fund had on average less than 5% of its assets invested in fixed-income securities rated BB or Ba, the rating categories just below investment grade, and B. The Fund had no assets invested in securities rated below these rating categories. During the same period, the Star Advisers Fund had no assets invested in fixed-income securities rated below investment grade. Securities of below investment grade are commonly known as "junk bonds." For more information, see the Statement's "Appendix A -- Description of Bond Ratings." [] FOREIGN SECURITIES (CAPITAL GROWTH, BALANCED, INTERNATIONAL EQUITY, STAR ADVISERS AND VALUE FUNDS) Investments in foreign securities present risks not typically associated with investments in comparable securities of U.S. issuers. There may be less information publicly available about a foreign corporate or government issuer than about a U.S. issuer, and foreign corporate issuers are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions and securities custody costs are often higher than those in the United States, and judgments against foreign entities may be more difficult to obtain and enforce. With respect to certain foreign countries, there is a possibility of governmental expropriation of assets, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in those countries. The receipt of interest on foreign government securities may depend on the availability of tax or other revenues to satisfy the issuer's obligations. The International Equity and Star Advisers Funds' investments in foreign securities may include investments in countries whose economies or securities markets are not yet highly developed. Special considerations associated with these investments (in addition to the considerations regarding foreign investments generally) may include, among others, greater political uncertainties, an economy's dependence on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, highly limited numbers of potential buyers for such securities and delays and disruptions in securities settlement procedures. Most foreign securities in the Capital Growth, Balanced, International Equity, Star Advisers and Value Funds' portfolios will be denominated in foreign currencies or traded in securities markets in which settlements are made in foreign currencies. Similarly, any income on such securities is generally paid to the Fund in foreign currencies. The value of these foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of the Fund's portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of the Fund's income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of the Fund's assets and on the net investment income available for distribution may be favorable or unfavorable. The Capital Growth, Balanced, International Equity, Star Advisers and Value Funds may incur costs in connection with conversions between various currencies. In addition, those Funds 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. [] OPTIONS (INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS) The International Equity and the Star Advisers Fund may each seek to increase its current return by writing covered call options and covered put options, with respect to securities it holds or intends to buy, through the facilities of options exchanges and directly with market makers in the over-the- counter market. A Fund receives a premium from writing a call or put option, which increases the Fund's current return if the option expires unexercised or is closed out at a net profit. At times when a Fund has written call options on a substantial portion of its portfolio, the Fund's ability to profit from changes in market prices of portfolio securities will be limited. Appreciation in securities covering the options would likely be partially or wholly offset by losses on the options. The termination of options positions under such conditions would generally result in the realization of short-term capital losses, which would reduce the Fund's current return. Accordingly, the Fund may seek to realize capital gains to offset realized losses by selling securities. As described in Part II of the Statement, over-the-counter options involve certain special risks (including liquidity and credit risks) not necessarily present with exchange-listed options. A Fund will treat as illiquid any over-the-counter options and assets maintained as "cover" for over-the-counter options that the Fund has written. The options markets of foreign countries are small compared to those of the United States and consequently are characterized in most cases by less liquidity than are the U.S. markets. In addition, foreign markets may be subject to less detailed reporting requirements and regulatory controls than U.S. markets. See "Foreign Securities" above. [] HEDGING TRANSACTIONS (INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS) At the discretion of its adviser or any of its subadvisers, respectively, the International Equity and Star Advisers Funds may engage in foreign currency exchange transactions, in connection with the purchase and sale of portfolio securities, to protect the value of specific portfolio positions or in anticipation of changes in relative values of currencies in which current or future Fund portfolio holdings are denominated or quoted. For more information on foreign currency hedging transactions, see Part II of the Statement. For hedging purposes, the Funds may also buy put or call options on securities that they hold or intend to buy, respectively. In addition to engaging in options transactions on established exchanges, the Funds may purchase over-the-counter options from brokerage firms and other financial institutions. The Funds may invest in options and futures contracts on various stock indices to hedge against changes in the value of securities they hold or expect to acquire. The Funds may also invest in options on stock index futures. Neither Fund will invest more than 5% of its net assets in stock index futures or options on stock index futures that are traded on a U.S. commodities exchange. Certain asset segregation requirements apply when a Fund becomes obligated under a hedging instrument. There is no assurance that the Funds' hedging strategies will be effective. These strategies involve costs and the risk of loss to the Funds. See Part II of the Statement for more information. [] ZERO COUPON BONDS (STAR ADVISERS FUND) The Star Advisers Fund may invest in zero coupon bonds or "strips." Zero coupon bonds do not make regular interest payments; rather, they are sold at a discount from face value. Principal and accrued discount (representing interest accrued but not paid) are paid at maturity. "Strips" are debt securities that are stripped of their interest after the securities are issued, but otherwise are comparable to zero coupon bonds. The market values of "strips" and zero coupon bonds generally fluctuate in response to changes in interest rates to a greater degree than do interest paying securities of comparable term and quality. Under many market conditions, investments in stripped securities may be illiquid, making it difficult for the Fund to dispose of them or determine their current value. [] MISCELLANEOUS (BALANCED, INTERNATIONAL EQUITY AND STAR ADVISERS FUNDS) The International Equity Fund may invest up to 10% of its assets in securities of other investment companies. As a shareholder of an investment company, the Fund may indirectly bear investment management fees of that investment company, which are in addition to the management fees the Fund pays its adviser. No Fund will invest more than 15% of its assets in "illiquid securities," that is, securities which are not readily resalable, which include securities whose disposition is restricted by federal securities laws. The Balanced, International Equity and Star Advisers Funds may purchase Rule 144A securities. These are privately offered securities that can be resold only to certain qualified institutional buyers. Rule 144A securities are treated as illiquid, unless an adviser or subadviser has determined, under guidelines established by New England Funds Trust I's trustees, that the particular issue of Rule 144A securities is liquid. Investment in restricted or other illiquid securities involves the risk that a Fund may be unable to sell such a security at the desired time. Also, a Fund may incur expenses, losses or delays in the process of registering restricted securities prior to resale. The International Equity and Star Advisers Funds may purchase securities on a "when-issued" or "delayed-delivery" basis. This means that a Fund enters into a commitment to buy the security before the security has been issued, or, in the case of a security that has already been issued, to accept delivery of the security on a date beyond the usual settlement period. If the value of a security purchased on a "when-issued" or "delayed delivery" basis falls or market rates of interest increase between the time a Fund commits to buy the security and the delivery date, a Fund, may sustain a loss in value of or yield on the security. For more information on "when-issued" and "delayed delivery" securities, see Part II of the Statement. To the extent the Star Advisers Fund may invest in derivative securities for other than bona fide hedging purposes, such investments may be speculative in nature and may involve additional risks. The Star Advisers Fund is a "non-diversified" fund and as such is not required to meet any diversification requirements under the Investment Company Act of 1940 (the "1940 Act"), although the Fund must meet certain diversification standards to qualify as a "regulated investment company" under the Internal Revenue Code. Since the Fund may invest a relatively high percentage of its assets in the obligations of a limited number of issuers, the Fund may be more susceptible than a more widely-diversified fund to any single economic, political or regulatory occurrence. [] SPECIAL CONSIDERATIONS REGARDING THE MULTI-ADVISER APPROACH (STAR ADVISERS FUND) NEIC, the adviser of the Star Advisers Fund, oversees the portfolio management services provided to the Fund by each of the four subadvisers. The adviser does not, however, determine what investments will be purchased or sold for any segment of the portfolio. Because each subadviser will be managing its segment of the portfolio independently from the other subadvisers, the same security may be held in two different segments of the portfolio, or may be acquired for one segment of the portfolio at a time when another subadviser deems it appropriate to dispose of the security from another segment of the portfolio. Similarly, under some market conditions, one or more of the subadvisers may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another subadviser or subadvisers believe continued exposure to the equity markets is appropriate for their segments of the portfolio. Because each subadviser directs the trading for its own segment of the portfolio, and does not aggregate its transactions with those of the other subadvisers, the Fund may incur higher brokerage costs than would be the case if a single adviser or subadviser were managing the entire portfolio. Also, because each segment of the portfolio will perform differently from the other segments depending upon the investments it holds and changing market conditions, the segment of the Fund's assets managed by a subadviser may be larger or smaller at various times than the segments managed by other subadvisers. Net cash inflows or outflows resulting from sales and redemptions of the Fund shares will, however, be allocated on a substantially equal basis among the four segments of the portfolio. FUND MANAGEMENT The adviser of the Capital Growth Fund, the Balanced Fund and the Value Fund is Loomis Sayles. Founded in 1926, Loomis Sayles, One Financial Center, Boston, Massachusetts 02111, is one of the country's oldest and largest investment counsel firms. In 1994, the Capital Growth Fund, the Balanced Fund and the Value Fund each paid 0.75%, respectively, of their net assets in advisory fees to Loomis Sayles. Richard W. Hurckes, Vice President of Loomis Sayles and Vice President of New England Funds Trust I, and Scott S. Pape, Vice President of Loomis Sayles and New England Funds Trust I, have served as the portfolio managers of the Capital Growth Fund since its inception in 1992. Carol C. McMurtrie, Vice President, Managing Partner and Director of Loomis Sayles and Vice President of New England Funds Trust I, and Tricia H. Mills and Douglas D. Ramos, Vice Presidents of Loomis Sayles and New England Funds Trust I, have served as portfolio managers of the Value Fund since March 1993. Douglas D. Ramos and Meri Anne Beck have served as portfolio managers of the Balanced Fund since 1990; Ms. Beck is also a Vice President of Loomis Sayles and New England Funds Trust I. All of the foregoing persons have been employed by Loomis Sayles for five years except Ms. McMurtrie and Mr. Pape who, prior to the time they joined Loomis Sayles, were Vice President of Addison Capital Management and Equity Portfolio Manger of the Illinois State Board of Investment, respectively. The adviser of the Growth Fund is CGM, One International Place, Boston, Massachusetts 02110. In 1994, the Growth Fund paid 0.68% of its net assets in advisory fees to CGM. CGM, organized in 1989, serves as investment adviser to seven mutual funds and to other institutional investors. The general partner of CGM is a corporation owned in equal shares by Robert L. Kemp and G. Kenneth Heebner, who are officers of New England Funds Trust I. Mr. Heebner, Senior Portfolio Manager of CGM and Senior Vice President of New England Funds Trust I, has served as portfolio manager of the Growth Fund since 1976. NEFM, 399 Boylston Street, Boston, Massachusetts 02116 is the adviser of the Growth Opportunities Fund and has entered into subadvisory arrangements for this Fund with Westpeak, 1050 Walnut Street, Boulder, Colorado 80302. NEFM oversees, evaluates and monitors the subadvisory services provided to the Fund and furnishes general business management and administration to the Fund. NEFM has not previously served as investment adviser to a mutual fund. The Fund pays NEFM a management fee at the annual rate of 0.70% of the first $200 million of the Fund's average net assets, 0.65% of the next $300 million of such assets and 0.60% of such assets in excess of $500 million. NEFM pays Westpeak for providing subadvisory services at the annual rate of 0.50% of the first $25 million of the Fund's average net assets, 0.40% of the next $75 million of such assets, 0.35% of the next $100 million of such assets and 0.30% of such assets in excess of $200 million. The portfolio manager of the Growth Opportunities Fund is Gerald H. Scriver, President and Chief Executive Officer of Westpeak and Vice President of New England Funds Trust II. Mr. Scriver has been with Westpeak since its inception in 1991. Mr. Scriver was Director of Quantitative Strategies of INVESCO from 1989 through 1991. Prior to May 1, 1995, the Fund was advised by a different adviser and paid a lower rate of advisory fees. The International Equity Fund is advised by Draycott, 8 City Road, London EC2Y 1HE. Draycott was organized in 1991 to provide investment advice and management services to institutional investors' accounts and to mutual funds distributed to both institutional and retail customers. Draycott is a member of the Investment Management Regulatory Organization Limited (IMRO), the U.K. regulator of investment advisers. In addition to the Fund, Draycott currently manages three separate investment accounts that invest substantially all of their assets in international equity securities. The International Equity Fund pays Draycott 0.80% of its average daily net assets annually without giving effect to any voluntary expense limitation. Nicholas D. P. Carn, Chief Investment Officer, President and Chief Executive Officer of Draycott, Timothy S. Griffen, Senior Portfolio Manager and Pacific Rim Specialist of Draycott, Gregory D. Eckersley, Portfolio Manager and United Kingdom Specialist of Draycott, and Nigel Hankin, Portfolio Manager and European Specialist of Draycott, have served as the portfolio managers of the International Equity Fund since the Fund's inception in 1992. Prior to Draycott's organization in 1991, Mr. Carn was Managing Director, International Equities Group, Mr. Griffen was a Vice President and Portfolio Manager, Mr. Eckersley was Investment Manager and Mr. Hankin was European Fund Manager, all at CIGNA International Investment Advisors, Ltd. Short-term U.S. cash management services for the International Equity Fund are provided by Back Bay Advisors, L.P., 399 Boylston Street, Boston, Massachusetts 02116, as subadviser to Draycott. For these services, Draycott has agreed to compensate Back Bay Advisors at the annual rate of .08% of the value of the Fund's average daily net assets. The advisory fee rates payable by the Capital Growth, Balanced, Growth, International Equity and Value Funds are higher than those paid by most other mutual funds but are comparable to fee rates paid by many funds that have investment objectives similar to the Funds'. NEIC, 399 Boylston Street, Boston, Massachusetts 02116, serves as the Star Advisers Fund's adviser. NEIC oversees, evaluates and monitors the subadvisers' provision of subadvisory services to the Fund and provides general business management and administration to the Fund. The Fund pays NEIC a management fee at the annual rate of 1.05% of the Fund's average daily net assets. This fee rate payable by the Fund is higher than that paid by most other mutual funds. This difference in the fee rate is partially due to the multi-adviser format. NEIC pays each subadviser an advisory fee at the annual rate of 0.55% of the first $50 million of the average daily net assets of the segment of the Fund that the subadviser manages and 0.50% of such assets in excess of $50 million. The Distributor in its discretion may award an incentive bonus to the subadviser whose segment of the Star Advisers Fund's portfolio has the highest total return for the prior year. Subject to the supervision of NEIC, each subadviser manages its segment of the Star Advisers Fund's portfolio in accordance with the Fund's investment objective and policies, makes investment decisions for that segment of the portfolio, places orders to purchase and sell securities for that segment of the portfolio, and employs professional advisers and securities analysts who provide research services to that segment of the portfolio. The Fund pays no direct fees to any of the subadvisers. Below is a brief description of the subadvisers. BERGER, 210 University Boulevard, Suite 900, Denver, Colorado 80206. Rodney L. Linafelter, Vice President of Berger, has day-to-day responsibility for the management of the segment of the Fund managed by Berger. Kansas City Southern Industries, Inc. ("KCSI") controls Berger. FOUNDERS, 2930 East Third Avenue, Denver, Colorado 80206. To facilitate day-to-day investment management, Founders employs a unique team-and-lead-manager system. The management team for a portfolio or fund is comprised of Founders' Chief Investment Officer Bjorn K. Borgen, a lead portfolio manager, assistant portfolio managers, traders and research analysts. Daily decisions on portfolio selection rest with the lead portfolio manager, who, through participation in the committee process, utilizes the input of other team members in making purchase and sale determinations. Edward F. Keely is lead portfolio manager for the segment of the Fund that is managed by Founders. Mr. Borgen has served as Founders' Chief Investment Officer since 1969 and owns all of Founders' outstanding shares. JANUS CAPITAL, 100 Fillmore Street, Suite 300, Denver, Colorado 80206. Warren B. Lammert has day-to-day management responsibility for those assets of the Fund allocated to Janus Capital where he serves as a portfolio manager and Vice President of Investments. KCSI owns approximately 83% of Janus Capital. LOOMIS SAYLES. Jeffrey C. Petherick, Vice President of Loomis Sayles and New England Funds Trust I, and Mary Champagne, Vice President of Loomis Sayles, have day-to-day management responsibility for the segment of the Fund that is allocated to Loomis Sayles. Mr. Petherick has co-managed the Loomis Sayles segment of the Fund since the Fund's inception. Mr. Petherick was an investment manager at Masco Corporation prior to joining Loomis Sayles in 1990. Ms. Champagne has co-managed the Loomis Sayles segment of the Fund since July 1995. Prior to joining Loomis Sayles in 1993, Ms. Champagne served as a portfolio manager at NBD Bank for 10 years. The general partners of each of Loomis Sayles, NEFM, Westpeak and Back Bay Advisors are special purpose corporations. These corporations are indirect wholly-owned subsidiaries of NEIC, whose sole general partner, New England Investment Companies, Inc., is a wholly-owned subsidiary of The New England. NEIC is also the parent of Draycott. In placing portfolio transactions for the Funds, each adviser or subadviser seeks the best execution. Subject to this policy, the advisers or subadviser may consider sales of shares of the Funds and other mutual funds they manage as a factor in the selection of broker-dealers. Subject to procedures adopted by the trustees of the Trusts, Fund brokerage transactions may be executed by brokers that are affiliated with any adviser or subadviser. Draycott, Westpeak, Loomis Sayles, NEFM and CGM provide executive and other personnel for the management of the Trusts. Each Trust's Board of Trustees supervises the affairs of the Trust. Under agreements between the investment advisers and the Distributor or New England Securities Corporation ("New England Securities"), an affiliate of the Distributor, either the Distributor or New England Securities provides certain administrative services to the Capital Growth, Balanced, Growth, Star Advisers, Value and Growth Opportunities Funds, at no extra cost to those Funds. Under an Administrative Services Agreement between the International Equity Fund and the Distributor, the Distributor provides the Fund with office space, facilities and equipment, services of executive and other personnel and certain administrative services. Under this agreement, the Fund pays the Distributor a fee at the annual rate of 0.10% of the average daily net assets of the Fund's Class A, Class B and Class C shares. Draycott and the Distributor have agreed to reduce their fees and to bear certain operating expenses charged to the International Equity Fund to the extent that the total of such fees and expenses would exceed 1.75% annually of the average daily net assets of the Fund's Class A shares and 2.50% annually of the average daily net assets of the Fund's Class B and Class C shares. Draycott and the Distributor may terminate these expense limitations at any time. BUYING FUND SHARES MINIMUM INVESTMENT $2,500 is the minimum for an initial investment in any Fund and $50 is the minimum for each subsequent investment. There are special initial investment minimums for the following plans: [] $25 (for initial and subsequent investments) for payroll deduction investment programs for 401(k), SARSEP, 403(b)(7) retirement plans and certain other retirement plans. [] $50 for automatic investing through the Investment Builder program. [] $250 for retirement plans with tax benefits such as corporate pension and profit sharing plans, IRAs and Keogh plans. [] $1,000 for accounts registered under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act. [] $1,000 (per Fund) for Portfolio 1,2,3 investment programs and New England Funds All Weather Portfolio. Subsequent investment minimums are $50 per Fund. See Part II of the Statement. 6 WAYS TO BUY FUND SHARES You may purchase Class A, Class B and Class C shares of the Funds (except the Growth Fund, which offers only Class A shares) in the following ways: [LOGO] THROUGH YOUR INVESTMENT DEALER: Many investment dealers have a sales agreement with the Distributor and would be pleased to accept your order. [LOGO] BY MAIL: FOR AN INITIAL INVESTMENT, simply complete an application and return it, with a check payable to New England Funds, P.O. Box 8551, Boston, MA 02266-8551. Proceeds of redemptions of Fund shares purchased by check may not be available for up to ten days after the purchase date. FOR SUBSEQUENT INVESTMENTS, please mail your check to New England Funds, P.O. Box 8551, Boston, MA 02266-8551 along with a letter of instruction or an additional deposit slip from your statements. To make investing even easier, you can also order personalized investment slips by calling 1-800-225-5478. [LOGO] BY WIRE TRANSFER OF FEDERAL FUNDS: FOR AN INITIAL INVESTMENT, call us at 1-800-225-5478 between 8:00 a.m. and 6:00 p.m. (Eastern time) to obtain an account number and wire transfer instructions. USING TELE#FACTS 1-800-346-5984 TELE#FACTS IS NEW ENGLAND FUNDS' AUTOMATED SERVICE SYSTEM THAT GIVES YOU 24-HOUR ACCESS TO YOUR ACCOUNT. THROUGH YOUR TOUCH-TONE TELEPHONE, YOU CAN RECEIVE YOUR CURRENT ACCOUNT BALANCE, YOUR LAST FIVE TRANSACTIONS, FUND PRICES AND RECENT PERFORMANCE INFORMATION. YOU CAN ALSO PURCHASE, SELL OR EXCHANGE CLASS A SHARES OF ANY NEW ENGLAND FUND. FOR A FREE BROCHURE ABOUT TELE#FACTS INCLUDING A CONVENIENT WALLET CARD, CALL US AT 1-800-225-5478. FOR SUBSEQUENT INVESTMENTS, direct your bank to transfer funds to State Street Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Fund (Fund name and class of shares), Shareholder Name, Shareholder Account Number. Funds may be transferred between 9:00 a.m. and 4:00 p.m. (Eastern time). Your bank may charge a fee for this service. [LOGO] BY INVESTMENT BUILDER: Investment Builder is New England Funds' automatic investment plan. You may authorize automatic monthly transfers of $50 or more from your bank checking or savings account to purchase shares of one or more New England Funds. FOR AN INITIAL INVESTMENT, please indicate that you would like to begin an automatic investment plan through Investment Builder on the enclosed application. Indicate the amount of the monthly investment and enclose a void check or 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. [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 us at 1-800-225-5478 between 8 a.m. and 6 p.m. (Eastern time) for instructions or call Tele#Facts at 1-800-346-5984 twenty-four hours a day. If you purchase your shares through ACH, you will receive the net asset value next determined after your order is received. Proceeds of redemptions of Fund shares purchased through ACH may not be available for up to ten days after the purchase date. [LOGO] BY EXCHANGE FROM ANOTHER NEW ENGLAND FUND: You may also purchase shares of a Fund by exchanging shares from another New England Fund. Please see " England Funds" for complete details. TO MAKE INVESTING EASIER, YOU CAN ALSO ORDER PERSONALIZED INVESTMENT SLIPS BY CALLING 1-800-225-5478. GENERAL All purchase orders are subject to acceptance by the Funds and will be effected at the net asset value next determined after the order is received in proper form by State Street Bank and Trust Company ("State Street Bank") (except orders received by your investment dealer before the close of trading on the New York Stock Exchange ["the Exchange"] and transmitted to the Distributor by 5:00 p.m. [Eastern time] on the same day, which will be effected at the net asset value determined on that day). Although the Funds do not anticipate doing so, they reserve 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 New England Funds, L.P. The Funds' "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. GROWTH FUND ELIGIBILITY: Shares of the Growth Fund are currently available for purchase by the following categories of investors only: (1) Shareholders of any fund in the New England Funds (and participants in retirement or salary savings plans that invest in such funds, as such participants) who have accounts established on or before August 3, 1992; (2) Current and retired employees of The New England, its subsidiaries, general agencies or any company affiliated with The New England; (3) Current and former directors and trustees of the Trusts, The New England or its affiliates; (4) Registered representatives of broker-dealers that have selling arrangements with the Distributor relating to the New England Funds; and (5) The spouses, parents, children, siblings, grandparents or grandchildren of any of the above persons. The Growth Fund offers only one class of shares. SALES CHARGES Each Fund (except the Growth 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. The current sales charges are: CAPITAL GROWTH FUND VALUE FUND BALANCED FUND INTERNATIONAL EQUITY FUND STAR ADVISERS FUND GROWTH OPPORTUNITIES FUND SALES CHARGE AS A % OF DEALER'S -------------------------- CONCESSION NET AS % OF VALUE OF TOTAL OFFERING AMOUNT OFFERING INVESTMENT PRICE INVESTED PRICE - -------------------------------------------------------------------------------- Less than $50,000 5.75% 6.10% 5.00% - -------------------------------------------------------------------------------- $50,000 - $99,999 4.50% 4.71% 4.00% - -------------------------------------------------------------------------------- $100,000 - $249,999 3.50% 3.63% 3.00% - ------------------------------------------------------------------------------- $250,000 - $499,999 2.50% 2.56% 2.15% - -------------------------------------------------------------------------------- $500,000 - $999,999 2.00% 2.04% 1.70% - -------------------------------------------------------------------------------- $1,000,000 or more None None * GROWTH FUND SALES CHARGE AS A % OF DEALER'S -------------------------- CONCESSION NET AS % OF VALUE OF TOTAL OFFERING AMOUNT OFFERING INVESTMENT PRICE INVESTED PRICE - -------------------------------------------------------------------------------- Less than $25,000 6.50% 6.95% 5.75% - -------------------------------------------------------------------------------- $25,000 - $49,999 5.50% 5.82% 4.75% - -------------------------------------------------------------------------------- $50,000 - $99,999 4.50% 4.71% 4.00% - -------------------------------------------------------------------------------- $100,000 - $249,999 3.50% 3.63% 3.00% - -------------------------------------------------------------------------------- $250,000 - $499,999 2.50% 2.56% 2.15% - -------------------------------------------------------------------------------- $500,000 - $999,999 2.00% 2.04% 1.70% - -------------------------------------------------------------------------------- $1,000,000 or more None None * *The Distributor may, at its discretion, pay investment dealers who initiate and are responsible for such purchases a commission of up to the following amounts: 1% on the first $2 million invested; .80% on the next $1 million; .20% on the next $2 million; and .08% on the excess over $5 million. These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. CONTINGENT DEFERRED SALES CHARGE (CLASS A SHARES ONLY). For purchases of $1,000,000 or more of Class A shares of the Funds, 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 the New England Cash Management Trust Money Market Series or U.S. Government Series or the New England Tax Exempt Money Market Trust (the "Money Market Funds"), then the one-year holding period for purposes of determining the expiration of the CDSC will stop and will resume only when an exchange is made back into Class A shares of a series of the Trusts. For purposes of the CDSC, it is assumed that the shares held the longest are the first to be redeemed. No CDSC applies to a redemption of shares followed by a reinvestment effected within 30 days after the date of the redemption. CLASS B SHARES Class B shares are offered at net asset value, without an initial sales charge, 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 to a CDSC if they are redeemed within 5 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 any 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 the Trusts, then a CDSC applies on the redemptions, 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. 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 same 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: CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE - ------------------- ------------------------ 1st ................................................. 4% 2nd ................................................. 3% 3rd ................................................. 3% 4th ................................................. 2% 5th ................................................. 1% thereafter .......................................... 0% 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, 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 or CDSC; are subject to a 0.25% annual service fee and a 0.75% annual distribution fee; and do not convert into another class. CLASS Y SHARES Each Fund (except the Growth Fund) also offers a fourth class of shares (which are not available to the general public) to certain qualified investors. See "Additional Facts About the Funds" below. 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. 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 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 five 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 five 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 Code Sections 401(a) or 403(b)(7) when such redemptions are necessary to make distributions to plan participants; (2) distributions from an IRA due to death, disability or a tax-free return of an excess contribution; (3) distributions by other employee benefit plans to pay benefits; and (4) distributions by a Section 401(a) plan due to death. For 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 Internal Revenue 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 "Systematic Withdrawal Plan" below. The Funds receive 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 a Trust to another series of a Trust 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 to investment dealers from time to time. The staff of the SEC is of the view that dealers receiving all or substantially all of the sales charge may be deemed underwriters of a fund's shares. For new amounts invested, the Distributor may, at its expense, pay investment dealers who sell shares of the Funds at net asset value to an eligible governmental authority .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 of the Funds or 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 Funds. In some instances these incentives are provided to certain dealers who achieve sales goals or who have sold or may sell significant amounts of shares. New England Funds, L.P., from time to time, may provide financial assistance programs to dealers in connection with conferences, sales or training programs, seminars, advertising and sales campaigns and/or shareholder services arrangements. Certain dealers who have sold or may sell significant amounts of shares also may receive compensation in the form of payment for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives to locations, within or outside of the U. S., for educational seminars or meetings of a business nature. The Distributor may provide non-cash incentives for achievement of specified sales levels by representatives of participating broker-dealers and financial institutions. Such incentives include, but are not limited to, merchandise from gift catalogues or other sources, gift certificates or vouchers through membership in the New England Funds Flagship Club. The participation of representatives in such incentive programs is at the discretion of the broker-dealer or financial institution with which the representative is associated. REDUCED SALES CHARGES (CLASS A SHARES ONLY) [] LETTER OF INTENT -- if aggregate purchases of all series and classes of the Trusts over a 13-month period will reach a breakpoint (a dollar amount at which a lower sales charge applies), smaller individual amounts can be invested at the sales charge applicable to that breakpoint. [] COMBINING ACCOUNTS -- purchases by all qualifying accounts of all series and classes of the Trusts (which do not include the Money Market Funds unless the shares were purchased through an exchange from a series of the Trusts) may be combined with purchases of qualifying accounts of a spouse, parents, children, siblings, grandparents or grandchildren, individual fiduciary accounts, sole proprietorships and/or single trust estates. The values of all accounts are combined to determine the sales charge. [] UNIT HOLDERS OF UNIT INVESTMENT TRUSTS -- unit investment trust distributions of less than $1 million may be invested in Class A shares of any 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 a Fund is a legally permissible investment and that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment company. [] CLIENTS OF AN ADVISER OR SUBADVISER (AFFILIATED WITH NEIC) -- no sales charge or CDSC applies to investments of $100,000 or more in the Funds by (1) clients of an adviser or subadviser (affiliated with NEIC) to any series of the Trusts; any director, officer or partner of a client of an adviser or subadviser (affiliated with NEIC) to any series of the Trusts; and the parents, spouses and children of the foregoing; (2) any individual who is a participant in a Keogh or IRA Plan under a prototype Plan document of an adviser or subadviser (affiliated with NEIC) to any series of the Trusts if at least one participant in the plan qualifies under category (1) above; and (3) an individual who invests through an IRA and is a participant in an employee benefit plan that is a client of an adviser or subadviser (affiliated with NEIC) to any series of the Trusts. Any investor eligible for these arrangements should so indicate in writing at the time of the purchase. [] Shares of the Funds may be purchased at net asset value with no sales charge or CDSC by advisory accounts through investment advisers that are registered under the Investment Advisers Act of 1940 and affiliated with broker-dealers. [] Current shareholders of the Growth Opportunities Fund who were participants in a certain Trust Securities Program, administered through State Street Bank, may purchase additional shares of the Growth Opportunities Fund at net asset value. [] There is no sales charge or CDSC related to investments by 401(a), 401(k), 457 or 403(b) plans that have total investment assets equal to or in excess of $5 million. [] There is no sales charge, CDSC or initial investment minimum related to investments by certain current and retired employees of the Trusts' investment advisers or subadvisers (affiliated with NEIC), the Distributor or any other company affiliated with The New England; current and former directors and trustees of the Trusts or their predecessor companies; agents and general agents of The New England and its insurance company subsidiaries; current and retired employees of such agents and general agents; registered representatives of broker-dealers that have selling arrangements with the Distributor; the spouse, parents, children, siblings, grandparents or grandchildren of the persons listed above; any trust, pension, profit sharing or other benefit plan for any of the foregoing persons; and any separate account of The New England or of any insurance company affiliated with The New England. [] Shareholders of Reich and Tang Government Securities Trust may exchange their shares of that fund for Class A shares of any series of the Trusts 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. 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 of the series of the Trusts) for the Class A shares of any other series of the Trusts (except the New England Growth Fund, which is subject to special eligibility restrictions) without paying a sales charge. Class A shares of the New England Intermediate Term Tax Free Fund of California and New England Intermediate Term Tax Free Fund of New York (and shares of the Money Market Funds acquired through exchanges of such shares) may be exchanged for Class A shares of the Funds at net asset value only if you have held them for at least six months; otherwise, sales charges apply to the exchange. If you exchange your Class A shares of the New England Adjustable Rate U.S. Government Fund (the "Adjustable Rate Fund") for shares of another fund 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 fund 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 Fund shares at the applicable sales charge. CLASS B SHARES You may exchange Class B shares of any Fund or 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 (except New England Growth Fund). 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. AUTOMATIC EXCHANGE PLAN THE FUNDS HAVE 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 SERIES OF THE TRUSTS (OTHER THAN THE GROWTH FUND, WHICH IS AVAILABLE ONLY TO CERTAIN ELIGIBLE INVESTORS). THE MINIMUM MONTHLY EXCHANGE AMOUNT UNDER THE PLAN IS $50. THERE IS NO FEE FOR EXCHANGES MADE PURSUANT TO THIS PROGRAM, BUT THERE MAY BE A SALES CHARGE AS DESCRIBED ON THIS PAGE. CLASS C SHARES You may exchange Class C shares of the Funds (except the Growth Fund) 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 a.m. and 6 p.m. (Eastern time), call Tele#Facts at 1-800-346-5984 twenty-four hours a day or write to New England Funds. The exchange must be for a minimum of $500 (or the total net asset value of your account, whichever is less), except that under the Automatic Exchange Plan the minimum is $50. All exchanges are subject to the minimum investment and eligibility requirements of the series into which you are exchanging. In connection with any exchange, you must receive a current prospectus of the series into which you are exchanging. The exchange privilege may be exercised only in those states where shares of such other series may be legally sold. You have the automatic privilege to exchange your Fund shares by telephone. New England Funds, L.P. will employ reasonable procedures to confirm that your telephone instructions are genuine, and, if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. New England Funds, L.P. will require a form of personal identification prior to acting upon your telephone instructions, will provide you with written confirmations of such transactions and will record your instructions. Except as otherwise permitted by SEC rule, shareholders will receive at least 60 days' advance notice of any material change to the exchange privilege. FUND DIVIDEND PAYMENTS The Capital Growth Fund, the Growth Fund, the International Equity Fund, the Value Fund and the Star Advisers Fund pay dividends annually and the Balanced Fund and the Growth Opportunities Fund pay dividends quarterly. Each Fund pays as dividends substantially all net investment income (other than long-term capital gains) each year and distributes annually all net realized long-term capital gains (after applying any available capital loss carryovers). The trustees of the Trusts may adopt a different schedule as long as payments are made at least annually. If you intend to purchase shares of a Fund shortly before it declares a dividend, you should be aware that a portion of the purchase price may be returned to you as a taxable dividend. 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 the same class of shares 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 respective 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. - -------------------------------------------------------------------------------- DIVIDEND DIVERSIFICATION PROGRAM You may also establish a dividend diversification program that allows you to have all dividends and any other distributions automatically invested in 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. For Class A shareholders, investments will be made at the appropriate offering price, which may include a sales charge. For Class B shareholders, shares acquired through this program will be subject to a CDSC if they are redeemed from the account. Dividends will be invested in the selected fund's shares on the dividend record date. A dividend diversification account must be in the same registration (shareholder name) as the distributing fund account and, if a new account in the purchased fund is being established, the purchased fund's minimum invest-ment requirements must be met. Before establishing a dividend diversification program into any other New England Fund, you must obtain a copy of that fund's prospectus. - ------------------------------------------------------------------------------- SELLING FUND SHARES 4 WAYS TO SELL FUND SHARES [logo] THROUGH YOUR INVESTMENT DEALER: Call your authorized investment dealer for information. [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, Class A, Class B and Class C shares may be redeemed by calling 1-800-225-5478 between 8 a.m. and 6 p.m. (Eastern time). Class A shares only may also be redeemed by calling Tele#Facts at 1- 800-346-5984 twenty-four hours a day. Redemption requests accepted after the Exchange has closed (4:00 p.m. Eastern time) will be processed at the next- determined net asset value. The proceeds (LESS ANY APPLICABLE CDSC) generally will be wired on the next business day to the bank account previously chosen by you on your application. A wire fee (currently $5.00) will be deducted from the proceeds. Your bank must be a member of the Federal Reserve System or have a correspondent bank that is a member. If your account is with a savings bank, it must have only one correspondent bank that is a member of the System. Mailed to Your Address of Record -- Shares may be redeemed by calling 1-800- 225-5478 and requesting that a check for the proceeds (LESS ANY APPLICABLE CDSC) be mailed to the address on your account, provided that the address has not changed over the previous month and that the proceeds are for $100,000 or less. Generally, the check will be mailed to you on the business day after your redemption request is received. Through ACH -- Shares may be redeemed electronically through the ACH system, provided that you have an approved ACH application on file with the Fund. To redeem through ACH, call 1-800-225-5478 prior to 3:00 p.m. (Eastern time) on a day when the Fund is open for business or call Tele#Facts at 1-800-346-5984 twenty-four hours a day. If your telephone call is made to Tele#Facts before 4:00 p.m., the redemption will be processed the day the call is made, unless it is a day when the Exchange closes before 4:00 p.m. and your call is made after the Exchange closes. The proceeds (LESS ANY APPLICABLE CDSC) generally will arrive at your bank within three business days; their availability will depend on your bank's particular rule. If you have recently purchased your shares through the ACH system, the Fund may withhold redemption proceeds until the funds have cleared, which may take up to ten days. [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 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. 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 Funds recommend that certificates be sent by registered mail. [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. Redemption of shares pursuant to the Plan will not be subject to a CDSC. For information, contact the Distributor or your investment dealer. Since withdrawal payments may have tax consequences, you should consult your tax adviser before establishing such a plan. GENERAL. Redemption requests will be effected at the net asset value next determined after your redemption request is received in proper form by State Street Bank or your investment dealer (except that orders received by your investment dealer before the close of regular trading on the Exchange and transmitted to the Distributor by 5:00 p.m. Eastern time on the same day will receive that day's net asset value). Redemption proceeds (LESS ANY APPLICABLE CDSC) will normally be mailed to you within seven days after State Street Bank or the Distributor receives your request in good order. During periods of substantial economic or market change, telephone redemptions may be difficult to implement. If you are unable to contact the Distributor by telephone, shares may be redeemed by delivering the redemption request in person to the Distributor or by mail as described above. Requests are processed at the net asset value next determined after the request is received. Special rules apply with respect to redemptions under powers of attorney. Please call your investment dealer or the Distributor for more information. Telephone redemptions are not available for tax qualified retirement plans or for Fund shares held in certificate form. If certificates have been issued for your investment, you must send them to New England Funds along with your request before a redemption request can be honored. See the instructions for redemption by mail above. The 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. REPURCHASE OPTION (CLASS A SHARES ONLY) You may apply your Class A share redemption proceeds (without a sales charge) to the repurchase of Class A shares of any series of the Trusts. To qualify, you must reinvest some or all of the proceeds within 120 days after your redemption and notify New England Funds or your investment dealer at the time of reinvestment that you are taking advantage of this privilege. You may reinvest the proceeds either by returning the redemption check or by sending your check for some or all of the redemption amount. Please note: For federal income tax purposes, a redemption is a sale that involves tax consequences (even if the proceeds are later reinvested). Please consult your tax adviser. FUND DETAILS HOW FUND SHARE PRICE IS DETERMINED Each Fund's holdings of equity securities are valued at the most recent sales prices on an applicable exchange or NASDAQ, or, in the case of unlisted securities (or listed securities which were not traded during the day), at the last quoted bid prices. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Short-term notes are valued at cost, or, where applicable, amortized cost, which method is intended to approximate market value. Loomis Sayles, under the supervision of New England Funds Trust I's Board of Trustees, determines the value of the fixed-income securities held by the Balanced Fund, and is authorized to delegate certain price determination functions to pricing services or facilities selected by Loomis Sayles. All other securities and assets of each Fund are valued at their fair market value as determined in good faith by the Fund's adviser or subadviser (or a pricing service selected by the adviser or subadviser) under the supervision of the relevant Trust's Board of Trustees. The net asset value of each Fund's shares is determined as of the close of regular trading (normally 4:00 p.m. Eastern time) on the Exchange each day it is open. The net asset value per share of each class is determined by dividing the value of each class's assets (the current U.S. dollar value, in the case of securities principally traded outside the United States), 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 each 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 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) to receive that day's public offering price. INCOME TAX CONSIDERATIONS Each Fund intends to meet all requirements of the Internal Revenue Code of 1986, as amended, necessary to qualify as a "regulated investment company" and thus does not expect to pay any federal income tax on investment income and capital gains distributed to shareholders in cash or in additional shares. Unless you are a tax-exempt entity, your distributions derived from 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-received deduction for corporations.) Distributions derived from a Fund's long-term capital gains ("capital gains distributions"), if designated as such by a Fund, are taxable to you as long-term capital gains, regardless of how long you have owned shares in the Fund. Both income distribution and capital gains distributions are taxable whether you elected to receive them in cash or additional shares. ================================================================================ CALCULATING THE PRICE OF SHARES Total Market Value of Other Any Portfolio Securities + Assets - Liabilities - ---------------------------------------------- = Net Asset Value (NAV) Total Number of Outstanding Shares in a Class 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. ================================================================================ To avoid an excise tax, each Fund intends to distribute prior to calendar year end virtually all the Fund's ordinary income and net capital gains earned during that calendar year. If declared in December to shareholders of record in that month, and paid the following January, these distributions will be considered for federal income tax purposes to have been received by shareholders on December 31. Each 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 a Fund is notified that you have underreported income in the past, or if you fail to certify to a Fund that you are not subject to such withholding. In addition, each 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 a 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 International Equity 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 Fund may in some circumstances be eligible to, and in its discretion may, make an election under the Internal Revenue Code which would allow Fund shareholders who are U.S. citizens or U.S. corporations to claim a foreign tax credit or deduction (but not both) on their U.S. income tax return. If the Fund makes the election, the amount of each shareholder's distribution reported on the information returns filed by the Fund with the Internal Revenue Service must be increased by the amount of the shareholder's portion of the Fund's foreign tax paid. The International Equity Fund may limit its investments in certain "passive foreign investment companies" in order to avoid certain taxes that arise as a result of such investments. The foregoing is a summary of certain federal income tax consequences of an investment in a 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 a Fund on their particular federal, state and local tax situations. Shareholders of the International Equity Fund should also consult their tax advisers about consequences of their investment under foreign laws. THE FUNDS' EXPENSES In addition to the management fee paid to its adviser and (in the case of the International Equity Fund) the administrative services fees paid to the Distributor, each Fund pays all expenses not borne by its adviser, subadviser or the Distributor, including, but not limited to, the charges and expenses of each Fund's custodian and transfer agent, independent auditors and legal counsel, 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 or state securities laws, all expenses of shareholders' and trustees' meetings and preparing, printing and mailing prospectuses and reports to shareholders and the compensation of trustees who are not directors, officers or employees of The New England or its affiliates, other than affiliated registered investment companies. In the case of Funds that offer Class Y shares, certain expenses are 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 Funds," below.) Under Service Plans adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, each 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 the Class A, Class B and Class C shares (except the Growth Fund which pays such fee rate with respect to all its net assets). The Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Fund's shares, for providing personal services to investors in shares of the Fund and/or the maintenance of shareholder accounts. In the case of the Class B shares, the Distributor pays investment dealers at the time of sale the first year's service fee, in the amount of up to .25% of the amount invested. In the case of each Fund except the Growth Opportunities Fund, 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. In the case of the Class A shares of the Growth, Value and Balanced Funds, reimbursable expenses may include such expenses incurred by those Funds' former distributor (an affiliate of the Distributor) in prior years. To the extent that the Distributor's reimbursable expenses in any year exceed the maximum amount payable under the relevant Service Plan for that year, such expenses may be carried forward for reimbursement in future years in which the Plan remains in effect. The amounts of unreimbursed Class A expenses carried over into 1995 from previous plan years were $563,284 for the Capital Growth Fund, $2,041,399 for the Balanced Fund, $2,030,882 for the Growth Fund, $514,256 for the International Equity Fund and $1,651,994 for the Value Fund. The Class B and C service fees for all funds (except the Growth Fund, which has only Class A shares), and the Class A service fee of the Growth Opportunities Fund, are payable regardless of the amount of the Distributor's related expenses. Each Fund's Class B and Class 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 respective Fund's 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, as distribution fees in connection with the sale of the Fund's shares. The Distributor retains the balance of the fee as compensation for its services as distributor of the Class B and Class C shares. PERFORMANCE CRITERIA Each Fund may include total return information for each class of shares in advertisements or other written sales material. Each Fund will 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, or, in the case of the Growth Opportunities Fund's Class A shares, for the period since July 27, 1988, when there was a change in that Fund's investment adviser. 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' total return is higher. The Balanced Fund may also include the yield of its Class A, Class B and Class C shares, accompanied by the total return, in advertising and other written material. Yield will be computed in accordance with the SEC's standardized formula by dividing the adjusted net investment income per share earned during a recent thirty-day period by the maximum offering price of a share of the relevant class (reduced by any earned income expected to be declared shortly as a dividend) on the last day of the period. Yield calculations will reflect any voluntary expense limitations in effect for the Fund during the relevant period. The Balanced Fund may also present one or more distribution rates for each class in its sales literature. These rates will be determined by annualizing the class's distributions from net investment income and net short-term capital gain over a recent twelve-month, three-month or thirty-day period and dividing that amount by the maximum offering price or the net asset value on the last day of such period. If the net asset value, rather than the maximum offering price, is used to calculate the distribution rate, the rate will be higher. Total return will generally be higher for Class A shares than for Class B and Class C shares of the same Fund, because of the higher levels of expenses borne by the Class B and Class C shares. An investor should balance this expected lower total return against the benefit gained by 100% immediate investment of the purchase price of Class B or Class C shares. As a result of lower operating expenses, Class Y shares of each Fund that offers such shares can be expected to achieve a higher investment return than the Fund's Class A, Class B or Class C shares. All performance information is based on past results and is not an indication of likely future performance. ADDITIONAL FACTS ABOUT THE FUNDS [] New England Funds Trust I was organized in 1985 as a Massachusetts business trust and is authorized to issue an unlimited number of full and fractional shares in multiple series. The Growth, Value and Balanced Funds were organized prior to 1985 and conducted investment operations as separate corporations until their reorganization as series of New England Funds Trust I in January 1987. The International Equity Fund and the Capital Growth Fund were organized in 1992 and the Star Advisers Fund was organized in 1994. [] New England Funds Trust II was organized in 1931 as a Massachusetts business trust and is authorized to issue an unlimited number of full and fractional shares in multiple series. The Growth Opportunities Fund is the original series of shares of the Trust and has been in operation since 1931. [] When you invest in a Fund, you acquire freely transferable shares of beneficial interest that entitle you to receive annual or quarterly dividends as determined by the respective Trust's trustees and to cast a vote for each share you own at shareholder meetings. Shares of each Fund vote separately from shares of other series of the same Trust, except as otherwise required by law. Shares of all classes of a 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. [] Except for matters that are explicitly identified as "fundamental" in this prospectus or Part I of the Statement, the investment policies of each Fund may be changed without shareholder approval or, in most cases, prior notice. The investment objectives of the Growth, Value and Balanced Funds are fundamental. The investment objectives of the Capital Growth, International Equity and Star Advisers Funds are not fundamental. The investment objective of the Growth Opportunities Fund is not fundamental but, as a matter of policy, the trustees would not change the objective without shareholder approval. If there is a change in the Capital Growth, International Equity, Star Advisers or Growth Opportunities Funds' objectives, shareholders should consider whether these Funds remain appropriate investments in light of their current financial position and needs. [] CLASS Y SHARES: Each Fund except the Growth Fund offers Class Y shares to certain investors. Class Y shares may be purchased by endowments and foundations. The minimum initial investment is $1 million for these entities and the minimum for each subsequent investment is $100,000. 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 in these plans of at least $10 million. 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 The New England or of any other insurance company affiliated with The New England ("Separate Accounts") and, in the case of International Equity Fund, by bank common trust funds, bank collective trust funds and dedicated corporate trustee funds, such as nuclear decommissioning trusts and hospital depreciation funds ("Special Accounts"). There is no minimum initial or subsequent investment amount for Retirement Plans, Separate Accounts or Special Accounts. Investments in Class Y shares may also be made by certain individual retirement accounts if the amounts invested represent rollover distributions from investments by any of the foregoing Retirement Plans of amounts invested in Class Y shares. [] 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 bears its own transfer agency and prospectus printing costs and does not bear any portion of those costs relating to other classes of shares. In the case of the International Equity Fund, Class Y shares bear a lower rate of administrative services fee. [] The Trusts do not generally hold regular shareholder meetings and will do so only when required by law. Shareholders of a 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 Funds is New England Funds, L.P., 399 Boylston Street, Boston, MA 02116. New England Funds, L.P. has subcontracted certain of its obligations as such to State Street Bank, 225 Franklin Street, Boston, MA 02110. [] If the balance in your account with a Fund is less than a minimum amount set by the trustees of the Trusts from time to time (currently $500), that 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 tax-qualified plans (such as IRAs, Keoghs and pension and profit sharing plans), automatic investment plans or accounts that have fallen below the minimum solely because of fluctuations in a Fund's net asset value per share. [] Each Trust offers only its own Funds' shares for sale, but it is possible that a Trust might become liable for any misstatements in this prospectus that relate to the other Trust. The trustees of each Trust have considered this possible liability and approved the use of this combined prospectus for Funds of both Trusts. [] Each Fund's annual report contains additional performance information and is made available upon request and without charge. [] The Class A, Class B, Class C and Class Y structure could be terminated should certain IRS rulings be rescinded. See Part II of the Statement for more details. GLOSSARY OF TERMS Capital gain distributions -- Payments to shareholders of profits earned from selling securities in the fund's portfolio. Capital gain distributions are usually paid once a year. Contingent Deferred Sales Charge (CDSC) -- A fee that may be charged when a shareholder sells fund shares. Distribution fee -- An annual asset-based sales charge that is used to pay for sales-related expenses. Income Distributions -- Payments to shareholders resulting from interest or dividend income earned by a fund's portfolio. Mutual fund -- The pooled assets of a group of investors, professionally managed in pursuit of a specific objective. Net asset value (NAV) -- The market value of one share of a mutual fund on any given day without sales charge or CDSC. Determined by dividing the fund's total net assets by the number of fund shares outstanding. New England Funds, L.P. -- The distributor and transfer agent of the New England Funds. Open end investment management company -- A mutual fund that allows investors to redeem fund shares directly from the fund company on any business day. Public offering price (POP) -- The price of one share of a mutual fund, including its initial sales charge, if there is one. Record date -- The date on which mutual fund investors must own a fund's shares to be eligible to receive specific income or capital gain distributions. Service fee -- Payments by a fund for personal service to investors and/or for maintenance of shareholder accounts by the Distributor or a financial representative. Total Return -- The change in value of an investment in a fund investment over a specific time period, assuming all earnings are reinvested in additional shares of the fund. Expressed as a percentage. Yield -- The rate at which a fund earns income, expressed as a percentage. Yield calculations are standardized among mutual funds, based on a formula developed by the Securities and Exchange Commission. 12b-1 fees -- Fees paid by a mutual fund under a plan adopted under SEC Rule 12b-1. Can include both distribution fees and service fees. -----END PRIVACY-ENHANCED MESSAGE-----