NEW ENGLAND FUNDS TRUST II, 485APOS, 1995-10-11

NEW ENGLAND FUNDS TRUST II
485APOS, 1995-10-11

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<PAGE>

Registration Nos. 2-11101
811-242

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. _____ _____

Post-Effective Amendment No. 100 x
----- -----
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 34 x
---- -----
(Check appropriate box or boxes)

NEW ENGLAND FUNDS TRUST II
--------------------------
(Exact Name of Registrant as Specified in Charter)

399 Boylston Street, Boston, Massachusetts 02116
------------------------------------------------
(Address of Principal Executive Offices)

(617) 578-1388
--------------
(Registrant's Telephone Number, including Area Code)

Robert P. Connolly, Esq. Copy to: Edward A. Benjamin,Esq.
New England Funds, L.P. Ropes & Gray
399 Boylston Street One International Place
Boston, Massachusetts 02116 Boston,Massachusetts 02110-26624
--------------------------------------------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective
(check appropriate box)

_____ immediately upon filing pursuant to paragraph (b) of Rule 485

_____ (DATE) pursuant to paragraph (b) of Rule 485

_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485

_____ on (DATE) pursuant to paragraph (a)(1) of Rule 485

_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485

X on December 26, 1995 pursuant to paragraph (a)(2) of Rule 485.
- -----

If appropriate, check the following box:
<PAGE>

_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

Registrant has registered an indefinite number of securities under the
Securities Act of 1933 in accordance with Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant filed on February 27, 1995 the Rule
24f-2 Notice for the Registrant's fiscal year ended December 31, 1994.

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<PAGE>

NEW ENGLAND FUNDS TRUST II
(Prospectus and Statement of Additional Information)

CROSS REFERENCE SHEET

Items required by Form N-1A

<TABLE>
<CAPTION>
Item No. of
Form N-1A Caption in Prospectus
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<S> <C>

1....................... Cover Page

2....................... Schedule of Fees

3....................... None

4....................... Cover page; Additional Facts about the Fund;
Investment Objectives; How the Fund Pursues Its
Investment Objective; Fund Investments; Investment
Risks

5....................... Fund Management; Back Cover Page

6....................... Cover page; Additional Facts about the Fund; 6
Ways to Buy Fund Shares; Fund Dividend Payments;
Income Tax Considerations

7....................... Cover page; Schedule of Fees; 6 Ways to Buy Fund
Shares; How Fund Share Price is Determined; Sales
Charges; Reduced Sales Charges; Back Cover Page

8....................... 4 Ways to Sell Fund Shares; Repurchase Option;
Exchanging Among New England Funds

9....................... None
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Item No. of Caption in Statement of
Form N-1A Additional Information
- --------- ----------------------

<S> <C>
10...................... Cover page

11...................... Table of Contents

12...................... Description of the Trust and Ownership of Shares

13...................... Miscellaneous Investment Practices; Investment
Restrictions

14...................... Management of the Trust

15...................... Management of the Trust

16...................... Fund Charges and Expenses; Management of the Trust

17...................... Portfolio Transactions and Brokerage; Fund Charges
and Expenses

18...................... Description of the Trust and Ownership of Shares

19...................... How to Buy Shares; Net Asset Value and Public
Offering Price; Reduced Sales Charges; Shareholder
Services; Redemptions

20...................... Performance Information (in prospectus); Standard
Performance Measures; Income Dividends, Capital
Gain Distributions and Tax Status

21...................... Advisory and Subadvisory Agreements; Distribution
Agreement and Distribution Plans; Fund Charges and
Expenses

22...................... Performance Information (in prospectus); Standard
Performance Measures

23...................... None
</TABLE>

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<PAGE>

LOGO

GROWTH FUND OF ISRAEL
PROSPECTUS AND APPLICATION
JANUARY __, 1996

Growth Fund of Israel (the "Fund") is a newly organized, non-diversified mutual
fund. The Fund is a series of New England Funds Trust II (the "Trust"), a
registered open-end management investment company. Other series of the Trust
are described in separate prospectuses.

The Fund's investment objective is long-term growth of capital. The Fund will
seek to achieve its objective by investing primarily in equity securities of
Israeli issuers. There can be no assurance that the Fund will achieve its
objective, which may be changed without shareholder approval.

Investments in Israel involve certain risks and special considerations which are
not typically associated with investments in the United States. An investment
in the Fund should be considered speculative. See "Risk Factors and Special
Considerations" for a description of certain material factors that should be
considered in connection with an investment in the Fund.

Harris Associates, L.P. ("Harris Associates") is the Fund's investment
subadviser and Batucha Securities & Investments Ltd. ("Batucha") provides
information to Harris relating to Israel and its markets and industries.
Batucha is a wholly-owned subsidiary of Clal (Israel) Ltd. ("Clal") and a major
shareholder of Clal is Bank Hapoalim B.M. ("Bank Hapoalim"), Israel's largest
bank. See "Fund Management."

B'nai B'rith has entered into an arrangement whereby it provides consultation
and assistance to the Distributor with respect to the design and marketing of
the Fund and with respect to matters of particular interest to B'nai B'rith, its
members and others in the Jewish community in the United States. B'nai B'rith's
broker-dealer affiliate receives compensation for this role. See "Sales Charges
- - General" for further information

The Fund offers three classes of shares to the general public (Classes A, B and
C), and an additional class of shares to qualified institutional investors
(Class Y). 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 and Class C shares bear higher
annual 12b-1 fees than Class A shares. Class Y shares bear no sales charges or
12b-1 fees. See "Buying Fund Shares -- Sales Charges."

Class Y shares of the Fund are not currently available for purchase, but may be
offered for sale at a later date. If and when Class Y shares of the Fund are
offered for sale, the Fund will supplement its prospectus.

This prospectus sets forth information you should know before investing in the
Fund. Please read it carefully and keep it for future reference. A statement of
additional information (the "Statement") about the Fund dated January __, 1996
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 Fund
and is incorporated into this prospectus by reference.
<PAGE>

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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.

FOR GENERAL INFORMATION ON THE FUND OR ANY OF ITS SERVICES AND FOR ASSISTANCE IN
OPENING AN ACCOUNT, CONTACT YOUR INVESTMENT DEALER OR CALL THE DISTRIBUTOR TOLL
FREE AT 1-800-225-5478.
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
NEW ENGLAND INVESTMENT COMPANIES
AND THE FUND'S ADVISER AND SUBADVISERS

SCHEDULE OF FEES

INITIAL SUBSCRIPTION PERIOD

INVESTMENT STRATEGY
How the Fund Pursues Its Investment Objective
Hedging Transactions
Lending of Portfolio Securities
Other Investments and Investment Technique

INVESTMENT RISKS
Equity Securities
Fixed-Income Securities
Repurchase Agreements
Short-Term Trading
Small Companies
Israeli and Other Foreign Securities
Securities Market Characteristics
Economic Factors
Regional Political Factors
Concentration of Control
Foreign Aid
Miscellaneous

FUND MANAGEMENT

BUYING FUND SHARES
Minimum Investment - Classes A, B and C
Minimum Investment - Class Y
6 Ways to Buy Fund Shares
Sales Charges
Reduced Sales Charges (Class A Shares Only)

OWNING FUND SHARES
Exchanging Among New England Funds
Fund Dividend Payments

SELLING FUND SHARES
4 Ways to Sell Fund Shares
Repurchase Option (Class A Shares Only)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

PAGE
<S> <C>
FUND DETAILS
How Fund Share Price Is Determined
Income Tax Considerations
The Fund's Expenses
Performance Criteria
Additional Facts About the Fund

GLOSSARY OF TERMS
</TABLE>
<PAGE>

NEW ENGLAND INVESTMENT COMPANIES
AND THE FUND'S ADVISER AND SUBADVISERS

The investment adviser and investment subadviser of the 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 $___ billion in assets for individuals and institutions.
The adviser and subadviser operate independently and are staffed by experienced
investment professionals. The adviser and investment subadviser apply
specialized knowledge and careful analysis to the pursuit of the Fund's
objectives. NEIC's sole general partner, New England Investment Companies, Inc.,
is a wholly-owned subsidiary of New England Mutual Life Insurance Company ("The
New England"). [Add disclosure about New England/Met Life merger.]

NEW ENGLAND FUNDS MANAGEMENT, L.P. ("NEFM") is the Fund's investment adviser.
NEFM also serves as investment adviser to certain of the New England Funds.

HARRIS ASSOCIATES L.P., investment subadviser to the Fund, has advised and
managed mutual funds since 1970. Harris Associates also serves as investment
adviser to other mutual funds and to individuals, trusts, retirement plans,
endowments and foundations, and manages numerous private partnerships. Harris
Associates has extensive experience in managing international equity portfolios,
including the Oakmark International Fund, which had $__ billion in assets as of
October 31, 1995.

BATUCHA SECURITIES & INVESTMENTS LTD. serves as special economic and market
subadviser for the Fund. In this capacity, Batucha provides Harris Associates
with information, advice and assistance regarding economic, financial,
political, technological and social matters, trends or changes relating to or
affecting Israel and information on markets and industries in Israel. Batucha,
based in Tel Aviv, Israel, is an indirect subsidiary of Clal, a publicly traded
Israeli conglomerate, and is not affiliated with NEIC.

SCHEDULE OF FEES

Expenses are one of several factors to consider when you invest in the Fund. The
following table summarizes your maximum transaction costs from investing in the
Fund and estimated annual expenses for each class of the Fund's shares. The
Example shows the cumulative expenses attributable to a hypothetical $1,000
investment in each class of shares of the Fund for the periods specified.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES -- PAID DIRECTLY BY SHAREHOLDERS
CLASS A CLASS B CLASS C CLASS Y
-------- -------- ------- -------

<S> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase
(as a percentage of offering price) (1) (2)......................... 5.75% None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as applicable)(2) (3) 4.00% None None
Redemption Fee...................................................... None None None None
Exchange Fee........................................................ None None None None
</TABLE>
<PAGE>

(1) During the Fund's initial subscription period, the maximum initial sales
charge for Class A shares is 2.5%. Reduced sales charges on Class A shares
apply in some cases. See "Initial Subscription Period" and "Sales Charges."
(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."

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES -- PAID DIRECTLY BY THE FUND, AND INDIRECTLY BY ITS SHAREHOLDERS
(as a percentage of average net assets)
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees ................................... 1.10% 1.10% 1.10% 1.10%
12b-1 Fees ....................................... 0.25% 1.00% 1.00%* None
Other Expenses**................................... 0.85% 0.85% 0.85% 0.85%
Total Expenses..................................... 2.20% 2.95% 2.95% 1.95%
</TABLE>

* Because of the higher 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
rules of the National Association of Securities Dealers, Inc.
** Other Expenses are based on estimated amounts for the Fund's first fiscal
year.

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.

<TABLE>
<CAPTION>
CLASS A CLASS B Class C Class Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.................................... $ $ $/1/ $ $
3 Years................................... $ $ $ $ $
</TABLE>

(1) Assuming no redemption at period end.

The purpose of this fee schedule is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly if you invest in
the Fund.

Please keep in mind that the Example shown above is hypothetical. The
information above should not be consid ered a representation of past or future
return or expenses; actual return or expenses may be more or less than those
shown.

For additional information about the Fund's fees and other expenses, please see
"Fund Management," "Additional Facts about the Fund" and "The Fund's Expenses."

A wire fee (currently $5.00) will be deducted from your proceeds if you elect to
transfer redemption proceeds by wire.

- 2 -
<PAGE>

INITIAL SUBSCRIPTION PERIOD

Shares of the Fund will be offered during an initial subscription period, which
is scheduled to end the sooner of when total subscriptions reach $50 million or
April 15, 1996 (the "Initial Subscription Period"). The Initial Subscription
Period is subject to extension by the Distributor if $50 million in
subscriptions have not been received by April 15, 1996. During the Initial
Subscription Period, shares will be offered at a price of $12.50 per share, plus
a sales load in the case of Class A shares. Sales loads will be subject to
reductions depending upon the amount invested. If subscriptions received during
the Initial Subscription Period (including any extension) do not reach $50
million and, in the judgment of the Distributor, the investment adviser and the
investment subadviser, subscriptions received are insufficient to permit the
Fund to operate efficiently and economically, no subscriptions will be accepted,
and the Fund will not commence operations.

The Fund will be closed to new investors for approximately 60 days after the end
of the Initial Subscription Period. Following this 60-day period, Class A, Class
B and Class C shares will be offered in a continuous offering at the applicable
net asset value per share plus (in the case of Class A shares) the applicable
sales load. Sales loads on Class A shares during any such continuous offering
would be greater than the sales loads being charged during the Initial
Subscription Period on Class A shares. See "Buying Fund Shares -Sales Charges."
The Fund may also offer Class Y shares for sale at such time or at any time
thereafter. Class Y shares would be offered at the applicable net asset value
per share.

- 3 -
<PAGE>

INVESTMENT STRATEGY

The Fund's objective is long term growth of capital.

HOW THE FUND PURSUES ITS INVESTMENT OBJECTIVE

The Fund seeks to attain its objective by investing primarily in equity
securities (1) of issuers organized under the laws of the State of Israel, (2)
of issuers that derive a significant portion of their revenues or profits from
goods or services sold or produced in Israel, or (3) whose principal trading
market is Israel (collectively, "Israeli 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 Israeli Equity
Securities. The Fund may invest up to 15% of its assets in unlisted, private
Israeli Equity Securities.

Under normal conditions, up to 35% of the Fund's assets may be invested in U.S.
or foreign government securities, obligations of U.S. or foreign corporate
issuers rated in the top four rating categories by at least two major rating
agencies or, if unrated, determined to be of comparable quality by the
investment subadviser, and repurchase agreements that are fully collateralized
by U.S. Government securities. Under unusual market conditions as determined by
the Fund's investment subadviser, all or any portion of the Fund's assets may be
invested, for temporary, defensive purposes, in such securities or in cash
(including foreign currency).

Harris Associates, the Fund's investment subadviser, believes that shares of the
Fund could provide an attractive opportunity for investors seeking long term
capital growth by investing in Israeli Equity Securities. While it is possible
for investors to purchase equity securities of certain Israeli issuers in the
United States, most such equity securities are traded on the Tel Aviv Stock
Exchange (the "TASE") and relatively few U.S. investment firms follow or provide
research on these securities. Batucha, as special economic and market
subadviser, will provide Harris Associates with information, advice and
assistance regarding economic, financial, political, technological and social
matters, trends or changes relating to or affecting Israel and information on
markets and industries in Israel. Batucha will not, however, generally furnish
advice or make recommendations regarding the purchase or sale of securities for
the Fund's portfolio. See "Fund Management." Harris Associates expects the Fund
to benefit from research and information about the Israeli economy and financial
markets provided by Batucha that are not ordinarily available to investors other
than Israeli institutional investors.

Harris Associates believes that during the next three to five years the Israeli
economy could be favorably affected by several factors. Despite certain adverse
conditions prevailing in Israel in recent years, including the negative effects
of political uncertainty and high inflation, which are described elsewhere in
this Prospectus, the Israeli gross domestic product ("GDP") has increased in
real terms in each of the last five [calendar] years and a significant number of
companies engaged in scientific and technological activities (including computer
software and components, biotechnology, civil and military electronics,
communications, aviation and space technology) have been funded and have grown
during such period. The substantial immigration into Israel from the former
Soviet Union, which has brought to Israel a significant number of educated and
trained people, and the prospect for continued immigration (although potentially
at reduced levels), enhance the prospects for further growth of the Israeli
economy, especially in the areas of science and technology. Real wages have also
been declining since 1989, aiding competitiveness and profitability. Israel also
has preferential trade arrangements with the United States and the European
Community, such as favorable tariff rates. In addition, the recent success of a
number of Israeli companies, particularly in the area of high technology, along
with the increase in daily trading on the TASE generally experienced in recent
years and relaxation of restrictions on foreign investment, has prompted the
potential entry of a number of investors in search of investment opportunities
in Israel. Harris Associates also believes that greater investment in listed
shares by "provident" (e.g., pension) funds and savings plans in Israel may
increase liquidity and demand for TASE-listed shares.

- 4 -
<PAGE>

Although Harris Associates cannot predict whether recent negotiations among
Israel, certain of its neighboring Arab countries and Palestinian
representatives will result in a significant improvement in Israel's relations
with such parties, should such a development occur, Harris Associates believes
that Israel's economy could potentially benefit in a number of respects,
including the potential opening of new markets in and economic cooperation with
such neighboring states, the attraction of new investments if the Arab boycott
should end and partial relief of the burden on Israel's economy and manpower of
military defense obligations. There can be no assurance that investment
opportunities will be available at valuations and on terms that the
Fund considers appropriate.

The government of Israel has announced a major privatization program and has
privatized either wholly or partially several large and mid-sized government-
owned companies including the state telephone company, a chemical company and an
oil marketing company. The government has announced its intention to continue to
privatize many of the companies it now owns or controls in industries such as
shipping, telecommunications, airlines, chemicals and banking (including some of
the largest companies in Israel), through public issuance of shares on the TASE
and other foreign exchanges or by private placements. Each privatization
transaction is subject to its own political and economic factors which may vary
the terms upon which investors, such as the Fund, may participate. No assurance
can be given that privatizations will continue to occur or that the Fund will be
able or will desire to participate in them.

Companies in which the Fund may invest may have small, medium or large market
capitalizations, and their equity securities may or may not pay dividends. When
selecting industries and companies for investment by the Fund, Harris Associates
will consider factors such as overall growth prospects, competitive position in
domestic and export markets, technology, research and development, productivity,
labor costs, raw material costs and sources, profit margins, return on
investment, capital resources, governmental regulation and the experience of
management. Consideration will also be given to companies that could benefit
from the economic development of Israel and the West Bank and from the possible
opening of the borders between Israel and its neighbors.

HEDGING TRANSACTIONS

The Fund may, for hedging purposes only, engage in derivatives transactions,
such as options, futures or forward transactions, designed to manage its
exposure to changing security prices and currency exchange rates. The Fund may,
subject to specified limitations, buy put and call options and write covered
call options based on any type of security or index related to the Fund's
investments, including options traded on foreign exchanges and in the over-the-
counter markets. Buying puts and writing covered calls tend to hedge the Fund's
investments against price fluctuations, whereas buying calls tends to increase
the Fund's market exposure. The Fund will hedge no more than 25% of its total
assets by buying puts and writing covered calls. In addition, the Fund will not
purchase a put or call option if, as a result, more than 10% of the Fund's total
assets would be committed to premiums for such options. The Fund may invest in
options and futures contracts on various stock indices to hedge against changes
in the value of securities it holds or expects to acquire. The Fund may also
invest in options on stock index futures. The Fund will not invest more than 25%
of its net assets in stock index futures or options on stock index futures that
are traded on a futures exchange.

The Fund's ability to use derivatives successfully requires skills different
from those needed to select the Fund's portfolio securities and involves Harris
Associates' judgment as to the potential risks and rewards of these different
types of strategies. Derivatives can be volatile investments and may not perform
as expected. If the Fund applies a hedge at an inappropriate time or Harris
Associates judges market trends incorrectly, derivatives strategies may lower
the Fund's return. The Fund could also experience losses if the prices of its
derivatives were poorly correlated with its other investments, or if it could
not close out its positions because of an illiquid secondary market. When
required by guidelines established by the SEC, the Fund will place the required
amount of liquid high-quality debt securities in a segregated custodial account
to provide for payment of its obligations in connection with derivatives
transactions. Derivatives transactions in which the Fund may engage are
described in further detail in the Statement.

- 5 -
<PAGE>

LENDING OF PORTFOLIO SECURITIES

The Fund is permitted to lend up to 10% of the total value of its securities.
These loans must be secured continuously by cash or equivalent collateral or by
a letter of credit in an amount at least equal to the market value of the
securities loaned plus accrued income. By lending its securities, the Fund may
increase its income by continuing to receive income on the loaned securities as
well as the opportunity to receive interest on the collateral. Any gain or loss
in the market price of the borrowed securities which occurs during the term of
the loan belongs to the Fund rather than to the borrower of the securities. The
risks of lending portfolio securities, as with other extensions of credit,
include possible delay in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. In considering
whether the Fund will lend securities, Harris Associates will consider all
relevant factors and circumstances, including the creditworthiness of the
borrower.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES

The Fund may also utilize the following investments and investment techniques
and practices: securities not registered under the Securities Act of 1933, as
amended (the "Securities Act"), but that can be sold to qualified institutional
buyers in accordance with Rule 144A under the Securities Act ("Rule 144A
Securities"), sponsored or unsponsored American Depository Receipts ("ADRs") or
European Depository Receipts ("EDRs"), American Depository Shares ("ADSs"), and
when-issued and delayed-delivery securities. See "Investment Risks -
Miscellaneous" below and Part II of the Statement for further information
regarding these investments and investment techniques.

- 6 -
<PAGE>

INVESTMENT RISKS

It is important to understand the following risks inherent in the Fund before
you invest.

EQUITY SECURITIES

Equity securities are securities that represent an ownership interest (or the
right to acquire such an interest) in a company, and include common and
preferred stocks and securities exercisable for or convertible into common or
preferred stocks (such as warrants, convertible debt securities and convertible
preferred stock).

While offering greater potential for long-term growth, equity securities are
more volatile and more risky than some other forms of investment. Therefore the
value of your investment in the Fund may sometimes decrease instead of increase.
The Fund may invest in equity securities of companies with relatively small
market capitalization. Securities of such companies may be more volatile than
the securities of larger, more established companies and the broad equity market
indices. See "Small Companies" below. The Fund's investments may include
securities traded "over-the-counter" as well as those traded on a securities
exchange. Some over-the-counter securities may be more difficult to sell under
some market conditions.

The Fund may invest in convertible securities, including corporate bonds, notes
or preferred stocks that can be converted into common stocks or other equity
securities. Convertible securities also include other securities, such as
warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally 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 Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P"). Less than 35% of the Fund's assets will be invested in convertible or
debt securities rated below investment grade and unrated convertible or debt
securities of comparable quality.

FIXED-INCOME SECURITIES

Fixed-income securities include debt obligations of governmental and corporate
issuers. Because interest rates vary, it is impossible to predict the income of
a fund that invests in fixed-income securities for any particular period.
Fluctuations in the value of the Fund's investments in fixed-income securities
will cause the Fund's net asset value to increase or decrease.

Fixed-income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. Credit risk relates to the ability of the issuer to make
payments of principal and interest.

REPURCHASE AGREEMENTS

In repurchase agreements, the Fund buys securities from a seller, usually a bank
or brokerage firm, with the understanding that the seller will repurchase the
securities at a higher price at a later date. Such transactions afford an
opportunity for the Fund to earn a return on available cash at minimal market
risk, although the Fund may be subject to various delays and risks of loss if
the seller is unable to meet its obligation to repurchase.

- 7 -
<PAGE>

SHORT-TERM TRADING

Although the Fund seeks long-term growth or return, the Fund may, consistent
with its investment objective, engage in portfolio trading in anticipation of,
or in response to, changing economic or market conditions and trends. These
policies may result in higher turnover rates in the Fund's portfolio which may
produce higher transaction costs and a higher level of taxable capital gains.
Portfolio turnover considerations will not limit the investment subadviser's
investment discretion in managing the Fund's assets.

SMALL COMPANIES

The Fund, in the discretion of the investment 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.

ISRAELI AND OTHER FOREIGN SECURITIES

Investments in Israeli and other foreign securities present risks not typically
associated with investments in comparable securities of U.S. issuers.

There may be less information publicly available about an Israeli or other
foreign corporate or governmental issuer than about a U.S. issuer, and Israeli
and other foreign 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 Israeli and other 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,
including Israel, there is a possibility of 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.

Most securities in the Fund's portfolio will be denominated in Israeli shekels
or traded in securities markets in which settlements are made in shekels.
Similarly, any income on such securities is generally paid to the Fund in
shekels. The value of the shekel and other 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
foreign currencies on the dollar value of the Fund's assets and on the net
investment income available for distribution may be favorable or unfavorable.

The Fund may incur costs in connection with conversions between dollars and
shekels or other foreign currencies. In addition, the Fund may be required to
liquidate portfolio assets, or may incur increased currency conversion costs, to
compensate for a decline in the dollar value of the shekel or other foreign
currencies 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.

- 8 -
<PAGE>

SECURITIES MARKET CHARACTERISTICS

The Israeli securities market is substantially smaller, less liquid and more
volatile than the major securities markets in the United States. Brokerage
commissions and other transaction costs on the TASE are individually negotiated
and are also generally somewhat higher than the United States.

Due to the relatively small equity market capitalization and small number of
company listings in comparison to the U.S. securities markets, the Israeli
equity market is subject to greater short-term price volatility and a relatively
limited secondary trading environment. The securities listed on the TASE and
various TASE indices have been subject to sharp declines in the recent past and
no assurance can be given as to the future performance of TASE-listed
securities. In addition, this market may be subject to greater influence from
adverse events generally affecting the Israeli economy and may be more affected
when a few investors trade significant blocks of securities than would the U.S.
market.

The regulations of the TASE may at times limit the maximum price swing for a
specific security on a specific day. The limits vary depending on several
factors, but they are typically 10% in the case of equity shares, convertible
debt securities and warrants and 3% in the case of other debt securities. Among
the factors that may affect the limits are whether there has been a suspension
of trading in the securities and whether a convertible security is about to
expire. As a result of the limits, the Fund may experience difficulties in
liquidating certain assets.

Trading on the TASE has been subject to disruption in the past. In August 1994,
upon the announcement by the Minister of Finance of the intention of the Israeli
government to seek to eliminate the exemption from tax on capital gains realized
on the sale of equity securities listed on the TASE, trading on the TASE was
suspended for two days and, when trading resumed, limits on share price movement
ordinarily in place were removed for one day. In March 1994, a strike by the
personnel of the TASE interfered with trading on the TASE to the extent that
trading time was slightly curtailed. Similarly, the TASE was closed briefly as a
result of a strike by its personnel in 1990. Early in 1983, prices on the TASE
experienced severe declines, and, in October 1983, following the termination by
the major banks of their activities in support of their share prices, the TASE
was closed for two weeks. The Israeli government intervened with a substantial
bail-out by offering to purchase certain securities over a period of time at
specified prices. No assurances can be given that the Israeli government would
intervene in the market in any manner in the future. In the event a strike or
other similar interruption were to occur again, the Fund's ability to effect
transactions on the TASE could be materially affected. There is less government
supervision and regulation of the Israeli securities market, brokers, dealers
and companies with respect to certain matters than exists in the United States.
Foreign investment is regulated and controlled by the Bank of Israel and
regulations could be imposed from time to time precluding foreign investment in
certain types of securities, although the current trend is toward liberalizing
such restrictions.

The factors described above result in a limited supply of available equity
investments and may adversely affect the Fund's ability to become fully invested
in accordance with its investment objective as well as the Fund's performance.

The relatively limited liquidity of the Israeli equity securities market may
also affect the Fund's ability to acquire or dispose of securities at a
desirable price when it wishes to do so. Accordingly, in periods of rising
market prices, the Fund may be unable to participate fully in such price
increases to the extent that it is unable to acquire desired portfolio positions
quickly; conversely, the Fund's inability to dispose fully and promptly of
positions in declining markets could cause its net asset value to decline as the
market value of unsold positions declines.

ECONOMIC FACTORS

Israel's economy has been subject to many destabilizing factors, including
military conflicts and tension, a period of hyper-inflation in the early to mid-
1980s, civil unrest in the West Bank and Gaza Strip since 1987, the closing

- 9 -
<PAGE>

of the TASE in 1983 for two weeks due to a collapse in the prices of the shares
in the banking sector, large government deficits, recurring weaknesses in state-
owned enterprises, low foreign exchange reserves and fluctuations in world
commodity prices. For these and other reasons, the Israeli government has
intervened in all sectors of the economy employing, among other means, fiscal,
monetary and trade policies, import duties, foreign currency restrictions and
controls of wages, prices and exchange rates, and other measures to pursue its
various economic policies and goals. The Israeli government is in the process of
reducing its direct involvement in economic activity, but there can be no
assurance that this trend will continue. Foreign investment in Israel is
regulated and controlled by the Bank of Israel, primarily through its regulation
of currency exchange, although there are no current restrictions on the purchase
and sale of securities that trade on the TASE. These regulations may at times
limit or preclude foreign investment in certain types of equity securities. The
repatriation of both investment income and capital from Israel is currently
controlled to a limited degree under regulations of the Bank of Israel, although
the Fund believes it can, generally, when acting in compliance with foreign
currency regulations, convert and remit into dollars the proceeds of the sale of
listed and non-listed securities as well as dividend and interest income,
subject to the payment of applicable Israeli taxes.

REGIONAL POLITICAL FACTORS

Many Israeli companies are heavily dependent upon sales of their products
outside of Israel and upon imported components, primarily from the United
States, Europe and Japan. Accordingly, operations of these companies could be
adversely affected if major hostilities involving Israel should occur in the
Middle East or if trade between Israel and its present trading partners should
be curtailed. Certain countries participate in a boycott of Israeli firms and
firms that do business in Israel or with Israeli companies. Despite measures to
counteract the boycott, including anti-boycott legislation in the United States,
and the recent increased willingness of certain countries and companies to
commence diplomatic and trade relations with Israel and Israeli firms, the
boycott has not officially ended and has had an indeterminate negative impact on
trade and foreign investment in Israel.

CONCENTRATION OF CONTROL

The Israeli economy is subject to a substantial amount of concentrated control.
In addition to the government's direct involvement in and influence over the
private sector, the government owns or controls numerous government corporations
and other entities representing in the aggregate a substantial portion of the
Israeli economy by measure of gross domestic product in 1994. Hevrat HaOvdim,
the economic arm of the Histadrut, Israel's labor union federation, also has
substantial holdings in numerous corporations. A substantial portion of the
Israeli private sector is controlled by relatively few companies.

FOREIGN AID

It is uncertain whether the economy of Israel could sustain increases in gross
domestic product without the continued receipt of external capital inflows,
particularly from the United States. Direct foreign assistance from the U.S.
government, in the form of grants for economic and military assistance, has
totaled approximately $3 billion annually over the past several years. In
addition, the State of Israel has received approximately $10 billion of U.S.
Government loan guarantees. There can be no assurance that such capital inflows
or loan guarantees will continue. A significant reduction in capital inflows or
loan guarantees could have a material adverse effect on the Israeli economy and
the Fund.

MISCELLANEOUS

The Fund will not invest more than 15% of its assets in illiquid securities,
that is, securities which are not readily resalable, which include securities
whose disposition is restricted by federal securities laws.

- 10 -
<PAGE>

The Fund may purchase Rule 144A Securities. These are privately offered
securities that can be resold only to certain qualified institutional buyers.
Rule 144A Securities are treated as illiquid, unless Harris Associates has
determined, under guidelines established by the Trust's trustees, that the
particular issue of Rule 144A Securities is liquid. Investment in restricted or
other illiquid securities involves the risk that the Fund may be unable to sell
such a security at the desired time. Also, the Fund may incur expenses, losses
or delays in the process of registering restricted securities prior to resale.

The Fund may purchase securities on a when-issued or delayed-delivery basis.
This means that the Fund enters into a commitment to buy the security before the
security has been issued, or, in the case of a security that has already been
issued, to accept delivery of the security on a date beyond the usual settlement
period. If the value of a security purchased on a when-issued or delayed
delivery basis falls or market rates of interest increase between the time the
Fund commits to buy the security and the delivery date, the Fund may sustain a
loss in value of or yield on the security. For more information on when-issued
and delayed delivery securities, see the Statement.

The Fund is a non-diversified fund and as such is not required to meet any
diversification requirements under 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.

- 11 -
<PAGE>

FUND MANAGEMENT

NEW ENGLAND FUNDS MANAGEMENT, L.P., 399 Boylston Street, Boston, Massachusetts
02116, serves as the Fund's adviser. NEFM 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 NEFM a
management fee at the annual rate of 1.10% 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, but is believed to be appropriate for the services received by the
Fund and to be comparable to fees paid by other mutual funds investing in a
manner similar to the Fund. For the services that Harris Associates provides to
the Fund, NEFM pays Harris Associates a fee at the annual rate of 0.70% of the
first $50 million of the Fund's average daily net assets, and 0.60% of such
assets in excess of $50 million. For the services that Batucha provides to the
Fund, NEFM pays Batucha a fee at the annual rate of 0.10% of the Fund's average
daily net assets.

Subject to the supervision of NEFM, Harris Associates manages the Fund's
portfolio in accordance with the Fund's investment objective and policies, makes
investment decisions for the portfolio, places orders to purchase and sell
securities for the portfolio, and employs professional advisers and securities
analysts who provide research services to the portfolio. Batucha provides Harris
Associates with statistical and other factual information, advice and assistance
regarding economic, financial, political, technological or social matters,
trends or changes relating to or affecting Israel and information on markets and
industries in Israel, but does not generally furnish advice or make
recommendations regarding the purchase or sale of securities for the Fund's
portfolio. The Fund pays no direct fees to either Harris Associates or Batucha.
Below is a brief description of the subadvisers.

HARRIS ASSOCIATES L.P., Two North LaSalle Street, Chicago, Illinois 60602,
investment subadviser to the Fund, has advised and managed mutual funds since
1970. Harris Associates also serves as investment adviser to other mutual funds
and to individuals, trusts, retirement plans, endowments and foundations, and
manages numerous private partnerships. Harris Associates has extensive
experience managing international equity portfolios, including the Oakmark
International Fund, which had $__ billion in assets as of October 31, 1995. Adam
Schor, one of the Fund's co-managers, has been a portfolio manager and analyst
with Harris Associates since 1993; from 1992-1993 he was an analyst with
American Family Insurance Group; prior to that time he was an analyst with the
State of Wisconsin Investment Board. David G. Herro, the Fund's other co-
manager, joined Harris Associates in 1992 from the State of Wisconsin Investment
Board, where he managed a $700 million international equity fund from 1989-1992.
Before 1989, Mr. Herro was a portfolio manager of a global equity mutual fund
and other accounts for the Principal Financial Group.

BATUCHA SECURITIES AND INVESTMENTS LTD., 8 Karl Netter Street, Tel Aviv, Israel,
special economic and market subadviser for the Fund, is organized under the laws
of the State of Israel and is a wholly-owned subsidiary of Clal (Israel) Ltd.
Batucha had in excess of $600 million of assets under management as of
_____________, 1995. A major shareholder of Clal is Bank Hapoalim, Israel's
largest bank, which serves as the Fund's custodian in Israel, subject to the
supervision of State Street Bank and Trust Company.

The Trust's Board of Trustees supervises the affairs of the Trust as conducted
by NEFM and Harris Associates.

ADVISORY COUNCIL. NEFM has established an Advisory Council to provide assistance
and consultation to NEFM on certain matters relating to Israel and the Fund,
including advising on investment trends, the Fund's image,

- 12 -
<PAGE>

Israeli economic developments, and those other areas which will enhance the
success. The council consists of the following individuals:

[list Advisory Council members]

The Advisory Council does not generally furnish advice or make recommendations
regarding the purchase or sale of securities for the Fund's portfolio.

In placing portfolio transactions for the Fund, Harris Associates seeks best
execution. Subject to this policy, Harris Associates may consider sales of
shares of the Fund and other mutual funds that it manages as a factor in the
selection of broker-dealers. Subject to procedures adopted by the Trust's Board
of Trustees, Fund brokerage transactions may be executed by brokers that are
affiliated with NEFM or Harris Associates.

- 13 -
<PAGE>

BUYING FUND SHARES

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.

MINIMUM INVESTMENT - CLASSES A, B AND C

$2,500 is the minimum for an initial investment in Class A, Class B and Class C
shares of the Fund and $50 is the minimum for each subsequent investment. There
are special initial investment minimums for the following plans:

. $25 (for initial and subsequent investments) for payroll
deduction investment programs for 401(k), SARSEP, 403(b)
retirement plans and certain other retirement plans.

. $50 for automatic investing through the Investment Builder
program.

. $250 for retirement plans with tax benefits such as corporate
pension and profit sharing plans, IRAs and Keogh plans.

. $1,000 for accounts registered under the Uniform Gifts to Minors
Act or the Uniform Transfers to Minors Act.

. $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 the Statement.

MINIMUM INVESTMENT - CLASS Y

Class Y shares of the Fund 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 by investment companies
registered under the 1940 Act. There is no minimum initial or subsequent
investment amount for Retirement Plans, Separate Accounts or registered
investment companies. 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.

6 WAYS TO BUY FUND SHARES

You may purchase Class A, Class B and Class C shares of the Fund in the
following ways:

- 14 -
<PAGE>

. THROUGH YOUR INVESTMENT DEALER:

Many investment dealers have a sales agreement with the Distributor and
would be pleased to accept your order.

. BY MAIL:

FOR AN INITIAL INVESTMENT, simply complete an application and return it,
with a check payable to New England Funds, P.O. Box 8551, Boston, MA 02266-
8551. Proceeds of redemptions of Fund shares purchased by check may not be
available for up to ten days after the purchase date.

FOR SUBSEQUENT INVESTMENTS, please mail your check to New England Funds,
P.O. Box 8551, Boston, MA 02266-8551 along with a letter of instruction or
an additional deposit slip from your statements. To make investing even
easier, you can also order personalized investment slips by calling 1-800-
225-5478.

. BY WIRE TRANSFER OF FEDERAL FUNDS:

FOR AN INITIAL INVESTMENT, call us at 1-800-225-5478 between 8:00 a.m. and
6:00 p.m. (Eastern time) to obtain an account number and wire transfer
instructions.

FOR SUBSEQUENT INVESTMENTS, direct your bank to transfer funds to State
Street Bank and Trust Company, ABA #011000028, DDA #99011538, Credit Growth
Fund of Israel, 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.

. 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 from your bank account.

TO ADD INVESTMENT BUILDER TO AN EXISTING ACCOUNT, please call us at 1-800-
225-5478 for a Service Options form.

. BY ELECTRONIC PURCHASE THROUGH ACH:

You may purchase additional shares electronically through the Automated
Clearing House ("ACH") system as long as your bank or credit union is a
member of the ACH system and you have a completed, approved ACH application
on file with the Fund.

To purchase through ACH, call us at 1-800- 225-5478 between 8 a.m. and 6
p.m. (Eastern time) for instructions or call Tele#Facts at 1-800-346-5984
twenty-four hours a day. If you purchase your shares through ACH, you will
receive the net asset value next determined after your order is received.
Proceeds of redemptions of Fund shares purchased through ACH may not be
available for up to ten days after the purchase date.

- 15 -
<PAGE>

. BY EXCHANGE FROM ANOTHER NEW ENGLAND FUND:

You may also purchase shares of the Fund by exchanging shares from another
New England Fund. Please see "Exchanging Among New England Funds" for
complete details.

GENERAL

All purchase orders are subject to acceptance by the Fund and will be effected
at the net asset value next determined after the order is received in proper
form by State Street Bank and Trust Company ("State Street Bank") (except orders
received by your investment dealer before the close of trading on the New York
Stock Exchange [the "NYSE"] and transmitted to the Distributor by 5:00 p.m.
[Eastern time] on the same day, which will be effected at the net asset value
determined on that day). Although the Fund does not anticipate doing so, it
reserves the right to suspend or change the terms of sales of shares.

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 Fund's open account system for
recording your investment eliminates the problems and expense of handling and
safekeeping certificates. Certificates will not be issued for Class 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.

An eligible investor may purchase Class Y shares of the Fund by mail, by wire
transfer of federal funds or by exchange from another New England Fund, as set
forth above.

SALES CHARGES

CLASS A SHARES

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.

During the Initial Subscription Period, Class A shares are subject to the
following sales charges:

<TABLE>
<CAPTION>
SALES CHARGES AS A % OF DEALER'S CONCESSION
-----------------------
AS A % OF
VALUE OF TOTAL INVESTMENT PUBLIC OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------------- --------------------- --------------- --------------

<S> <C> <C> <C>
Less than $100,000............. 2.5% 2.56% 2.5%

$100,000 - $999,999............ 1.0% 1.01% 1.0%

$1,000,000 or more............. None None *
</TABLE>

After the Initial Subscription Period, and following the period of approximately
60 days during which the Fund will be closed to new investors, Class A shares
will be offered subject to the following initial sales charges:

- 16 -
<PAGE>

<S> <C> <C> <C>
Less than $50,000 .............. 5.75% 6.10% 5.00%

$50,000 - $99,999 .............. 4.50% 4.71% 4.00%

$100,000 - $249,999 ............ 3.50% 3.63% 3.00%

$250,000 - $499,999 ............ 2.50% 2.56% 2.15%

$500,000 - $999,999 ............ 2.00% 2.04% 1.70%

$1,000,000 or more ............. None None *
</TABLE>

* The Distributor may, at its discretion, pay investment dealers who initiate
and are responsible for such purchases 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.

- --------------------------------------------------------------------------------
TO MAKE INVESTING EVEN EASIER,
YOU CAN ALSO ORDER PERSONALIZED INVESTMENT SLIPS BY CALLING 1-800-225-5478.
- --------------------------------------------------------------------------------

CONTINGENT DEFERRED SALES CHARGE (CLASS A SHARES ONLY). For purchases of
$1,000,000 or more of Class A shares of the Fund, 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 New
England Funds Trust I or New England Funds Trust II (the "Trusts"). For purposes
of the CDSC, it is assumed that the shares held the longest are the first to be
redeemed. No CDSC applies to a redemption of shares followed by a reinvestment
effected within 30 days after the date of the redemption.

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

- 17 -
<PAGE>

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:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
------------------- -----------------

<S> <C>
1st............................... 4%

2nd............................... 3%

3rd............................... 3%

4th............................... 2%

5th............................... 1%

Thereafter........................ 0%
</TABLE>

Year one ends one year after the day on which the purchase was accepted, and
so on.

The CDSC is deducted from the proceeds of the redemption, 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 up to
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 and are subject to a 0.25% annual service fee and a 0.75% annual
distribution fee.

CLASS Y SHARES

Class Y shares are offered to eligible investors at net asset value, without an
initial sales charge or CDSC, and are not subject to a service fee or
distribution fee.

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

- 18 -
<PAGE>

DECIDING WHICH CLASS TO PURCHASE

The decision as to whether Class A, Class B or Class C shares are more
appropriate for an investor depends on the amount and intended length of the
investment. Investors making large investments, qualifying for a reduced initial
sales charge, might consider Class A shares because Class A shares have lower
12b-1 fees and pay correspondingly higher dividends per share. For these
reasons, the Distributor will treat any order of $1 million or more for Class B
shares as a Class A order. Any order of $1 million or more for Class C shares
will be treated as an order for Class A shares, unless you indicate on the
relevant section of your application that you have been informed of the relative
advantages and disadvantages of Class A and Class C shares. Investors making
smaller investments might consider Class B or Class C shares because 100% of the
purchase is invested immediately. Investors making smaller investments who
anticipate redeeming their shares within 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. In general,
investors who are eligible to purchase Class Y shares should do so in preference
over other Classes, because Class Y shares do not bear the sales loads, CDSCs or
12b-1 fees that apply to other Classes. 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. Also, there is no CDSC on certain withdrawals pursuant to a
Systematic Withdrawal Plan. See "Systematic Withdrawal Plan" below.

The Fund receives the net asset value next determined after an order is received
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 Fund 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 series of the Trusts or if the account is registered in street name.

The Distributor may, at its expense, provide additional promotional incentives
or payments to dealers who sell shares of the Fund. In some instances these
incentives are provided to certain dealers who achieve sales goals or

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<PAGE>

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. 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.

The New England has entered into an arrangement (the "Program") with B'nai
B'rith relating to the marketing of certain insurance and investment products of
The New England and its affiliates to members of B'nai B'rith and certain other
purchasers. New England Securities Corporation ("NES"), a broker-dealer
subsidiary of The New England, pays [B'nai B'rith's broker-dealer affiliate]
("BBBD"), a broker-dealer affiliate of B'nai B'rith, an amount not to exceed 10%
of the dealer concession or reallowance and servicing fees received by NES from
the Distributor with respect to shares of the Fund and other New England Stock
and Bond Funds sold by NES under the Program. The Distributor has agreed to
compensate BBBD to the extent that the foregoing payments by NES to BBBD fall
short of 0.10% annually of the average daily net asset value of shares of the
New England Stock and Bond Funds sold under the Program that remain outstanding
from time to time.

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.

. ENDOWMENTS, FOUNDATIONS AND CHARITABLE ORGANIZATIONS - no sales charge
applies to purchases of Class A shares by endowments, foundations and
charitable organizations. (Note that endowments and foundations
investing more than $1 million will be eligible to purchase Class Y
shares when such shares become available for purchase. Class Y shares
have a lower expense ratio than Class A shares because of the absence
of 12b-1 fees.)

. 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 the
Fund is a legally permissible investment and that is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered investment
company.

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<PAGE>

. CLIENTS OF AN ADVISER OR SUBADVISER (AFFILIATED WITH NEIC) - no sales
charge or CDSC applies to investments in the Fund by (1) clients of an
adviser or subadviser (affiliated with NEIC) to any series of the
Trusts; any director, officer or partner of a client of an adviser or
subadviser (affiliated with NEIC) to any series of the Trusts; and the
parents, spouses and children of the foregoing; (2) any individual who
is a participant in a Keogh or IRA Plan under a prototype Plan
document of an adviser or subadviser (affiliated with NEIC) to any
series of the Trusts if at least one participant in the plan qualifies
under category (1) above; and (3) an individual who invests through an
IRA and is a participant in an employee benefit plan that is a client
of an adviser or subadviser (affiliated with NEIC) to any series of
the Trusts. Any investor eligible for these arrangements should so
indicate in writing at the time of the purchase.

. Purchase of Class A shares may be made with no sales charge or CDSC
through an investment adviser, broker or financial planner that
charges a fee for its services. Purchases of Class A shares may be
made with no sales charge or CDSC by participating investment
advisers, brokers and financial planners, provided such purchases are
placed through an omnibus account with the Fund.

. 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 & 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 the 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 New England Growth Fund, which
is subject to special eligibility restrictions) without paying a sales charge.
Class A shares of New England Intermediate Term Tax Free Fund of California and
New England Intermediate Term Tax Free Fund of New York (and shares of the

- 21 -
<PAGE>

Money Market Funds acquired through exchanges of such shares) may be exchanged
for Class A shares of the Fund at net asset value (or at a reduced sales charge)
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 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.

- --------------------------------------------------------------------------------
AUTOMATIC EXCHANGE PLAN.
THE FUND HAS AN AUTOMATIC EXCHANGE PLAN UNDER WHICH SHARES OF A CLASS OF THE
FUND ARE AUTOMATICALLY EXCHANGED EACH MONTH FOR SHARES OF THE SAME CLASS OF
OTHER SERIES OF THE TRUSTS (OTHER THAN NEW ENGLAND 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 B SHARES

You may exchange Class B shares of the Fund or any series of the Trusts (and
Class B shares of the Money Market Funds or Class A shares of the Money Market
Funds which have not been subject to a previous sales charge) for Class B shares
of any other series of the Trusts (except New England Growth Fund, which does
not offer Class B shares). Such exchanges will be made at the next determined
net asset value of the shares. Class B shares will automatically convert on a
tax-free basis to Class A shares eight years after they are purchased (excluding
the time the shares are held in a Money Market Fund). See "Sales Charges - Class
B Shares" above.

CLASS C SHARES

You may exchange Class C shares of the 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.

CLASS Y SHARES

A shareholder may exchange Class Y shares of the Fund for Class Y shares of any
other series of the Trusts which offers Class Y 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.

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<PAGE>

Except as otherwise permitted by SEC rule, shareholders will receive at least 60
days' advance notice of any material change to the exchange privilege.

FUND DIVIDEND PAYMENTS

The Fund pays dividends annually. The Fund pays as dividends substantially all
net investment income (other than long-term capital gains) each year and
distributes annually all net realized long-term capital gains (after applying
any available capital loss carryovers). The trustees of the Trust may adopt a
different schedule as long as payments are made at least annually. If you in
tend to purchase shares of the 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 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. Dividends will be
invested in the selected fund's shares on the dividend record date. A dividend
diversification account must be in the same registration (shareholder name) as
the distributing fund account and, if a new account in the purchased fund is
being established, the purchased fund's minimum investment requirements must be
met. Before establishing a dividend diversification program into any other New
England Fund, you must obtain a copy of that fund's prospectus.
- --------------------------------------------------------------------------------

SELLING FUND SHARES

4 WAYS TO SELL FUND SHARES

. THROUGH YOUR INVESTMENT DEALER (CLASS A, CLASS B AND CLASS C ONLY):
Call your authorized investment dealer for information.

. BY TELEPHONE:
You or your investment dealer may redeem (sell) shares by telephone using any
of the three methods described below:

Wired to Your Bank Account - If you have previously selected the telephone
redemption privilege on your account, shares may be redeemed by calling 1-
800-225-5478 between 8 a.m. and 6 p.m. (Eastern time). Class

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<PAGE>

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 NYSE 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 - Class A, Class B and Class C shares only 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 pm., 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 NYSE closes. The
proceeds (LESS ANY APPLICABLE CDSC) generally will arrive at your bank within
three business days; their availability will depend on your bank's particular
rule. If you have recently purchased your shares through the ACH system, the
Fund may withhold redemption proceeds until the funds have cleared, which may
take up to ten days.

. BY MAIL:

You may redeem your shares at their net asset value (LESS ANY APPLICABLE CDSC)
next determined after receipt of your request in good order by sending a
written request (including any necessary special documentation) to New England
Funds, P.O. Box 8551, Boston, MA 02266-8551.

The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, the number of shares or the
dollar amount to be redeemed and whether you wish the proceeds mailed to your
address of record, wired to your bank account or transmitted through ACH. All
owners of the shares must sign the request in the exact names in which the
shares are registered (this appears on your confirmation statement) and
indicate any special capacity in which you are signing (such as trustee,
custodian 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 Fund
recommends that certificates be sent by registered mail.

. BY SYSTEMATIC WITHDRAWAL PLAN (CLASS A, CLASS B AND CLASS C ONLY):

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<PAGE>

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 NYSE and transmitted to the
Distributor by 5:00 p.m. Eastern time on the same day will receive that day's
net asset value). Redemption proceeds (LESS ANY APPLICABLE CDSC) will normally
be mailed to you within seven days after State Street Bank or the Distributor
receives your request in good order.

During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If you are unable to contact the Distributor by
telephone, shares may be redeemed by delivering the redemption request in person
to the Distributor or by mail as described above. Requests are processed at the
net asset value next determined after the request is received.

Special rules apply with respect to redemptions under powers of attorney. Please
call your investment dealer or the Distributor for more information.

Telephone redemptions are not available for tax qualified retirement plans or
for Fund shares held in certificate form. If certificates have been issued for
your investment, you must send them to New England Funds along with your request
before a redemption request can be honored. See the instructions for redemption
by mail above.

The Fund may suspend the right of redemption and may postpone payment for more
than seven days when the NYSE is closed for other than weekends or holidays, or
if permitted by the rules of the SEC when trading on the NYSE is restricted or
during an emergency which makes it impracticable for the Fund to dispose of its
securities or to determine fairly the value of its net assets, or during any
other period permitted by the SEC for the protection of investors.

REPURCHASE OPTION (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

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<PAGE>

The net asset value for the Fund is determined at the close of regular trading
(currently 4:00 p.m. Eastern time) on the NYSE on each day that the NYSE is open
for trading, except that the Trust's Board of Trustees determined that because
there is no trading on the TASE on Fridays and certain Israeli holidays and
because most of the Fund's portfolio securities are listed and traded primarily
on the TASE, the Fund generally will not seek to calculate its net asset value
per share on Fridays and such Israeli holidays when the TASE is closed for
trading. Orders to purchase or redeem shares of the Fund received after the
close of the NYSE on Thursday of each week or on any other day on which the TASE
is closed will be effected at the price determined on the Fund's next business
day, generally a Monday, as of the close of the NYSE on that day. The net asset
value is determined by dividing the difference between the Fund's assets and its
liabilities by the number of shares outstanding. In general, the Fund's
investments will be valued at the representative rate of exchange which is
published by the Bank of Israel Monday through [Friday] (the "representative
rate") or, in the absence of a representative rate, at fair value as determined
by or under the direction of the Trust's Board of Trustees.

Securities traded on foreign exchanges such as the TASE generally will be valued
for purposes of calculating the Fund's net asset value at the preceding closing
value of the securities on the exchange, except that, when an occurrence
subsequent to the time a value was so established is likely to have materially
changed that value, the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Trust's Board of
Trustees. A security that is primarily traded on a domestic or foreign
securities exchange will be valued at the last sale price on that exchange or,
if no sales occurred during the day, at the current quoted bid price. An option
that is written by the Fund generally will be valued at the last sale price or,
in the absence of the last sale price, the last offer price. An option that is
purchased by the Fund is generally valued at the last sale price or in the
absence of the last sale price, the last bid price. The value of a futures
contract will be equal to the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract. A settlement price may
not be used if the market makes a limit move with respect to a particular
futures contract or if the securities underlying the futures contract experience
significant price fluctuations after the determination of the settlement price.
When a settlement price cannot be used, futures contracts will be valued at
their fair value as determined by or under the direction of the Trust's Board of
Trustees. Any assets initially expressed in terms of shekels will be translated
into U.S. dollars at the prevailing market rate on the date of net asset value
computation, or, if no such rate is quoted at such time, at such other
appropriate rate as may be determined by or under the direction of the Trust's
Board of Trustees.

The TASE trades on Sundays and certain other customary U.S. business holidays on
which the NYSE is not open for trading. Even though the Fund's assets traded on
the TASE may continue to trade on these days, the Fund will not accept orders
and the net asset value of the Fund's shares will not be determined on these
days. As a result, investors will not be able to purchase, sell or exchange
shares on these days even though the NYSE is open for trading on those days and
the net asset value may be significantly affected by trading on the NYSE.

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) plus any cash and other assets
(including dividends and interest receivable but not collected) less all
liabilities (including accrued expenses), by the number of shares of such class
outstanding. The public offering price of the Fund's Class A shares is
determined by adding the applicable sales charge to the net asset value. See
"Buying Fund Shares - Sales Charges" above. The public offering price of Class
B, Class C and Class Y shares is the net asset value per share.

The price you pay for a share will be determined using the next set of
calculations made after your order is accepted by the 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 NYSE on Tuesday. If you buy shares through your
investment dealer, the dealer must receive your order by the close of regular
trading on the NYSE and transmit it to the Distributor by 5:00 p.m. (Eastern
time) to receive that day's public offering price.

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<PAGE>

INCOME TAX CONSIDERATIONS

The Fund intends to meet all requirements of the Internal Revenue Code of 1986,
as amended, necessary to qualify as a regulated investment company and thus does
not expect to pay any U.S. federal income tax on investment income and capital
gains distributed to shareholders in cash or in additional shares. Unless you
are a tax-exempt entity, your distributions derived from the Fund's short-term
capital gains and ordinary income are taxable to you as ordinary income. (These
distributions are unlikely to qualify for the dividends-received deduction for
corporations.) Distributions derived from the Fund's long-term capital gains
("capital gains distributions"), if designated as such by the Fund, are taxable
to you as long-term capital gains, regardless of how long you have owned shares
in the Fund. Both income distribution and capital gains distributions are
taxable whether you elected to receive them in cash or additional shares.

To avoid an excise tax, the Fund intends to distribute prior to calendar year
end virtually all the Fund's ordinary income and net capital gains earned during
that calendar year. If declared in December to shareholders of record in that
month, and paid the following January, these distributions will be considered
for federal income tax purposes to have been received by shareholders on
December 31.

The Fund is required to withhold 31% of all income dividends and capital gains
distributions it pays to you if you do not provide a correct, certified taxpayer
identification number, if the Fund is notified that you have underreported
income in the past, or if you fail to certify to the Fund that you are not
subject to such withholding. In addition, the Fund will be required to withhold
31% of the gross proceeds of Fund shares you redeem if you have not provided a
correct, certified taxpayer identification number. If you are a tax-exempt
shareholder, however, these back-up withholding rules will not apply so long as
you furnish the Fund with an appropriate certification.

Annually, if you earn more than $10 in taxable income from the Fund, you will
receive a Form 1099 to assist you in reporting the prior calendar year's
distributions on your federal income tax return. You should consult your tax
adviser about any state or local taxes that may apply to such distributions. Be
sure to keep the Form 1099 as a permanent record. A fee may be charged for any
duplicate information requested.

The 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 foregoing is a summary of certain federal income tax consequences of an
investment in the Fund for shareholders who are U.S. citizens or corporations.
Shareholders should consult a competent tax adviser as to the effect of an
investment in the Fund on their particular federal, state and local tax
situations and about consequences of their investment under Israeli tax law.

ISRAELI TAXES AND PASS THROUGH TO SHAREHOLDERS

The following is a short summary of the tax structure applicable to corporations
in Israel with reference to its effect on the Fund. The following discussion is
partially based on enacted Israeli legislation that has not been subjected to
judicial or administrative interpretation. There can be no assurance that views
expressed herein will be accepted by the courts or by the Israeli Tax
Commission.

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<PAGE>

Capital Gains Tax. The Israeli Income Tax Ordinance [New Version] (the
"Ordinance") imposes a tax on capital gains derived by residents of Israel, or
by non-residents of Israel who sell assets which represent a direct or an
indirect interest in Israeli assets. The Fund, however, will be exempt from such
capital gains tax. Pursuant to the tax treaty between the United States and
Israel (the "Treaty"), the sale, exchange or disposition of securities by a
person, such as the Fund, qualifying as a resident of the United States within
the meaning of the Treaty and entitled to claim the benefits afforded to such
resident by the Treaty will not be subject to the Israeli capital gains tax,
with certain exceptions not applicable to the Fund. See the Statement for
further details.

Corporate Taxes. In general, Israeli companies are currently subject to "Company
Tax" at a rate of 36% of taxable income. Reduced tax rates apply to taxable
income attributable to those portions of the company's operations which have
been granted "Approved Enterprise" status under the Law for the Encouragement of
Capital Investments. A company which also qualifies as a Foreign Investors'
Company is entitled to further reductions in the Company Tax generally
applicable to Approved Enterprises.

Withholding Tax on Payments of Dividends and Interest. Non-residents of Israel,
including the Fund, are subject to income tax on income accrued or derived from
sources in Israel or received in Israel. Generally, on distributions of
dividends other than bonus shares (stock dividends), income tax at a rate of 25%
is withheld at the source. This tax is reduced to 15% with respect to dividends
distributed from income generated by an "Approved Enterprise." Interest paid on
debt securities is generally subject to income tax a rate of 25%. However,
pursuant to the Treaty, such rate is reduced to 17.5% for U.S. residents.

OTHER TAXATION

Distribution also may be subject to additional state, local and foreign taxes
depending on each shareholder's particular situation.

This discussion is limited only to U.S. federal income tax and Israeli tax.
Moreover, the U.S. federal income tax and Israeli tax discussion set forth above
is a summary included for general information purposes only. In view of the
individual nature of tax consequences, each investor is advised to consult its
own tax adviser with respect to the specific tax consequences to it of
participation in the Fund, including the effect and applicability of state,
local, foreign and other tax laws and the possible effects of changes in federal
or other tax laws.

- --------------------------------------------------------------------------------

AVERAGE COST STATEMENT.
IF YOU HAVE EXCHANGED OR REDEEMED SHARES DURING THE YEAR, YOU WILL RECEIVE A
STATEMENT THAT SHOWS THE COST BASIS OF THOSE SHARES WHICH SHOULD HELP YOU
DETERMINE YOUR GAIN OR LOSS FOR TAX PURPOSES.

- --------------------------------------------------------------------------------

THE FUND'S EXPENSES

In addition to the management fee paid to the Adviser, the Fund pays all
expenses not borne by the Adviser, the subadvisers or the Distributor,
including, but not limited to, the charges and expenses of the Fund's custodian
and transfer agent, independent auditors and legal counsel, 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 of the Trust who are not directors, officers or employees of The New
England or its affiliates, other than affiliated registered investment
companies.

- 28 -
<PAGE>

Under a Service Plan in the case of Class A shares, and a Service and
Distribution Plan in the case of Class B and Class C shares, adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor a monthly service fee at an annual rate not to exceed 0.25% of the
Fund's average daily net assets attributable to the Class A, Class B and Class C
shares. The Distributor may pay up to the entire amount of this fee to
securities dealers who are dealers of record with respect to the Fund's shares,
for providing personal services to investors in shares of the Fund and/or the
maintenance of shareholder accounts. In the case of the Class B shares, the
Distributor pays investment dealers at the time of the sale the first year's
service fee, in the amount of up to .25% of the amount invested. The Class A
service fee is payable only to reimburse the

Distributor for amounts it pays or expends in connection with the provision of
personal services to investors and/or the maintenance of shareholder accounts.
To the extent that the Distributor's reimbursable expenses in any year exceed
the maximum amount payable under the 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 Class B and Class C service fees are payable
regardless of the amount of the Distributor's related expenses.

The 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 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

The Fund may include total return information for each class of shares in
advertisements or other written sales material. The Fund will show each class's
average annual total return for the one-, five- and ten-year periods (or the
life of the class, if shorter) through the end of the most recent calendar
quarter. Total return is measured by comparing the value of a hypothetical
$1,000 investment in a class at the beginning of the relevant period to the
value of the investment at the end of the period (assuming deduction of the
current maximum sales charge on Class A shares, automatic reinvestment of all
dividends and capital gains distributions). Total return may be quoted with or
without giving effect to any voluntary expense limitations in effect for the
class in question during the relevant period. The class may also show total
return over other periods, on an aggregate basis for the period presented, or
without deduction of a sales charge. If a sales charge is not deducted in
calculating total return, the class's total return is higher.

Total return will generally be higher for Class A shares than for Class B and
Class C shares, because of the higher levels of expenses borne by the 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 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 FUND

. 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 Fund is a newly
organized series of the Trust.

. When you invest in the Fund, you acquire freely transferable shares of
beneficial interest that entitle you to receive dividends as
determined by the Trust's trustees and to cast a vote for each share
you own at shareholder meetings. Shares of the Fund vote separately
from shares of other

- 29 -
<PAGE>

series of the Trust, except as otherwise required by law. Shares of
all classes of the Fund vote together, except as to matters relating
to the Rule 12b-1 plan that applies to the Class A, Class B or Class C
shares, on which only shares of that class are entitled to vote. No
Rule 12b-1 plan applies to the Class Y shares of the Fund.

. Except for matters that are explicitly identified as "fundamental" in
this prospectus or the Statement, the investment policies of the Fund
may be changed without shareholder approval or, in most cases, prior
notice. The investment objective of the Fund is not fundamental. If
there is a change in the Fund's objective, shareholders should
consider whether the Fund remains an appropriate investment in light
of their current financial position and needs.

. The Trust does not generally hold regular shareholder meetings and
will do so only when required by law. Shareholders of the Trust may
remove the trustees of the Trust from office by votes cast at a
shareholder meeting or by written consent.

. The transfer and dividend paying agent for the Fund is New England
Funds, L.P., 399 Boylston Street, Boston, MA 02116. New England Funds,
L.P. has subcontracted certain of its obligations as such to State
Street Bank, 225 Franklin Street, Boston, MA 02110.

. If the balance in your account with the Fund is less than a minimum
amount set by the trustees of the Trust from time to time (currently
$500 for all accounts, except for those indicated below and for
Individual Retirement Accounts, which have a $25 minimum), the Fund
may close your account and send the proceeds to you. Shareholders who
are affected by this policy will be notified of the Fund's intention
to close the account and will have 60 days immediately following the
notice to bring the account up to the minimum. The minimum does not
apply to Keogh, pension and profit sharing plans, automatic investment
plans or accounts that have fallen below the minimum solely because of
fluctuations in the Fund's net asset value per share.

. The Fund's annual report contains additional performance information
and will be 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.

- 30 -
<PAGE>

GLOSSARY OF TERMS

CAPITAL GAIN DISTRIBUTIONS - Payments to shareholders of profits earned from
selling securities in a fund's portfolio. Capital gain distributions are usually
paid once a year.

CONTINGENT DEFERRED SALES CHARGE (CDSC) - A fee that may be charged when a
shareholder sells fund shares.

DISTRIBUTION FEE - An annual asset-based sales charge that is used to pay for
sales-related expenses.

INCOME DISTRIBUTIONS - Payments to shareholders resulting from interest or
dividend income earned by a fund's portfolio.

MUTUAL FUND - The pooled assets of a group of investors, professionally managed
in pursuit of a specific objective.

NET ASSET VALUE (NAV) - The market value of one share of a mutual fund on any
given day without sales charge or CDSC. Determined by dividing the fund's total
net assets by the number of fund shares outstanding.

NEW ENGLAND FUNDS, L.P. - The distributor and transfer agent of the New England
Funds.

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 - 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.

LOGO

- 31 -
<PAGE>

NEW ENGLAND FUNDS

GROWTH FUND OF ISRAEL

STATEMENT OF ADDITIONAL INFORMATION

January __, 1996

This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
prospectus of Growth Fund of Israel (the "Fund"). This Statement is not a
prospectus and is only authorized for distribution when accompanied or preceded
by the prospectus of the Fund dated January __, 1996 for Class A, B, C or Y
shares (the "prospectus"). The Statement should be read together with the
prospectus. Investors may obtain a free copy of the prospectus from New England
Funds, L.P., Prospectus Fulfillment Desk, 399 Boylston Street, Boston, MA 02116.

This Statement contains information about the Class A, B, C and Y shares of
the Fund. The Fund is a series of New England Funds Trust II (the "Trust"), a
registered investment company that offers a total of eight series.

<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
PART I
Investment Restrictions
Fund Charges and Expenses

PART II
Miscellaneous Investment Practices
Management of the Trusts
Portfolio Transactions and Brokerage
Description of the Trusts and Ownership of Shares
How to Buy Shares
Net Asset Value and Public Offering Price
Reduced Sales Charges
Shareholder Services
Redemptions
Standard Performance Measures
Income Dividends, Capital Gain Distributions and Tax Status

Appendix A - Description of Bond Ratings
Appendix B - Publications That May Contain Fund Information
Appendix C - Advertising and Promotional Literature
</TABLE>

-i-
<PAGE>

________________________________________________________________________________

INVESTMENT RESTRICTIONS
________________________________________________________________________________

The following is a description of restrictions on the investments to be
made by the Fund, some of which restrictions (those restrictions marked with an
asterisk) may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. The percentages set forth below and
the percentage limitations set forth in the prospectus will apply at the time of
the purchase of a security and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result of a purchase
of such security.

The Fund may not:

(1) Purchase any security (other than U.S. Government obligations) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer;

*(2) Purchase any security (other than U.S. Government Securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries);

(3) Purchase securities on margin (but it may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of securities),
or make short sales except where, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and
the Fund will not deposit or pledge more than 10% of its total assets
(taken at current value) as collateral for such sales. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);

(4) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and all debt issues
of an issuer as a single class) or acquire more than 10% of the outstanding
voting securities of an issuer;

*(5) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and then
only as a temporary measure for extraordinary or emergency purposes;

(6) Pledge more than 15% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to
initial and variation margin are not deemed to be a pledge of assets);

(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;

-ii-
<PAGE>

(8) Purchase or retain securities of any issuer if officers and trustees of the
Trust or of the investment adviser of the Fund who individually own more
than 1/2 of 1% of the shares or securities of that issuer, together own
more than 5%;

*(9) Make loans, except by entering into repurchase agreements or by purchase of
bonds, debentures, commercial paper, corporate notes and similar evidences
of indebtedness, which are a part of an issue to the public or to financial
institutions, or through the lending of the Fund's portfolio securities;

*(10)Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund may
buy and sell futures contracts and related options. (This restriction does
not prevent the Fund from purchasing securities of companies investing in
the foregoing);

*(11)Act as underwriter, except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws;

(12) Make investments for the purpose of exercising control or management;

(13) Participate on a joint or joint and several basis in any trading account in
securities. (The "bunching" of orders for the purchase or sale of portfolio
securities with Harris Associates L.P. or accounts under its management to
reduce brokerage commissions, to average prices among them or to facilitate
such transactions is not considered a trading account in securities for
purposes of this restriction.);

(14) Write, purchase or sell options or warrants, except that the Fund may (a)
acquire warrants or rights to subscribe to securities of companies issuing
such warrants or rights, or of parents or subsidiaries of such companies,
(b) write, purchase and sell put and call options on securities or
securities indexes and (c) enter into currency forward contracts;

(15) Purchase any illiquid security if, as a result, more than 15% of its total
assets (taken at current value) would be invested in such securities;

(16) Invest in the securities of other investment companies, except by purchases
in the open market involving only customary brokers' commissions. Under the
Investment Company Act of 1940 (the "1940 Act"), the Fund may not (a)
invest more than 10% of its total assets (taken at current value) in such
securities, (b) own securities of any one investment company having a value
in excess of 5% of the total assets of the Fund (taken at current value),
or (c) own more than 3% of the outstanding voting stock of any one
investment company; or

*(17)Issue senior securities. For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts; and the issuance of shares of beneficial interest permitted from
time to time by the provisions

-iii-
<PAGE>

of the Trust's Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom.

The staff of the Securities and Exchange Commission (the "SEC") is
currently of the view that repurchase agreements maturing in more than seven
days are subject to restriction (15) above.

________________________________________________________________________________

FUND CHARGES AND EXPENSES
________________________________________________________________________________

INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEES

Pursuant to an Advisory Agreement dated January __, 1996, New England Funds
Management, L.P. ("NEFM") has agreed, subject to the supervision of the board of
trustees of the Trust, to manage the investment and reinvestment of the assets
of the Fund and to provide a range of administrative services to the Fund. For
the services described in the Advisory Agreement, the Fund pays NEFM a fee at
the annual rate of 1.10% of the Fund's average daily net assets.

The Advisory Agreement provides that NEFM may delegate its responsibilities
thereunder to other parties. NEFM has delegated responsibility for the
investment and reinvestment of the assets of the portfolio to Harris Associates
L.P. ("Harris"). NEFM pays Harris a fee for managing the portfolio, at the
annual rate of 0.70% of the average daily net assets of the Fund up to $50
million, and 0.60% of such assets in excess of $50 million.

Batucha Securities & Investments Ltd. ("Batucha") provides information,
advice to the Fund on various matters relating to or affecting Israel, and
information on markets and industries in Israel, pursuant to an agreement
between NEFM and Batucha. NEFM pays Batucha a fee for such services at the
annual rate of 0.10% of the Fund's average daily net assets.

For more information about the Fund's investment advisory and subadvisory
agreements, see "Management of the Trust" in Part II of this Statement.

-iv-
<PAGE>

PART II
________________________________________________________________________________

MISCELLANEOUS INVESTMENT PRACTICES
________________________________________________________________________________

The following information relates to certain investment practices in which
the Fund may engage.

Loans of Portfolio Securities. The Fund may lend its portfolio securities to
- -----------------------------
broker-dealers under contracts calling for cash collateral equal to at least the
market value of the securities loaned, marked to the market on a daily basis.
(The Fund at the present time has no intention to engage in the lending of
portfolio securities.) The Fund will continue to benefit from interest or
dividends on the securities loaned and will also receive interest through
investment of the cash collateral in short-term liquid investments, which may
include shares of money market funds subject to any investment restriction
listed in Part I. No loans will be made if, as a result, the aggregate amount
of such loans outstanding at any one time would exceed 15% of the Fund's total
assets (taken at current value). Any voting rights, or rights to consent,
relating to securities loaned pass to the borrower. However, if a material
event affecting the investment occurs, such loans will be called so that the
securities may be voted by the Fund. The Fund pays various fees in connection
with such loans, including shipping fees and reasonable custodian and placement
fees approved by the board of trustees of the Trust or persons acting pursuant
to the direction of the board.

These transactions must by fully collateralized at all times, but involve
some credit risk to the Fund if the other party should default on its obligation
and the Fund is delayed in or prevented from recovering the collateral.

U.S. Government Securities. The Fund may invest in some or all of the following
- --------------------------
U.S. Government Securities:

. U.S. Treasury Bills - Direct obligations of the United States Treasury
-------------------
which are issued in maturities of one year or less. No interest is paid on
Treasury bills; instead, they are issued at a discount and repaid at full face
value when they mature. They are backed by the full faith and credit of the
United States Government.

. U.S. Treasury Notes and Bonds - Direct obligations of the United States
-----------------------------
Treasury issued in maturities that vary between one and 40 years, with interest
normally payable every six months. These obligations are backed by the full
faith and credit of the United States Government.

. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or guaranteed
by the Veterans Administration. The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer of
these certificates on the underlying mortgages. An assistant attorney general
of the United States has rendered an opinion that the guarantee by GNMA is a
general

-1-
<PAGE>

obligation of the United States backed by its full faith and credit. Mortgages
included in single family or multi-family residential mortgage pools backing an
issue of Ginnie Maes have a maximum maturity of up to 30 years. Scheduled
payments of principal and interest are made to the registered holders of Ginnie
Maes (such as the Fund) each month. Unscheduled prepayments may be made by
homeowners, or as a result of a default. Prepayments are passed through to the
registered holder (such as the Fund, which reinvests any prepayments) of Ginnie
Maes along with regular monthly payments of principal and interest.

. "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a
-------------
government-sponsored corporation owned entirely by private stockholders that
purchases residential mortgages from a list of approved seller/servicers.
Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the United States Government.

. "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
--------------
corporate instrumentality of the United States Government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United States
Government.

As described in the prospectus, U.S. Government Securities do not involve
the credit risks associated with investments in other types of fixed-income
securities, although, as a result, the yields available from U.S. Government
Securities are generally lower than the yields available from corporate fixed-
income securities. Like other fixed-income securities, however, the values of
U.S. Government Securities change as interest rates fluctuate. Fluctuations in
the value of portfolio securities will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value. Since
the magnitude of these fluctuations will generally be greater at times when the
Fund's average maturity is longer, under certain market conditions the Fund may,
for temporary defensive purposes, accept lower current income from short-term
investments rather than investing in higher yielding long-term securities.

[When-Issued Securities. The Fund may enter into agreements with banks or
----------------------
broker-dealers for the purchase or sale of securities at an agreed-upon price on
a specified future date. Such agreements might be entered into, for example,
when the Fund anticipates a decline in interest rates and is able to obtain a
more advantageous yield by committing currently to purchase securities to be
issued later. When the Fund purchases securities in this manner (i.e. on a
when-issued or delayed-delivery basis), it is required to create a segregated
account with the Trust's custodian and to maintain in that account cash or U.S.
Government Securities in an amount equal to or greater than, on a daily basis,
the amount of the Fund's when-issued or delayed-delivery commitments. The Fund
will make commitments to purchase on a when-issued or delayed-delivery basis
only securities meeting the Fund's investment criteria. The Fund may take
delivery of these securities or, if it is deemed advisable as a matter of
investment strategy, the Fund may sell these securities before the settlement
date. When the time comes to pay for when-issued or delayed-delivery
securities, the Fund will meet its obligations from the then available cash flow
or the sale of securities, or from the sale of the when-issued or delayed-
delivery securities themselves (which may have a value greater or less than the
Fund's payment obligation).]

-2-
<PAGE>

Repurchase Agreements. The Fund may enter into repurchase agreements by which
- ---------------------
the Fund purchases a security and obtains a simultaneous commitment from the
seller to repurchase the security at an agreed-upon price and date. The resale
price is in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate
of indebtedness, note or bond issued by an agency, authority or instrumentality
of the United States Government, the obligation of the seller is not guaranteed
by the United States Government and there is a risk that the seller may fail to
repurchase the underlying security. In such event, the Fund would attempt to
exercise rights with respect to the underlying security, including possible
disposition in the market. However, the Fund may be subject to various delays
and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto, (b) possible reduced levels of income and lack of access to income
during this period and (c) inability to enforce rights and the expenses involved
in the attempted enforcement.

Zero Coupon Securities. Zero coupon securities are debt obligations that do not
- ----------------------
entitle the holder to any periodic payments of interest either for the entire
life of the obligation or for an initial period after the issuance of the
obligations. Such securities are issued and traded at a discount from their
face amounts. The amount of the discount varies depending on such factors as
the time remaining until maturity of the securities, prevailing interest rates,
the liquidity of the security and the perceived credit quality of the issuer.
The market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero coupon
securities having similar maturities and credit quality. In order to satisfy a
requirement for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"), the Fund must distribute
each year at least 90% of its net investment income, including the original
issue discount accrued on zero coupon securities. Because the Fund will not on
a current basis receive cash payments from the issuer of a zero coupon security
in respect of accrued original issue discount, in some years the Fund may have
to distribute cash obtained from other sources in order to satisfy the 90%
distribution requirement under the Code. Such cash might be obtained from
selling other portfolio holdings of the Fund. In some circumstances, such sales
might be necessary in order to satisfy cash distribution requirements even
though investment considerations might otherwise make it undesirable for the
Trust to sell such securities at such time.

Convertible Securities. The Fund may invest in convertible securities including
- ----------------------
corporate bonds, notes or preferred stocks of U.S. or foreign issuers that can
be converted into (that is, exchanged for) common stocks or other equity
securities. Convertible securities also include other securities, such as
warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.

Options and Futures
- -------------------

FUTURES CONTRACTS. A futures contract is an agreement between two parties to
buy and sell a particular commodity (e.g., an interest-bearing security) for a
specified price on a specified future date. In the case of futures on an index,
the seller and buyer agree to settle in cash, at a

-3-
<PAGE>

future date, based on the difference in value of the contract between the date
it is opened and the settlement date. The value of each contract is equal to
the value of the index from time to time multiplied by a specified dollar
amount. For example, Standard & Poor's 500 Index futures trade in contracts
equal to $500 multiplied by the Standard & Poor's 500 Index.

When a trader, such as the Fund, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker as "initial margin"
an amount of cash or short-term high-quality securities (such as U.S. Treasury
Bills or high-quality tax exempt bonds acceptable to the broker) equal to
approximately 2% to 5% of the delivery or settlement price of the contract
(depending on applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of the contract
changes, the value of futures contract positions increases or declines. At the
end of each trading day, the amount of such increase and decline is received and
paid respectively by and to the holders of these positions. The amount received
or paid is known as "variation margin." If the Fund has a long position in a
futures contract it will establish a segregated account with the Fund's
custodian containing cash or certain illiquid assets equal to the purchase price
of the contract (less any margin on deposit). For short positions in futures
contracts, the Fund will establish a segregated account with the custodian with
cash or high grade liquid debt assets that, when added to the amounts deposited
as margin, equal the market value of the instruments or currency underlying the
futures contracts.

Although futures contracts by their terms require actual delivery and
acceptance of securities (or cash in the case of index futures), in most cases
the contracts are closed out before settlement. A futures sale is closed by
purchasing a futures contract for the same aggregate amount of the specific type
of financial instrument or commodity and with the same delivery date.
Similarly, the closing out of a futures purchase is closed by the purchaser
selling an offsetting futures contract.

Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.

OPTIONS. An option on a futures contract obligates the writer, in return for
the premium received, to assume a position in a futures contract (a short
position if the option is a call and a long position if the option is a put), at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option generally will be accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the exercise price
to the market price and volatility of the underlying contract, the remaining
term of the option, supply and demand and interest rates. Options on futures
contracts traded in the United States may only be traded on a United States
board of trade licensed by the Commodity Futures Trading Commission.

An option on a security entitles the holder to receive (in the case of a
call option) or to sell (in the case of a put option) a particular security at a
specified exercise price. An "American style" option allows exercise of the
option at any time during the term of the option. A "European style" option
allows an option to be exercised only at the end of its term. Options on
securities may be traded on or off a national securities exchange.

-4-
<PAGE>

A call option on a futures contract written by the Fund is considered by
the Fund to be covered if the Fund owns the security subject to the underlying
futures contract or other securities whose values are expected to move in tandem
with the values of the securities subject to such futures contract, based on
historical price movement volatility relationships. A call option on a security
written by the Fund is considered to be covered if the Fund owns a security
deliverable under the option. A written call option is also covered if the Fund
holds a call on the same futures contract or security as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, Treasury bills or
other high grade liquid obligations in a segregated account with its custodian.

A put option on a futures contract written by the Fund, or a put option on
a security written by the Fund, is covered if the Fund maintains cash, U.S.
Treasury bills or other high-grade liquid debt obligations with a value equal to
the exercise price in a segregated account with the Fund's custodian, or else
holds a put on the same futures contract (or security, as the case may be) as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written.

If the writer of an option wishes to terminate its position, it may effect
a closing purchase transaction by buying an option identical to the option
previously written. The effect of the purchase is that the writer's position
will be canceled. Likewise, the holder of an option may liquidate its position
by selling an option identical to the option previously purchased.

Closing a written call option will permit the Fund to write another call
option on the portfolio securities used to cover the closed call option.
Closing a written put option will permit the Fund to write another put option
secured by the segregated cash, U.S. Treasury bills or other high-grade liquid
obligations used to secure the closed put option. Also, effecting a closing
transaction will permit the cash or proceeds from the concurrent sale of any
futures contract or securities subject to the option to be used for other Fund
investments. If the Fund desires to sell particular securities covering a
written call option position, it will close out its position or will designate
from its portfolio comparable securities to cover the option prior to or
concurrent with the sale of the covering securities.

The Fund will realize a profit from closing out an option if the price of
the offsetting position is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Fund will
realize a loss from closing out an option transaction if the price of the
offsetting option position is more than the premium received from writing the
option or is less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the covering securities, any loss resulting from the
closing of a written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.

Since premiums on options having an exercise price close to the value of
the underlying securities or futures contracts usually have a time value
component (i.e. a value that diminishes as the time within which the option can
be exercised grows shorter) an option writer may profit from the lapse of time
even though the value of the futures contract (or security in some cases)
underlying the option (and of the security deliverable under the futures
contract) has not changed. Consequently, profit from option writing may or may
not be offset by a decline in the value of securities covering the option. If
the profit is not entirely offset, the Fund will have a net gain from the
options transaction, and the Fund's total return will be enhanced. Likewise,
the profit or loss from writing put options may or may not be offset in

-5-
<PAGE>

whole or in part by changes in the market value of securities acquired by the
Fund when the put options are closed.

RISKS. The use of futures contracts and options involves risks. One risk
arises because of the imperfect correlation between movements in the price of
futures contracts and movements in the price of the securities that are the
subject of the hedge. The Fund's hedging strategies will not be fully effective
unless the Fund can compensate for such imperfect correlation. There is no
assurance that the Fund will be able to effect such compensation.

The correlation between the price movement of the futures contract and the
hedged security may be distorted due to differences in the nature of the
markets. If the price of the futures contract moves more than the price of the
hedged security, the Fund would experience either a loss or a gain on the future
that is not completely offset by movements in the price of the hedged
securities. In an attempt to compensate for imperfect price movement
correlations, the Fund may purchase or sell futures contracts in a greater
dollar amount than the hedged securities if the price movement volatility of the
hedged securities is historically greater than the volatility of the futures
contract. Conversely, the Fund may purchase or sell fewer contracts if the
volatility of the price of hedged securities is historically less than that of
the futures contracts.

The price of index futures may not correlate perfectly with movement in the
relevant index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions, which could distort the
normal relationship between the index and futures markets. Secondly, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market, and as a result the futures market may
attract more speculators than does the securities market. In addition, trading
hours for foreign stock index futures may not correspond perfectly to hours of
trading on the foreign exchange to which a particular foreign stock index future
relates. This may result in a disparity between the price of index futures and
the value of the relevant index due to the lack of continuous arbitrage between
the index futures price and the value of the underlying index. Finally, hedging
transactions using stock indices involve the risk that movements in the price of
the index may not correlate with price movements of the particular portfolio
securities being hedged.

Price movement correlation also may be distorted by the illiquidity of the
futures and options markets and the participation of speculators in such
markets. If an insufficient number of contracts are traded, commercial users
may not deal in futures contracts or options because they do not want to assume
the risk that they may not be able to close out their positions within a
reasonable amount of time. In such instances, futures and options market prices
may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market enhances its liquidity. Nonetheless,
speculators trading spreads between futures markets may create temporary price
distortions unrelated to the market in the underlying securities.

Positions in futures contracts and options on futures contracts may be
established or closed out only on an exchange or board of trade. There is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. The liquidity of markets in
futures contracts and options on futures contracts may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges

-6-
<PAGE>

which limit the amount of fluctuation in a futures or options price during a
single trading day. Once the daily limit has been reached in a contract, no
trades may be entered into at a price beyond the limit, which may prevent the
liquidation of open futures or options positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days. If there is
not a liquid market at a particular time, it may not be possible to close a
futures or options position at such time, and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, if futures or options are used to hedge portfolio
securities, an increase in the price of the securities, if any, may partially or
completely offset losses on the futures contract.

An exchange-traded option may be closed out only on a national securities
or commodities exchange which generally provides a liquid secondary market for
an option of the same series. If a liquid secondary market for an exchange-
traded option does not exist, it might not be possible to effect a closing
transaction with respect to a particular option, with the result that the Fund
would have to exercise the option in order to realize any profit. If the Fund
is unable to effect a closing purchase transaction in a secondary market, it
will be not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

Because the specific procedures for trading foreign stock index futures on
futures exchanges are still under development, additional or different margin
requirements as well as settlement procedures may be applicable to foreign stock
index futures at the time the Fund purchases foreign stock index futures.

The successful use of transactions in futures and options depends in part
on the ability of Harris to forecast correctly the direction and extent of
interest rate movements within a given time frame. To the extent interest rates
move in a direction opposite to that anticipated, the Fund may realize a loss on
the hedging transaction that is not fully or partially offset by an increase in
the value of portfolio securities. In addition, whether or not interest rates
move during the period that the Fund holds futures or options positions, the
Fund will pay the cost of taking those positions (i.e. brokerage costs). As a
result of these factors, the Fund's total return for such period may be less
than if it had not engaged in the hedging transaction.

Options trading involves price movement correlation risks similar to those
inherent in futures trading. Additionally, price movements in options on
futures may not correlate with price movements in the futures underlying the
options. Like futures, options positions may become less liquid because of
adverse economic circumstances. The securities covering written option
positions are expected to offset adverse price movements if those options

-7-
<PAGE>

positions cannot be closed out in a timely manner, but there is no assurance
that such offset will occur. Also, an option writer may not effect a closing
purchase transaction after it has been notified of the exercise of an option.

OVER-THE-COUNTER OPTIONS. An over-the-counter option (an option not traded on a
national securities exchange) may be closed out only with the other party to the
original option transaction. While the Fund will seek to enter into over-the-
counter options only with dealers who agree to or are expected to be capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to liquidate an over-the-counter option at a favorable
price at any time prior to its expiration. Accordingly, the Fund might have to
exercise an over-the-counter option it holds in order to realize any profit
thereon and thereby would incur transactions costs on the purchase or sale of
the underlying assets. If the Fund cannot close out a covered call option
written by it, it will not be able to sell the underlying security until the
option expires or is exercised. Furthermore, over-the-counter options are not
subject to the protections afforded purchasers of listed options by the Options
Clearing Corporation or other clearing organizations.

ECONOMIC EFFECTS AND LIMITATIONS. Income earned by the Fund from its hedging
activities will be treated as capital gain and, if not offset by net recognized
capital losses incurred by the Fund, will be distributed to shareholders in
taxable distributions. Although gain from futures and options transactions may
hedge against a decline in the value of the Fund's portfolio securities, that
gain, to the extent not offset by losses, will be distributed in light of
certain tax considerations and will constitute a distribution of that portion of
the value preserved against decline.

The Fund will not "over hedge," that is, maintain open short positions in
futures or options contracts if, in the aggregate, the market value of its open
positions exceeds the current market value of its securities portfolio plus or
minus the unrealized gain or loss on such open positions, adjusted for the
historical price volatility relationship between the portfolio and futures and
options contracts. Also, subject to change without shareholder approval, the
Fund will not sell futures contracts if, as a result, the sum of the amount of
its initial margin deposits on its existing futures positions would exceed 5% of
the Fund's total assets (taken at current value).

FUTURE DEVELOPMENTS. The above discussion relates to the Fund's proposed use of
futures contracts, options and options on futures contracts currently available.
The relevant markets and related regulations are still in the developing stage.
In the event of future regulatory or market developments, the Fund may also use
additional types of futures contracts or options and other investment techniques
for the purposes set forth above.

FOREIGN CURRENCY HEDGING TRANSACTIONS. To protect against a change in the
- -------------------------------------
foreign currency exchange rate between the date on which the Fund contracts to
purchase or sell a security and the settlement date for the purchase or sale, or
to "lock in" the equivalent of a dividend or interest payment in another
currency, the Fund might purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate. If conditions warrant, the Fund may also
enter into contracts with banks or broker-dealers to purchase or sell foreign
currencies at a future date ("forward contracts"). The Fund will maintain cash
or high-quality debt obligations in a segregated account with the custodian in
an amount at least equal to (i) the difference between the current value of the
Fund's liquid holdings that settle in the relevant currency and the Fund's
outstanding obligations under currency forward contracts, or (ii) the current
amount, if any, that would be required to be paid to enter into an offsetting
forward

-8-
<PAGE>

currency contract which would have the effect of closing out the original
forward contract. The Fund's use of currency hedging transactions may be limited
by tax considerations. The Fund may also purchase or sell foreign currency
futures contracts traded on futures exchanges. Foreign currency futures contract
transactions involve risks similar to those of other futures transactions. See
"Options and Futures" above.

________________________________________________________________________________

MANAGEMENT OF THE TRUST
________________________________________________________________________________

Trustees
- --------

Trustees of the Trust and their principal occupations during the past five years
are as follows:

GRAHAM T. ALLISON, JR. -- Trustee (55); 79 John F. Kennedy Street, Cambridge, MA
-------
02138; Douglas Dillon Professor and Director for the Center of Science and
International Affairs, John F. Kennedy School of Government; Special
Advisor to the United States Secretary of Defense; formerly, Assistant
Secretary of Defense; formerly Dean, John F. Kennedy School of Government.

KENNETH J. COWAN -- Trustee (63); One Beach Drive, S.E. #2103, St. Petersburg,
-------
Florida 33701; Retired; formerly, Senior Vice President-Finance and Chief
Financial Officer, Blue Cross of Massachusetts, Inc. and Blue Shield of
Massachusetts, Inc.; formerly Director, Neworld Bank for Savings and
Neworld Bancorp.

SANDRA O. MOOSE -- Trustee (53); 135 E. 57th Street New York, NY 10022; Senior
-------
Vice President and Director, The Boston Consulting Group, Inc. (management
consulting); Director, GTE Corporation and Rohm and Haas Company (specialty
chemicals).

HENRY L.P. SCHMELZER/*/ -- Trustee and President (52); President, Chief
---------------------
Executive Officer and Director, NEF Corporation; President and Chief
Executive Officer, New England Funds, L.P.; President and Chief Executive
Officer, NEFM; Director, Back Bay Advisors, Inc.; formerly, Director, New
England Securities Corporation ("New England Securities").

JOHN A. SHANE -- Trustee (62); 300 Unicorn Park Drive, Woburn, Massachusetts
-------
01801; President, Palmer Service Corporation (venture capital
organization); General Partner, The Palmer Organization and Palmer Partners
L.P.; Director, Arch Communications Group, Inc. (paging service); Director,
Dowden Publishing Company, Inc. (publishers of medical magazines);
Director, Eastern Bank Corporation; Director, Gensym Corporation (expert
system software); Director, Overland Data, Inc. (manufacturer of computer
tape drives);Director, Summa Four, Inc. (manufacturer of telephone
switching equipment); Director, United Asset Management Corporation
(holding company for institutional money management); formerly, Director,
Abt Associates, Inc. (consulting firm); formerly, Director, Aviv
Corporation (manufacturer of

__________________________

/*/ Trustee deemed an "interested person" of the Trusts, as defined in the
Investment Company Act of 1940 (the "1940 Act").

-9-
<PAGE>

controllers); formerly, Director, Banyan Systems, Inc. (manufacturer of
network software); formerly, Director, Cerjac Inc. (manufacturer of
telephone testing equipment).

PETER S. VOSS* -- Chairman of the Board, Chief Executive Officer and Trustee
----------------------------------------------------------
(49); President and Chief Executive Officer, New England Investment
-
Companies, L.P. ("NEIC"); Director, President and Chief Executive Officer,
New England Investment Companies, Inc.; Chairman of the Board and Director,
NEF Corporation; Chairman of the Board and Director, Back Bay Advisors,
Inc.; Director, New England Mutual Life Insurance Company ("The New
England"); formerly, Executive Vice President, Bank of America; formerly,
Group Head of International Banking, Trading and Securities, Security
Pacific National Bank, and Chief Executive Officer of the Security Pacific
Investment Group.

PENDLETON P. WHITE -- Trustee (64); 6 Breckenridge Lane, Savannah, Georgia
-------
31411; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants); Trustee, The
Faulkner Corporation.

Officers
- --------

Officers of the Trust and their principal occupations during the past five
years are as follows:

J. STEVEN NEAMTZ -- Vice President; Executive Vice President, NEF Corporation;
--------------
Executive Vice President, New England Funds, L.P..

BRUCE R. SPECA -- Vice President; Executive Vice President, NEF Corporation;
--------------
Executive Vice President, New England Funds, L.P.; Executive Vice
President, NEFM.

FRANK NESVET -- Treasurer; Senior Vice President and Chief Financial Officer,
----------
NEF Corporation; Senior Vice President and Chief Financial Officer, New
England Funds, L.P.; Senior Vice President and Chief Financial Officer,
NEFM; formerly, Executive Vice President, SuperShare Services Corporation.

ROBERT P. CONNOLLY -- Secretary and Clerk; Senior Vice President and General
-------------------
Counsel, NEF Corporation; Senior Vice President and General Counsel, New
England Funds, L.P.; Senior Vice President and General Counsel, NEFM:
formerly, Managing Director and General Counsel, Kroll Associates, Inc.
(business consulting company); formerly, Managing Director and General
Counsel, Equitable Capital Management Corporation (investment management
company).

CHARLES T. WALLIS -- Senior Vice President; President, Chief Executive Officer
---------------------
and Director, Back Bay Advisors, L.P. ("Back Bay Advisors"); Director, New
England Securities; formerly, Vice President, The New England.

GERALD H. SCRIVER -- Senior Vice President; President and Chief Executive
---------------------
Officer of Westpeak Investment Advisors, L.P. ("Westpeak"); formerly,
Director of Quantitative Strategies of INVESCO.

HAROLD B. BJORNSON -- Vice President; Vice President, Back Bay Advisors;
--------------
formerly Assistant Vice President, New England Securities.

-10-
<PAGE>

PHILIP J. COOPER -- Vice President; Vice President, Westpeak; formerly,
--------------
Portfolio Manager, United Asset Management Services.

CHRISTINE A. CREELMAN -- Vice President; Vice President, Back Bay Advisors.
--------------

KIMBERLY J. FORSYTH -- Vice President; Senior Vice President, Back Bay Advisors;
--------------
formerly, Senior Vice President and Director of Tax-Exempt Credit Research
Department, Legg Mason, Incorporated (investment advisory firm); formerly,
Vice President and Senior Credit Analyst, Putnam Investment Management,
Incorporated (investment management company); formerly, Director of
Municipal Research, Alex. Brown & Sons Incorporated (brokerage/advisory
firm).

CHARLES G. GLUECK -- Vice President; Senior Vice President, Back Bay Advisors;
--------------
formerly, Senior Investment Officer, The New England.

ERIC N. GUTTERSON -- Vice President; Vice President, Back Bay Advisors.
--------------

SCOTT A. MILLIMET -- Vice President; Vice President, Back Bay Advisors;
--------------
formerly, Senior Vice President and Manager of Carroll, McEntee & McGinley,
Chicago Board of Trade.

J. SCOTT NICHOLSON -- Vice President; Senior Vice President, Back Bay Advisors.
--------------

EDGAR M. REED -- Vice President; Executive Vice President and Chief Investment
--------------
Officer, Back Bay Advisors; formerly, Head of the Fixed Income Management
Group, Aetna Capital Management.

JAMES S. WELCH -- Vice President; Vice President, Back Bay Advisors; formerly,
--------------
Vice President, Putnam Management Company.

Except as indicated above, the address of each officer affiliated with Back
Bay Advisors or New England Funds, L.P. is 399 Boylston Street, Boston,
Massachusetts 02116. The address of each officer associated with Westpeak is
1050 Walnut Street, Boulder, Colorado 80302. The address of each officer
associated with Harris is Two North LaSalle Street, Chicago, Illinois 60602.

Trustees Fees
- -------------

The Trust pays no compensation to its officers or to its trustees who are
interested persons thereof.

Each trustee who is not an interested person of the Trust receives, in the
aggregate for serving on the boards of the Trust and [12] other mutual fund
portfolios, a retainer fee at the annual rate of $40,000 and meeting attendance
fees of $2,500 for each meeting of the boards he or she attends and $1,500 for
each meeting he or she attends of a committee of the board of which he or she
was a member. Each committee chairman receives an additional retainer fee at
the annual rate of $2,500. These fees are allocated among the Fund and the [12]
other mutual fund portfolios based on a formula that takes into account, among
other factors, the net assets of each fund.

-11-
<PAGE>

During the fiscal year ended December 31, 1995 the persons who were then
trustees of the Trust received the amounts set forth in the following table for
serving as a trustee of the Trust and for also serving on the governing boards
of [28] other mutual fund portfolios (the "Other Funds").

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from the Trust and the
from the Trust in Other Funds in
Name of Trustee 1995 1995
--------------- ---- ----
<S> <C> <C>
Kenneth J. Cowan $ $
Joseph M. Hinchey
Richard S. Humphrey, Jr.
Robert B. Kittredge (a)
Laurens MacLure (a)
Sandra O. Moose
James H. Scott
John A. Shane
Joseph F. Turley
Pendleton P. White
</TABLE>

(a) Also includes compensation paid by the 5 CGM Funds, a group of mutual funds
for which Capital Growth Management Limited Partnership, the investment adviser
of New England Funds Trust I's New England Growth Fund, serves as investment
adviser.

The Trust provides no pension or retirement benefits to trustees, but has
adopted a deferred payment arrangement under which each trustee may elect not to
receive fees from the Trust on a current basis but to receive in a subsequent
period an amount equal to the value that such fees would have if they had been
invested in each of the funds in the Trust on the normal payment date for such
fees. As a result of this method of calculating the deferred payments, the
Fund, upon making the deferred payments, will be in the same financial position
as if the fees had been paid on the normal payment dates.

As of January __, 1996, the officers and trustees of the Trust as a group
owned less than 1% of the outstanding shares of the Trust.

Advisory and Subadvisory Agreements
- -----------------------------------

The Fund's advisory agreement provides that NEFM will furnish or pay the
expenses of the Fund for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain administrative services.

The Fund pays all expenses not borne by its adviser or subadviser including,
but not limited to, the charges and expenses of the Fund's custodian and
transfer agent, independent auditors and legal counsel, all brokerage
commissions and transfer taxes in connection with portfolio transactions, all
taxes and filing fees, the fees and expenses for registration or qualification
of its shares under the federal or state securities laws, all expenses of
shareholders' and trustees' meetings and of preparing, printing and mailing
reports to shareholders and the compensation of trustees who are not directors,
officers or employees of the Fund's adviser, subadviser or their affiliates,
other than affiliated registered investment

-12-
<PAGE>

companies. The Fund also pays NEFM for certain legal and accounting services
provided to the Fund by NEFM.

Under the Fund's advisory agreement, if the total ordinary business expenses
of the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentage of average net assets or income)
prescribed by any state in which the shares of the Fund or Trust are qualified
for sale, NEFM shall pay such excess. At present, the most restrictive state
annual expense limitation is 2 1/2% of the average annual net assets up to
$30,000,000, 2% of the next $70,000,000 and 1 1/2% of such assets in excess of
$100,000,000. NEFM will not be required to reduce its fee or pay such expenses
to an extent or under circumstances which might result in the Fund's inability
to qualify as a regulated investment company under the Code. The term
"expenses" is defined in the advisory agreement and excludes brokerage
commissions, taxes, interest, distribution-related expenses and extraordinary
expenses. This means that the distribution fees payable to New England Funds,
L.P. under the Fund's Distribution Agreement and the Distribution Plan would be
excluded from "expenses."

The advisory agreement and the subadvisory agreement between NEFM and Harris
provides that it will continue in effect for two years from its date of
execution and thereafter from year to year if its continuance is approved at
least annually (i) by the board of trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the trustees who are not "interested persons" of the Trust, as that
term is defined in the 1940 Act, cast in person at a meeting called for the
purpose of voting on such approval. Any amendment to the advisory agreement or
the subadvisory agreement must be approved by vote of a majority of the
outstanding voting securities of the Fund and by vote of a majority of the
trustees of the Trust who are not such interested persons, cast in person at a
meeting called for the purpose of voting on such approval. Each agreement may
be terminated without penalty by vote of the Trust's board of trustees or by
vote of a majority of the outstanding voting securities of the Fund, upon 60
days' written notice, or by NEFM upon 90 days' written notice, and each
terminates automatically in the event of its assignment. The subadvisory
agreement also may be terminated by Harris upon 90 days' notice and is
automatically terminated upon termination of the related advisory agreement. In
addition, the advisory agreement will automatically terminate if the Trust or
the Fund shall at any time be required by the Distributor to eliminate all
reference to the words "New England" or the letters "TNE" in the name of the
Trust, unless the continuance of the agreement after such change of name is
approved by a majority of the outstanding voting securities of the Fund and by a
majority of the Trustees who are not interested persons of the Trust or NEFM.

The advisory agreement and sub-advisory agreement each provide that the
adviser and subadviser shall not be subject to any liability in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.

NEFM, organized in 1995, is an independently operated subsidiary of NEIC,
and serves as the investment adviser to New England Growth Opportunities Fund,
New England Strategic Income Fund and New England Equity Income Fund, as well as
the Fund [UPDATE IF RESTRUCTURING BEFORE 1/1/96].

Harris was organized in 1995 to succeed to the business of a predecessor
limited partnership also named Harris Associates L.P., which together with its
predecessor had

-13-
<PAGE>

advised and managed mutual funds since 1970. Harris is a wholly-owned
subsidiary of NEIC, having been acquired by NEIC in 1995. Harris also serves as
investment adviser to individuals, trusts, retirement plans, endowments and
foundations, and manages numerous private partnerships.

Certain officers and employees of Harris who are also officers of the Trust
have responsibility for portfolio management of other advisory accounts and
clients (including other registered investment companies and accounts of
affiliates of Harris) that may invest in securities in which the Fund may
invest. Where Harris determines that an investment purchase or sale opportunity
is appropriate and desirable for more than one advisory account, purchase and
sale orders may be executed separately or may be combined and, to the extent
practicable, allocated by Harris to the participating accounts. Where advisory
accounts have competing interests in a limited investment opportunity, Harris
will allocate an investment purchase opportunity based on the relative time the
competing accounts have had funds available for investment, and the relative
amounts of available funds, and will allocate an investment sale opportunity
based on relative cash requirements and the time the competing accounts have had
investments available for sale. It is Harris's policy to allocate, to the
extent practicable, investment opportunities to each client over a period of
time on a fair and equitable basis relative to its other clients.

It is believed that the ability of the Fund to participate in larger volume
transactions in this manner will in some cases produce better executions for the
Fund. However, in some cases, this procedure could have a detrimental effect on
the price and amount of a security available to the Fund or the price at which a
security may be sold. The trustees are of the view that the benefits of
retaining Harris as investment manager outweigh the disadvantages, if any, that
might result from participating in such transactions.

Distribution Agreement and Rule 12b-1 Plans. Under an agreement with the
-------------------------------------------
Fund (the "Distribution Agreement"), New England Funds, L.P. serves as the
general distributor of each class of shares of the Fund. Under this agreement,
New England Funds, L.P. is not obligated to sell a specific number of shares.
New England Funds, L.P. bears the cost of making information about the Fund
available through advertising and other means and the cost of printing and
mailing prospectuses to persons other than shareholders. The Fund pays the cost
of registering and qualifying its shares under state and federal securities laws
and the distribution of prospectuses to existing shareholders.

New England Funds, L.P. is compensated under the Distribution Agreement
through receipt of the sales charges on Class A shares described below under
"Net Asset Value and Public Offering Price" and is paid by the Fund the service
and distribution fees described in the prospectus.

As described in the prospectuses, the Fund has adopted Rule 12b-1 plans (the
"Plans") for its Class A and Class C shares which, among other things, permit it
to pay the Fund's distributor (currently New England Funds, L.P.) monthly fees
out of its net assets. Pursuant to Rule 12b-1 under the 1940 Act, each Plan was
approved by the shareholders of the Fund, and (together with the Distribution
Agreement) by the board of trustees, including a majority of the trustees who
are not interested persons of the Trust (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Plan or
the Distribution Agreement (the "Independent Trustees").

-14-
<PAGE>

Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the Fund. Each Plan may be amended by vote of the
trustees, including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. Any change in any Plan that would materially
increase the fees payable thereunder by the relevant class of shares of the Fund
requires approval of the holders of such shares. The Trust's trustees review
quarterly written reports of such costs and the purposes for which such costs
have been incurred. For so long as a Plan is in effect, selection and
nomination of those trustees who are not interested persons of the Trust shall
be committed to the discretion of such disinterested persons.

The Distributor has entered into selling agreements with investment dealers,
including New England Securities, an affiliate of the Distributor, for the sale
of the Fund's shares. New England Securities is registered as a broker-dealer
under the Securities Exchange Act of 1934. The Distributor may at its expense
pay an amount not to exceed 0.50% of the amount invested to dealers who have
selling agreements with the Distributor. [Class Y shares of the Fund may be
offered by registered representatives of New England Securities who are also
employees of New England Investment Associates, Inc. ("NEIA"), an indirect,
wholly-owned subsidiary of NEIC. NEIA may receive compensation from NEFM with
respect to sales of Class Y shares.]

The Distribution Agreement may be terminated at any time on 60 days' written
notice without payment of any penalty by New England Funds, L.P. or by vote of a
majority of the outstanding voting securities of the Fund or by vote of a
majority of the Independent Trustees.

The Distribution Agreement and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Independent Trustees and (ii) by
the vote of a majority of the entire board of trustees cast in person at a
meeting called for that purpose or by a vote of a majority of the outstanding
securities of Fund (or the relevant class, in the case of the Plans).

With the exception of New England Funds, L.P., New England Securities and
their direct and indirect corporate parents (NEIC and The New England), no
interested person of the Trust nor any trustee of the Trust had any direct or
indirect financial interest in the operation of the Plans or any related
agreement.

Benefits to the Fund and its shareholders resulting from the Plans are
believed to include (1) enhanced shareholder service, (2) asset retention, (3)
enhanced bargaining position with third party service providers and economies of
scale arising from having higher asset levels and (4) portfolio management
opportunities arising from having an enhanced positive cash flow.

New England Funds, L.P. controls the words "New England" in the name of New
England Funds Trust II [and the Fund] and if it should cease to be the
distributor, New England Funds Trust II [or the Fund] may be required to change
their names and delete these words or letters. New England Funds, L.P. also
acts as general distributor for New England Cash Management Trust, New England
Tax Exempt Money Market Trust, New England Funds Trust I, New England Funds
Trust III and the other series of the Trust besides the Fund.

-15-
<PAGE>

During the years ended December 31, 1992, 1993 and 1994 (the last year for
which information is available), New England Funds, L.P. received commissions on
the sale of the Class A shares of New England Funds Trust II aggregating
$7,195,240, $5,970,295, and $2,071,744, respectively, of which $6,475,716,
$573,825 and $1,780,651, respectively, were reallowed to other securities
dealers and the balance retained by New England Funds, L.P.

Custodial Arrangements. State Street Bank and Trust Company ("State Street
----------------------
Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
the Fund and, in such capacity, is the registered owner of securities in book-
entry form belonging to the Fund. Upon instruction, State Street Bank receives
and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Trust and calculates the total net asset value,
total net income and net asset value per share of the Fund on a daily basis.

Independent Accountants. The Fund's independent accountants are Price
-----------------------
Waterhouse L.L.P., 160 Federal Street, Boston, MA 02109. The independent
accountants of the Trust conduct an annual audit of that Trust's financial
statements, assist in the preparation of federal and state income tax returns
and consult with the Trust as to matters of accounting and federal and state
income taxation.

Other Arrangements
- ------------------

Pursuant to a contract between the Fund and New England Funds, L.P., New
England Funds, L.P. acts as shareholder servicing and transfer agent for the
Fund and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Fund's shares. The Fund
pays per account fees to New England Funds, L.P. for these services in the
amount of $17.25. New England Funds, L.P. has subcontracted with State Street
Bank for it to provide, through its subsidiary Boston Financial Data Services,
Inc. ("BFDS") transaction processing, mail and other services. For these
services, New England Funds, L.P. pays BFDS a per account fee of [$8.40] [$7.40]
[$6.40] [$5.40] [?].

________________________________________________________________________________

PORTFOLIO TRANSACTIONS AND BROKERAGE
________________________________________________________________________________

In placing orders for the purchase and sale of portfolio securities for the
Fund, Harris always seeks the best price and execution. Some of the Fund's
portfolio transactions are placed with brokers and dealers who provide Harris
with supplementary investment and statistical information or furnish market
quotations to the Fund or other investment companies advised by Harris. The
business would not be so placed if the Fund would not thereby obtain the best
price and execution. Although it is not possible to assign an exact dollar
value to these services, they may, to the extent used, tend to reduce the
expenses of Harris. The services may also be used by Harris in connection with
their other advisory accounts and in some cases may not be used with respect to
the Fund.

In placing orders for the purchase and sale of equity securities, Harris
selects only brokers which it believes are financially responsible, will provide
efficient and effective

-16-
<PAGE>

services in executing, clearing and settling an order and will charge commission
rates that, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Harris will use its best efforts to obtain information as to the general level
of commission rates being charged by the brokerage community from time to time
and will evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account. Harris is the principal source of information and advice to the Fund,
and is responsible for making and initiating the execution of the investment
decisions by the Fund. However, the Board of Trustees of the Trust recognizes
that it is important for Harris, in performing its responsibilities to the Fund,
to continue to receive and evaluate the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Fund to take into account the value
of the information received for use in advising the Fund. Consequently, the
commission paid to brokers providing research services may be greater than the
amount of commission another broker would charge for the same transaction. The
extent, if any, to which the obtaining of such information may reduce the
expenses of Harris in providing management services to the Fund is not
determinable. In addition, it is understood by the Board of Trustees of the
Trust that other clients of Harris might also benefit from the information
obtained for the Fund, in the same manner that the Fund might also benefit from
information obtained by the Harris in performing services to others.

Subject to procedures adopted by the Board of Trustees of the Trust, the
Fund's brokerage transactions may be executed by brokers that are affiliated
with the Distributor, NEFM or Harris. Any such transactions will comply with
Rule 17e-1 under the Investment Company Act of 1940.

Portfolio turnover is not a limiting factor with respect to investment
decisions. The Fund anticipates that their portfolio turnover rates will vary
significantly from time to time depending on the volatility of economic and
market conditions.

Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Fund as a principal in the purchase and sale of securities.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principals for their own accounts, affiliated persons of
the Trust, such as New England Securities, may not serve as the Fund's dealer in
connection with such transactions.

It is expected that the portfolio transactions in fixed-income securities
will generally be with issuers or dealers on a net basis without a stated
commission. Securities firms may receive brokerage commissions on transactions
involving options, futures and options on futures and the purchase and sale of
underlying securities upon exercise of options. The brokerage commissions
associated with buying and selling options may be proportionately higher than
those associated with general securities transactions.

________________________________________________________________________________

DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
________________________________________________________________________________

-17-
<PAGE>

New England Funds Trust II was organized in 1931 as a Massachusetts business
trust and consisted of a single investment portfolio (now New England Growth
Opportunities Fund) until January 1989. The Fund is a newly organized series of
the Trust. The other series of the Trust are New England High Income Fund, New
England Massachusetts Tax Free Income Fund, New England Intermediate Term Tax
Free Fund of California and New England Intermediate Term Tax Free Fund of New
York, each of which has two classes of shares; New England Adjustable Rate U.S.
Government Fund, which has three classes of shares; and New England Growth
Opportunities Fund and New England Limited Term U.S. Government Fund, each of
which has four classes of shares. Until December 1988, the name of the Trust
was "Investment Trust of Boston"; from December 1988 until April 1992, its name
was "Investment Trust of Boston Funds." New England High Income Fund and New
England Massachusetts Tax Free Income Fund are successors to separate investment
companies that were organized in 1983 and 1984, respectively, and reorganized as
series of the Trust in January 1989. New England Limited Term U.S. Government
Fund was organized in 1988 and commenced operations in January 1989. New
England Adjustable Rate U.S. Government Fund was organized in 1991 and commenced
operations on October 18 of that year. New England Intermediate Term Tax Free
Fund of New York and New England Intermediate Term Tax Free Fund of California
were organized in 1993 and commenced operations on April 23 of that year.

The Declaration of Trust of the Trust currently permits the Trust's trustees
to issue an unlimited number of full and fractional shares of each series. The
Fund is represented by a series of shares of the Trust. The Declaration of
Trust further permits the Trust's trustees to divide the shares of each series
into any number of separate classes, each having such rights and preferences
relative to other classes of the same series as the trustees may determine. The
shares of Fund do not have any preemptive rights. Upon termination of the Fund,
whether pursuant to liquidation of the Trust or otherwise, shareholders of each
class of the Fund are entitled to share pro rata in the net assets attributable
to that class of shares of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.

The shares of the Fund are divided into four classes, Class A, Class B,
Class C and Class Y. The Fund offers Class A, Class B, Class C and Class Y
shares. The Class Y shares are available for purchase only by certain eligible
institutional investors and have higher minimum purchase requirements than
Classes A, B and C. All expenses of the Fund are borne by its Class A, Class B,
Class C and Class Y shares on a pro rata basis, except for the administrative
services fee (which may be charged at a separate rate to each class), 12b-1 fees
(which are borne only by Classes A, B and C) and the following expenses that are
separately allocated to each class: transfer agency fees and expenses of
printing and mailing prospectuses to shareholders.

The assets received by each class of the Fund for the issue or sale of its
shares and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to, and constitute the underlying
assets of, that class. The underlying assets of each class of the Fund are
segregated and are charged with the expenses with respect to that class and with
a share of the general expenses of the Trust. Any general expenses of the Trust
that are not readily identifiable as belonging to a particular class of a fund
in the Trust are allocated by or under the direction of the trustees in such
manner as the trustees determine to be fair and equitable. While the expenses
of the Trust are allocated to the separate books of account of each fund in the
Trust, certain expenses may be legally chargeable against the assets of all
classes of the funds in the Trust.

-18-
<PAGE>

The Declaration of Trust also permits Trust's trustees, without shareholder
approval, to subdivide any series or class of shares or fund into various sub-
series or sub-classes with such dividend preferences and other rights as the
trustees may designate. While the trustees have no current intention to
exercise this power, it is intended to allow them to provide for an equitable
allocation of the impact of any future regulatory requirements which might
affect various classes of shareholders differently. The trustees may also,
without shareholder approval, establish one or more additional series or classes
or merge two or more existing series or classes.

The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or any fund of the Trust, however, may be terminated at any time by
vote of at least two-thirds of the outstanding shares of each fund affected.
Similarly, any class within a fund may be terminated by vote of at least two-
thirds of the outstanding shares of such class. While the Declaration of Trust
further provides that the board of trustees may also terminate the Trust upon
written notice to its shareholders, the 1940 Act requires that the Trust receive
the authorization of a majority of its outstanding shares in order to change the
nature of its business so as to cease to be an investment company.

Voting Rights
- -------------

As summarized in the prospectus, shareholders are entitled to one vote for
each full share held (with fractional votes for each fractional share held) and
may vote (to the extent provided therein) in the election of trustees and the
termination of the Trust and on other matters submitted to the vote of
shareholders.

The Declaration of Trust provides that on any matter submitted to a vote of
all shareholders of the Trust, all Trust shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular
series or class would be adversely affected by the vote, in which case a
separate vote of that series or class shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it is clear
that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the SEC, shareholders of all series and classes vote together, irrespective
of series or class, on the election of trustees and the selection of the Trust's
independent accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain changes in
investment policies of that series or the approval of the investment advisory
and subadvisory agreements relating to that series, and shareholders of each
class within a series vote separately as to the Rule 12b-1 plan (if any)
relating to that class.

There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting

-19-
<PAGE>

shall be held upon the written request of the holders of not less than 10% of
the outstanding shares.

Upon written request by the holders of shares having a net asset value of at
least $25,000 or at least 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Trust has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).

Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Shareholder voting rights are not cumulative.

No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust except (i) to change
the Trust's or a fund's name or to cure technical problems in the Declaration of
Trust, (ii) to establish and designate new series or classes of Trust shares and
(iii) to establish, designate or modify new and existing series or classes of
Trust shares or other provisions relating to Trust shares in response to
applicable laws or regulations.

Shareholder and Trustee Liability
- ---------------------------------

Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
trustees. The Declaration of Trust provides for indemnification out of the
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund by reason of owning shares of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself would be unable to
meet its obligations.

The Declaration of Trust further provides that the board of trustees will
not be liable for errors of judgment or mistakes of fact or law. However,
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The By-Laws of the Trust provide for
indemnification by the Trust of trustees and officers of the Trust, except with
respect to any matter as to which any such person did not act in good faith in
the reasonable belief that his or her action was in or not opposed to the best
interests of the Trust. Such persons may not be indemnified against any
liability to the Trust or the Trust's shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.

________________________________________________________________________________

HOW TO BUY SHARES
________________________________________________________________________________

The procedures for purchasing shares of the Fund are summarized in the
prospectus. Banks may charge a fee for transmitting funds by wire. With respect
to shares purchased by

-20-
<PAGE>

federal funds, shareholders should bear in mind that wire transfers may take two
or more hours to complete.

For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange on a day
when the Exchange is open; otherwise the settlement date is the following
business day. For telephone orders, the settlement date is the fifth business
day after the order is made.

Shares may also be purchased either in writing, by phone or, in the case of
Class A, B and C shares, by electronic funds transfer using Automated Clearing
House ("ACH"), or by exchange as described in the prospectus through firms that
are members of the National Association of Securities Dealers, Inc. and that
have selling agreements with the Distributor.

The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of the Fund's Class A, B or C shares. Payment must
be received by the Distributor within five business days following the
transaction date or the order will be subject to cancellation. Telephone orders
must be placed through the Distributor or your investment dealer.

________________________________________________________________________________

NET ASSET VALUE AND PUBLIC OFFERING PRICE
________________________________________________________________________________

The method for determining the public offering price and net asset value per
share is summarized in the prospectus.

The total net asset value of each class of shares of the Fund (the excess of
the assets of the Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the New York Stock Exchange
is open for trading, except for Fridays and certain Israeli holidays on which
there is no trading on the Tel Aviv Stock Exchange (the "TASE"). The weekdays
that the New York Stock Exchange is expected to be closed are New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The non-Friday weekdays that the TASE is
expected to be closed in 1996 are April 3-4, April 9-10, April 23-24, May 23,
September 15 and September 22-23. Securities listed on a national securities
exchange or on the NASDAQ national market system are valued at their last sale
price, or, if there is no reported sale during the day, the last reported bid
price estimated by a broker. Unlisted securities traded in the over-the-counter
market are valued at the last reported bid price in the over-the-counter market
or on the basis of yield equivalents as obtained from one or more dealers that
make a market in the securities. U.S. Government Securities are traded in the
over-the-counter market. Options, interest rate futures and options thereon
that are traded on exchanges are valued at their last sale price as of the close
of such exchanges. Securities for which current market quotations are not
readily available and all other assets are taken at fair value as determined in
good faith by the board of trustees, although the actual calculations may be
made by persons acting pursuant to the direction of the board.

Generally, trading in Israeli and other foreign government securities and
other fixed-income securities, as well as trading in equity securities in
markets outside the United States, is substantially completed each day at
various times prior to the close of the New York Stock

-21-
<PAGE>

Exchange. The values of such securities used in determining the net asset value
of the Fund's shares are computed as of 3:00 p.m. Eastern time, in the case of
U.S. and Canadian Government Securities, and 5:00 p.m. London time, in the case
of foreign government securities and equity securities of non-U.S. issuers which
are not traded on a U.S. national exchange, except that, in unusual instances in
which London trading in certain foreign government securities continues past
5:00 p.m. London time, the values of such securities will be computed as of the
close of the New York Stock Exchange that day (or such earlier time as
significant trading activity in such foreign government securities ceases for
the day). The value of equity securities of non-U.S. issuers not traded on a
U.S. exchange will be valued at their last sale price, if any, on the exchange
on which they principally trade. Occasionally, events affecting the value of
fixed-income securities and of equity securities of non-U.S. issuers not traded
on a U.S. exchange may occur between the completion of substantial trading of
such securities for the day and the close of the New York Stock Exchange, which
events will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of the Fund's securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith by or in accordance with procedures approved by the
trustees.

The per share net asset value of a class of the Fund's shares is computed by
dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share of the
Fund is the net asset value per share next determined after a properly completed
purchase order is accepted by New England Funds, L.P. or State Street Bank, plus
a sales charge as set forth in the Fund's prospectus. The public offering price
of a Class B, C or Y share of a Fund is the next determined net asset value.

________________________________________________________________________________

REDUCED SALES CHARGES

Class A Shares Only
________________________________________________________________________________

Special purchase plans are enumerated in the text of the prospectus.

Cumulative Purchase Discount. A Fund shareholder making an additional
----------------------------
purchase of Class A shares may be entitled to a discount on the sales charge
payable on that purchase. This discount will be available if the shareholder's
"total investment" in the Fund reaches the breakpoint for a reduced sales charge
in the table under "Buying Fund Shares - Sales Charges" in the prospectus. The
total investment is determined by adding the amount of the additional purchase,
including sales charge, to the current public offering price of all series and
classes of shares of New England Funds Trust I and the Trust (the "Trusts") held
by the shareholder in one or more accounts. If the total investment exceeds the
breakpoint, the lower sales charge applies to the entire additional investment
even though some portion of that additional investment is below the breakpoint
to which a reduced sales charge applies. For example, if a shareholder who
already owns shares of one or more funds in the Trusts with a value at the
current public offering price of $30,000 makes an additional purchase of $20,000
of Class A shares of the Fund, the reduced sales charge of 4.5% of the public
offering price will apply to the entire amount of the additional investment.
[This discount

-22-
<PAGE>

will not be available to purchases of Fund shares during the Fund's Initial
Subscription Period described in the prospectus.]

Letter of Intent. A Letter of Intent (a "Letter"), which can be effected at
----------------
any time, is a privilege available to investors which reduces the sales charge
on investments in Class A shares. Ordinarily, reduced sales charges are
available for single purchases of Class A shares only when they reach certain
breakpoints (e.g., $50,000, $100,000, etc.). By signing a Letter, a shareholder
indicates an intention to invest enough money in Class A shares within 13 months
to reach a breakpoint. If the shareholder's intended aggregate purchases of all
series and classes of the Trusts over a defined 13-month period will be large
enough to qualify for a reduced sales charge, the shareholder may invest the
smaller individual amounts at the public offering price calculated using the
sales load applicable to the 13-month aggregate investment.

A Letter is a non-binding commitment, the amount of which may be increased,
decreased or canceled at any time. The effective date of a Letter is the date
it is received in good order at New England Funds, L.P., or, if communicated by
a telephone exchange or order, at the date of telephoning provided a signed
Letter, in good order, reaches New England Funds, L.P. within five business
days.

A reduced sales charge is available for aggregate purchases of all series
and classes of shares of the Trusts pursuant to a written Letter effected within
90 days after any purchase. In the event the account was established prior to 90
days before the Letter effective date, the account will be credited with Rights
of Accumulation ("ROA") towards the breakpoint level that will be reached upon
the completion of the 13 months' purchases. The ROA credit is the value of all
shares held as of the effective date of the Letter based on the "public offering
price computed on such date."

The cumulative purchase discount, described above, permits the aggregate
value at the current public offering price of Class A shares of any accounts
with the Trusts held by a shareholder to be added to the dollar amount of the
intended investment under a Letter, provided the shareholder lists them on the
account application.

State Street Bank will hold in escrow shares with a value at the current
public offering price of 5% of the aggregate amount of the intended investment.
The amount in escrow will be released when the Letter is completed. If the
shareholder does not purchase shares in the amount indicated in the Letter, the
shareholder agrees to remit to State Street Bank the difference between the
sales charge actually paid and that which would have been paid had the Letter
not been in effect, and authorizes State Street Bank to redeem escrowed shares
in the amount necessary to make up the difference in sales charges. Reinvested
dividends and distributions are not included in determining whether the Letter
has been completed.

Combining Purchases. Purchases of all series and classes of the Trusts by
-------------------
or for an investor, the investor's spouse, parents, children, siblings,
grandparents or grandchildren and any other account of the investor, including
sole proprietorships, in either Trust may be treated as purchases by a single
individual for purposes of determining the availability of a reduced sales
charge. Purchases for a single trust estate or a single fiduciary account may
also be treated as purchases by a single individual for this purpose, as may
purchases on behalf of a participant in a tax-qualified retirement plan and
other employee benefit plans, provided that the investor is the sole participant
in the plan.

-23-
<PAGE>

Combining with Other Series and Classes of the Trusts. A shareholder's
-----------------------------------------------------
total investment for purposes of the cumulative purchase discount and purchases
under a Letter of Intent includes the value at the current public offering price
of any shares of series and classes of the Trusts that the shareholder owns
(which includes shares of New England Cash Management Trust and New England Tax
Exempt Money Market Trust [the "Money Market Funds"] if such shares were
purchased by exchanging shares of either of the Trusts). Shares owned by
persons described in the preceding paragraph may also be included.

Unit Holders of Unit Investment Trusts. Unit investment trust distributions
--------------------------------------
may be invested in Class A shares of the Fund at a reduced sales charge of 1.50%
of the public offering price (or 1.52% of the net amount invested); for large
purchases on which a sales charge of less than 1.50% would ordinarily apply,
such lower charge also applies to investments of unit investment trust
distributions.

Clients of Advisers or Subadvisers (Affiliated with NEIC). No sales charge
---------------------------------------------------------
or contingent deferred sales charge applies to investments of $100,000 or more
in Class A shares of the Fund by (1) clients of an adviser or subadviser
(affiliated with NEIC) to the Trusts; any director, officer or partner of a
client of an adviser or subadviser (affiliated with NEIC) to the Trusts; and the
spouse, parents, children, siblings, grandparents or grandchildren of the
foregoing; (2) any individual who is a participant in a Keogh or IRA Plan under
a prototype of an adviser or subadviser (affiliated with NEIC) to the Trusts if
at least one participant in the plan qualifies under category (1) above; and (3)
an individual who invests through an IRA and is a participant in an employee
benefit plan that is a client of an adviser or subadviser (affiliated with NEIC)
to the Trusts. Any investor eligible for this arrangement should so indicate in
writing at the time of the purchase.

Offering to Employees of The New England and Associated Entities. There is
----------------------------------------------------------------
no sales charge, CDSC or initial investment minimum related to investments in
Class A shares of the Fund by any of the Trusts' investment advisers or
subadvisers (affiliated with NEIC), New England Funds, L.P. or any other company
affiliated with The New England; current and former directors and trustees of
the Trusts; agents and general agents of The New England and its insurance
company subsidiaries; current and retired employees of such agents and general
agents; registered representatives of broker-dealers that have selling
arrangements with New England Funds, L.P.; the spouse, parents, children,
siblings, grandparents or grandchildren of the persons listed above and any
trust, pension, profit sharing or other benefit plans for any of the foregoing
persons and any separate account of The New England or any other company
affiliated with The New England.

Eligible Governmental Authorities. There is no sales charge or contingent
---------------------------------
deferred sales charge related to investments in Class A shares of the Fund by
any state, county or city or any instrumentality, department, authority or
agency thereof that has determined that the Fund is a legally permissible
investment and that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered investment company.

Investment Advisory Accounts. There is no sales charge or contingent
----------------------------
deferred sales charge related to investments in Class A shares of the Fund by
any advisory accounts through investment advisers registered under the
Investment Advisers Act of 1940 and affiliated with broker-dealers.

-24-
<PAGE>

Shareholders of Reich and Tang Government Securities Trust. Shareholders of
-----------------------------------------------------------
Reich and Tang Government Securities Trust may exchange their shares of that
fund for Class A shares of the Fund at net asset value and without imposition of
a sales charge.

The reduction or elimination of the sales charge in connection with sales
described above reflects the absence or reduction of sales expenses associated
with such sales.
________________________________________________________________________________

SHAREHOLDER SERVICES
________________________________________________________________________________

Open Accounts
- -------------

A shareholder's investment is automatically credited to an open account
maintained for the shareholder by State Street Bank. Following each transaction
in the account, a shareholder will receive a confirmation statement disclosing
the current balance of shares owned and the details of recent transactions in
the account. After the close of each calendar year, State Street Bank will send
each shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. New England Funds, L.P. may charge a fee for
providing duplicate information.

The open account system provides for full and fractional shares expressed
to three decimal places and, by making the issuance and delivery of stock
certificates unnecessary, eliminates problems of handling and safekeeping, and
the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.

The costs of maintaining the open account system are paid by the Fund and
no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.

Automatic Investment Plans (Class A, B and C Shares)
- ----------------------------------------------------

Subject to the Fund's investor eligibility requirements, investors may
automatically invest in additional shares of the Fund on a monthly basis by
authorizing New England Funds, L.P. to draw checks on an investor's bank
account. The checks are drawn under the Investment Builder Program, a program
designed to facilitate such periodic payments, and are forwarded to New England
Funds, L.P. for investment in the Fund. A plan may be opened with an initial
investment of $50 or more and thereafter regular monthly checks of $50 or more
will be drawn on the investor's account. The reduced minimum initial investment
pursuant to an automatic investment plan is referred to in the prospectus. An
Investment Builder application must be completed to open an automatic investment
plan. An application may be found in the prospectus or may be obtained by
calling New England Funds, L.P. at (800) 225-5478 or your investment dealer.

This program is voluntary and may be terminated by New England Funds, L.P.
upon notice to existing plan participants.

The Investment Builder Program plan may be discontinued at any time by the
investor by written notice to New England Funds, L.P., which must be received at
least five business

-25-
<PAGE>

days prior to any payment date. The plan may be discontinued by State Street
Bank at any time without prior notice if any check is not paid upon
presentation; or by written notice to you at least thirty days prior to any
payment date. State Street Bank is under no obligation to notify shareholders
as to the nonpayment of any check.

Retirement Plans Offering Tax Benefits (Class A, B and C Shares)
- ----------------------------------------------------------------

The federal tax laws provide for a variety of retirement plans offering tax
benefits. These plans may be funded with shares of the Fund or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.

The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the prospectus. For these plans,
initial and subsequent investments in the Fund must be at least $25 for each
participant in a plan, and income dividends and capital gain distributions must
be reinvested (unless the investor is over age 59 1/2 or disabled). Plan
documents and further information can be obtained from New England Funds, L.P.

An investor should consult a competent tax or other adviser as to the
suitability of the Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects.

Certain retirement plans may also be eligible to purchase Class Y shares.
See the prospectus.

Systematic Withdrawal Plans (Class A, B and C Shares)
- -----------------------------------------------------

An investor owning Fund shares having a value of $5,000 or more at the
current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may be
paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or New England Funds, L.P.

A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.

In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. No CDSC applies to a redemption pursuant to the Plan.

-26-
<PAGE>

All shares under the Plan must be held in an open (uncertificated) account.
Income dividends and capital gain distributions will be reinvested (without a
sales charge in the case of Class A shares) at net asset value determined on the
record date.

Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, the
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The Fund
and New England Funds, L.P. make no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a plan.

It may be disadvantageous for a shareholder to purchase on a regular basis
additional Fund shares with a sales charge while redeeming shares under a
Systematic Withdrawal Plan. Accordingly, the Fund and New England Funds, L.P. do
not recommend additional investments in Class A shares by a shareholder who has
a withdrawal plan in effect and who would be subject to a sales load on such
additional investments.

Because of statutory restrictions this plan is not available to pension or
profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
trustee.

Exchange Privilege
- ------------------

A shareholder may exchange the shares of any fund in the Trusts (in the
case of Class A shares of New England Adjustable Rate U.S. Government Fund, New
England Intermediate Term Tax Free Fund of California and New England
Intermediate Term Tax Free Fund of New York, only if such shares have been held
for at least six months) for shares of the same class of any other fund of the
Trusts (subject to the investor eligibility requirements of the fund into which
the exchange is being made) on the basis of relative net asset values at the
time of the exchange without any sales charge. If you own Class A or Class C
shares, you may also elect to exchange your shares of the Fund for Class A
shares of the Money Market Funds. On all exchanges of Class A shares subject to
a CDSC, the exchange stops the aging period relating to the CDSC. The aging
resumes only when an exchange is made back into shares of one of the Trusts. If
you own Class Y shares of the Fund, you may exchange those shares for Class Y
shares of other funds in the Trusts or for the Class A shares of the Money
Market Funds. These options are summarized in the prospectus. An exchange may be
effected, provided that neither the registered name nor address of the accounts
are different and provided that a certificate representing the shares being
exchanged has not been issued to the shareholder, by (1) a telephone request to
New England Funds, L.P. at (800) 223-7124 or (2) a written exchange request to
New England Funds, P.O. Box 8551, Boston, MA 02266-8551. You must acknowledge
receipt of a current prospectus for a Fund before an exchange for that Fund can
be effected.

The investment objectives of the other funds (besides the Fund) in the Trusts
and the Money Market Funds are as follows:

STOCK FUNDS:

NEW ENGLAND GROWTH FUND seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.

-27-
<PAGE>

NEW ENGLAND CAPITAL GROWTH FUND seeks long-term growth of capital.

NEW ENGLAND VALUE FUND seeks a reasonable long-term investment return from
a combination of market appreciation and dividend income from equity securities.

NEW ENGLAND BALANCED FUND seeks a reasonable long-term investment return
from a combination of long-tern capital appreciation and moderate current
income.

NEW ENGLAND GROWTH OPPORTUNITIES FUND seeks opportunities for long-term
growth of capital and income.

NEW ENGLAND INTERNATIONAL EQUITY FUND seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.

NEW ENGLAND STAR ADVISERS FUND seeks long-term growth of capital.

NEW ENGLAND STAR WORLDWIDE FUND seeks long-term growth of capital.

BOND FUNDS:

NEW ENGLAND GOVERNMENT SECURITIES FUND seeks a high level of current income
consistent with safety of principal by investing in U.S. Government securities
and engaging in transactions involving related options, futures and options on
futures.

NEW ENGLAND LIMITED TERM U.S. GOVERNMENT FUND seeks a high current return
consistent with preservation of capital.

NEW ENGLAND ADJUSTABLE RATE U.S. GOVERNMENT FUND seeks a high level of
current income consistent with low volatility of principal.

NEW ENGLAND STRATEGIC INCOME FUND seeks high current income with a
secondary objective of capital growth.

NEW ENGLAND BOND INCOME FUND seeks a high level of current income
consistent with what the Fund considers reasonable risk. The Bond Income Fund
invests primarily in corporate and U.S. Government bonds.

NEW ENGLAND HIGH INCOME FUND seeks high current income plus the opportunity
for capital appreciation to produce a high total return.

NEW ENGLAND TAX EXEMPT INCOME FUND seeks as high a level of current income
exempt from federal income taxes as is consistent with reasonable risk and
protection of shareholder's' capital. The Tax Exempt Income Fund invests
primarily in debt securities, the interest of which is, in the opinion of the
debt issuer's counsel, exempt from federal income tax ("tax exempt bonds"), and
may engage in transactions in financial futures contracts and options on
futures.

NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as Back

-28-
<PAGE>

Bay Advisors, the Fund's investment adviser, believes is consistent with
preservation of capital.

NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA seeks as high a
level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.

NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF NEW YORK seeks as high a
level of current income exempt from federal income tax and its state personal
income tax and New York City personal income tax as is consistent with
preservation of capital.

MONEY MARKET FUNDS:

NEW ENGLAND CASH MANAGEMENT TRUST -

Money Market Series -- maximum current income consistent with
-------------------
preservation of capital and liquidity.

U.S. Government Series -- highest current income consistent with
----------------------
preservation of capital and liquidity.

NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- current income exempt from federal
income taxes consistent with preservation of capital and liquidity.

As of January __, 1996, the net assets of the funds in the Trusts and the
Money Market Funds totaled over [$____] billion.

An exchange constitutes a sale of shares for federal income tax purposes in
which the investor may realize a long- or short-term capital gain or loss .

Automatic Exchange Plan (Class A, B and C Shares)
- -------------------------------------------------

As described in the prospectus following the caption "Owning Fund Shares",
a shareholder may establish an Automatic Exchange Plan under which shares of the
Fund are automatically exchanged each month for shares of the same class of one
or more of the other funds in the Trusts. Registration on all accounts must be
identical. The exchanges are made on the 15th of each month or the first
business day thereafter if the 15th is not a business day until the account is
exhausted or until New England Funds, L.P. is notified in writing to terminate
the plan. Exchanges may be made in amounts of $500 or over ($1000 for spousal
IRAs). The Service Options Form is available from New England Funds, L.P. or
your financial representative to establish an Automatic Exchange Plan.

________________________________________________________________________________

REDEMPTIONS
________________________________________________________________________________

The procedures for redemption of shares of a Fund are summarized in the
prospectus. As described in the prospectus, a contingent deferred sales charge
("CDSC") may be imposed on certain purchases of Class A shares. For purposes of
the CDSC, an exchange of shares from the Fund to another series of the Trusts is
not considered a redemption or a purchase.

-29-
<PAGE>

For federal tax purposes, however, such an exchange is considered a sale and a
purchase and, therefore, would be considered a taxable event on which you may
recognize a gain or loss. In determining whether a contingent deferred sales
charge is applicable to a redemption of Class A shares, the calculation will be
determined in the manner that results in the lowest rate being charged.
Therefore, it will be assumed that the redemption is first of any Class C shares
in the shareholder's Fund account, second of shares held for over one year and
third of shares issued in connection with dividend reinvestment. The charge
will not be applied to dollar amounts representing an increase in the net asset
value of shares since the time of purchase or reinvested distributions
associated with such shares. Unless you request otherwise at the time of
redemption, the CDSC is deducted from the redemption, not the amount remaining
in the account.

Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution", as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, a signature guarantee will not be required if the proceeds
of the redemption do not exceed $100,000 and the proceeds check is made payable
to the registered owner(s) and mailed to the record address.

If you select the telephone redemption service in the manner described in
the next paragraph, shares of the Fund may be redeemed by calling toll free
(800) 225-5478. A wire fee, currently $5.00, will be deducted from the proceeds.
Telephone redemption requests must be received by the close of regular trading
on the New York Stock Exchange. Requests made after that time or on a day when
the New York Stock Exchange is not open for business cannot be accepted and a
new request on a later day will be necessary. The proceeds of a telephone
withdrawal will normally be sent on the first business day following receipt of
a proper redemption request.

In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, available from your investment dealer. When selecting
the service, a shareholder must designate a bank account to which the redemption
proceeds should be sent. Any change in the bank account so designated may be
made by furnishing to your investment dealer a completed Service Options Form
with a signature guarantee. Whenever the Service Options Form is used, the
shareholder's signature must be guaranteed as described above. Telephone
redemptions may only be made if the designated bank is a member of the Federal
Reserve System or has a correspondent bank that is a member of the System. If
the account is with a savings bank, it must have only one correspondent bank
that is a member of the System.

The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Fund reserves the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that the check
has cleared).

The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partly in kind if the Trust's
board of trustees determines it to be advisable and in the interest of the
remaining shareholders of the Fund. If portfolio securities are distributed in
lieu of cash, the shareholder will normally incur brokerage

-30-
<PAGE>

commissions upon subsequent disposition of any such securities. However, the
Fund has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to
which the Fund is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the Trust at the beginning of such period. The Fund does not
currently intend to impose any redemption charge (other than the CDSC imposed by
the Distributor), although it reserves the right to charge a fee not exceeding
1% of the redemption price. A redemption constitutes a sale of shares for
federal income tax purposes on which the investor may realize a long- or short-
term capital gain or loss. See also "Income Dividends, Capital Gain
Distributions and Tax Status," below.

Reinstatement Privilege (Class A shares only)
- ---------------------------------------------

The prospectus describes redeeming shareholders' reinstatement privileges
for Class A shares. Written notice and the investment check from persons
wishing to exercise this reinstatement privilege must be received by your
investment dealer within 120 days after the date of the redemption. The
reinstatement or exchange will be made at net asset value next determined after
receipt of the notice and the investment check and will be limited to the amount
of the redemption proceeds or to the nearest full share if fractional shares are
not purchased.

Even though an account is reinstated, the redemption will constitute a sale
for federal income tax purposes. Investors who reinstate their accounts by
purchasing shares of the Fund should consult with their tax advisers with
respect to the effect of the "wash sale" rule if a loss is realized at the time
of the redemption.

________________________________________________________________________________

STANDARD PERFORMANCE MEASURES
________________________________________________________________________________

Calculation of Total Return. Total return is a measure of the change in
---------------------------
value of an investment in the Fund over the period covered, which assumes that
any dividends or capital gains distributions are automatically reinvested in
shares of the same class of the Fund rather than paid to the investor in cash.
The formula for total return used by the Fund is prescribed by the Securities
and Exchange Commission and includes three steps: (1) adding to the total number
of shares of the particular class that would be purchased by a hypothetical
$1,000 investment in the Fund (with or without giving effect to the deduction of
sales charge or CDSC, if applicable) all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by multiplying the
total of shares owned at the end of the period by the net asset value per share
of the relevant class on the last trading day of the period; (3) dividing this
account value for the hypothetical investor by the amount of the initial
investment, and annualizing the result for periods of less than one year. Total
return may be stated with or without giving effect to any expense limitations in
effect for the Fund.

Performance Comparisons
- -----------------------

Total Return. Total returns will generally be higher for Class A shares
------------
than for Class B and C shares of the Fund, because of the higher levels of
expenses borne by the Class B and C shares. Because of its lower operating
expenses, Class Y shares of the Fund can be

-31-
<PAGE>

expected to achieve a higher total return than the Fund's Class A, B and C
shares. The Fund may from time to time include total return in advertisements
or in information furnished to present or prospective shareholders. The Funds
may from time to time include in advertisements its total return and the ranking
of those performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having similar investment
objectives.

Total return may also be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock and bond
market performance or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.

The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is a
market value-weighted and unmanaged index showing the changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500 is
composed almost entirely of common stocks of companies listed on the New York
Stock Exchange, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40 financial
services concerns. The S&P 500 represents about 80% of the market value of all
issues traded on the New York Stock Exchange.

The Salomon Brothers World Government Bond Index includes a broad range of
institutionally-traded fixed-rate government securities issued by the national
governments of the nine countries whose securities are most actively traded. The
index generally excludes floating- or variable-rate bonds, securities aimed
principally at non-institutional investors (such as U.S. Savings Bonds) and
private-placement type securities.

The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.

The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rated
agency.

The Dow Jones Industrial Average is a market value-weighted and unmanaged
index of 30 large industrial stocks traded on the New York Stock Exchange.

The Merrill Lynch High Yield Index includes over 750 issues and represents
public debt greater than $10 million (original issuance rated BBB/BB and below),
and the First Boston High Yield Index includes over 350 issues and represents
all public debt greater than $100 million (original issuance and rated BBB/BB
and below).

The Salomon Brothers Broad Investment Grade Bond Index is a price composite
of a broad range of institutionally based U.S. Government mortgage-backed and
corporate debt securities of investment outstanding of at least $1 million and
with a remaining period to maturity of at least one year.

-32-
<PAGE>

The Consumer Price Index, published by the U.S. Bureau of Labor Statistics,
is a statistical measure of changes, over time, in the prices of goods and
services in major expenditure groups.

Lipper Analytical Services, Inc. is an independent service that monitors
the performance of over 1,300 mutual funds, and calculates total return for the
funds grouped by investment objective.

The Morgan Stanley Capital International Europe, Australia and Far East
(Gross Domestic Product) Index (the "EAFE Index") is a market-value weighted and
unmanaged index of common stocks traded outside the U.S. The stocks in the index
are selected with reference to national and industry representation and weighted
in the EAFE Index according to their relative market value (market price per
share times the number of shares outstanding).

The Morgan Stanley Capital International Europe, Australia and Far East
Index (the "EAFE [GDP] Index") is a market-value weighted and unmanaged index of
common stocks traded outside the U.S. The stocks in the index are selected with
reference to national and industry representation and weighted in the EAFE (GDP)
Index according to their relative market values. The relative market value of
each country is further weighted with reference to the country's relative gross
domestic product.

The Fund may compare its performance to the Salomon-Russell Broad Market
Index Global X-US and to universes of similarly managed investment pools
compiled by Frank Russell Company and Intersec Research Corporation.

Articles and releases, developed by the Fund and other parties, about the
Fund regarding performance, rankings, statistics and analyses of the Fund's and
the fund group's asset levels and sales volumes, numbers of shareholders by fund
or in the aggregate for New England Funds, statistics and analyses of industry
sales volumes and asset levels, and other characteristics may appear in
advertising, promotional literature, publications and on various computer
networks, including, but not limited to, those publications and computer
networks listed in Appendix B to this Statement. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of such articles may
be used in the Funds' advertising and promotional literature. Such advertising
and promotional material may refer to NEIC, its structure, goals and objectives
and the advisory subsidiaries of NEIC, including their portfolio management
responsibilities, portfolio managers and their categories and background; their
tenure, styles and strategies and their shared commitment to fundamental
investment principles and may identify specific clients, as well as discuss the
types of institutional investors who have selected the advisers to manage their
investment portfolios and the reasons for that selection. The references may
discuss the independent, entrepreneurial nature of each advisory organization
and allude to or include excerpts from articles appearing in the media regarding
NEIC, its advisory subsidiaries and their personnel. For additional information
about the Fund's advertising and promotional literature, see Appendix C.

The Fund may enter into arrangements with banks exempted from registration
under the Securities Exchange Act of 1934. Advertising and sales literature
developed to publicize such arrangements will explain the relationship of the
bank to New England Funds and New England Funds, L.P. as well as the services
provided by the bank relative to the Fund. The material may identify the bank
by name and discuss the history of the bank including, but not

-33-
<PAGE>

limited to, the type of bank, its asset size, the nature of its business and
services and its status and standing in the industry.

The Fund may use the accumulation charts below in their advertisements to
demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.

INVESTMENTS AT 8% RATE OF RETURN

<TABLE>
<CAPTION>
5 YRS. 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
$ 50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148
</TABLE>
INVESTMENTS AT 10% RATE OF RETURN

The Fund's advertising and sales literature may refer to historical,
current and prospective economic trends and may include historical and current
performance and total returns of investment alternatives to the New England
Funds. Articles, releases, advertising and literature may discuss the range of
services offered by the Trusts and New England Funds, L.P., as distributor and
transfer agent of the Trusts, with respect to investing in shares of the Trusts
and customer service. Such materials may discuss the multiple classes of shares
available through the Trusts and their features and benefits, including the
details of the pricing structure.

Advertising and sales literature may also refer to the beta coefficient of
the New England Funds. A beta coefficient is a measure of systematic or
undiversifiable risk of a stock. A beta coefficient of more than 1 means that
the company's stock has shown more volatility than the market index (e.g. the
S&P 500) to which it is being related. If the beta is less than 1, it is less
volatile than the market average to which it is being compared. If it equals 1,
its risk is the same as the market index. High variability in stock price may
indicate greater business risk, instability in operations and low quality of
earnings. The beta coefficients of the New England Funds may be compared to the
beta coefficients of other funds.

In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and the Fund's
prospective shareholders. These materials may include, but are not limited to,
discussions of college planning,

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<PAGE>

retirement planning, reasons for investing and historical examples of the
investment performance of various classes of securities, securities markets and
indices.

________________________________________________________________________________

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
________________________________________________________________________________

As described in the Fund's prospectus, it is the policy of the Fund to pay
its shareholders, as dividends, substantially all net investment income and to
distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.

Income dividends and capital gain distributions are payable in full and
fractional shares of the relevant class of the Fund based upon the net asset
value determined as of the close of the New York Stock Exchange on the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gain distributions, or both, in cash.
The election may be made at any time by submitting a written request directly to
New England Funds. In order for a change to be in effect for any dividend or
distribution, it must be received by New England Funds on or before the record
date for such dividend or distribution.

As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.

The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to qualify, the Fund must, among other
things (i) derive at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans, gains from sale of securities
or foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive less than 30% of
its gross income from gains from the sale or other disposition of securities
held for less than three months; (iii) distribute at least 90% of its dividend,
interest and certain other taxable income each year; and (iv) at the end of each
fiscal quarter maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, other
securities of issuers which represent, with respect to each issuer, no more than
5% of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. government or other regulated
investment companies) of any one issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar or related trades and
businesses. To the extent it qualifies for treatment as a regulated investment
company, the Fund will not be subject to federal income tax on income paid to
its shareholders in the form of dividends or capital gains distributions.

An excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for

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<PAGE>

federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

Shareholders of the Fund will be subject to federal income taxes on
distributions made by the Fund whether received in cash or additional shares of
the Fund. Distributions by the Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Distributions of
long-term capital gains, if any, will be taxable to shareholders as long-term
capital gains, without regard to how long a shareholder has held shares of the
Fund. A loss on the sale of shares held for 12 months or less will be treated as
a long-term capital loss to the extent of any long-term capital gain dividend
paid to the shareholder with respect to such shares.

Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes.

The Fund may be eligible to make and, if eligible, may make an election
under Section 853 of the Code so that its shareholders will be able to claim a
credit or deduction on their income tax returns for, and will be required to
treat as part of the amounts distributed to them, their pro rata portion of
qualified taxes paid by the Fund to Israel and other foreign countries. The
ability of shareholders of the Fund to claim a foreign tax credit is subject to
certain limitations imposed by Section 904 of the Code, which in general limit
the amount of foreign tax that may be used to reduce a shareholder's U.S. tax
liability to that amount of U.S. tax which would be imposed on the amount and
type of income in respect of which the foreign tax was paid. A shareholder who
for U.S. income tax purposes claims a foreign tax credit in respect of Fund
distributions may not claim a deduction for foreign taxes paid by the Fund,
regardless of whether the shareholder itemizes deductions. Also, under Section
63 of the Code, no deduction in respect of income taxes paid by the Fund to
foreign countries may be claimed by shareholders who do not itemize deductions
on their federal income tax returns. The Fund will notify shareholders each year
of the amount for dividends and distributions and the shareholder's pro rata
share of qualified taxes paid by the Fund to foreign countries.

The Fund's transactions, if any, in foreign currencies are likely to result
in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.

The Fund may limit its investments in certain "passive foreign investment
companies" in order to avoid certain taxes that arise as a result of such
investments.

Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will be
long-term capital gain or loss, provided the shareholder holds the shares as a
capital asset. However, if a shareholder sells Fund shares at a loss within six
months after purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain distributions received
by the shareholder. Furthermore, no loss will be allowed on the sale of Fund
shares to the extent the shareholder acquired other shares of the Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.

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<PAGE>

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.

Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.

The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

ISRAELI TAXES

The following is a short summary of the tax structure applicable to
corporations in Israel with reference to its effect on the Fund. The following
discussion is partially based on enacted Israeli legislation that has not been
subjected to judicial or administrative interpretation. There can be no
assurance that views expressed herein will be accepted by the courts or by the
Israeli Tax Commission.

The Ordinance distinguishes between the "Real Gain" and the "Inflationary
Surplus." The Real Gain is the excess of the total capital gain over the
Inflationary Surplus, computed on the basis of the increase in the Consumer
Price Index ("CPI"), or in the case of foreign residents, on the basis of the
devaluation of the New Israel Shekel against the currency of the purchase,
between the date of purchase and the date of sale. The Inflationary Surplus
accumulated until December 31, 1993 is taxed at a rate of 10% for residents of
Israel, and is reduced to no tax for non-residents if calculated according to
the exchange rate of the foreign currency lawfully invested in shares of an
Israeli resident company. The Real Gain is added to ordinary income which is
taxed at ordinary rates of 30% to 50% for individuals and 37% for corporations
(declining to 36% in 1996 and thereafter). Inflationary Surplus accumulated from
and after December 31,1993 is exempt from any capital gains tax.

Pursuant to the Convention between the Government of the United States of
America and the Government of Israel with Respect to Taxes on Income (the
"Treaty"), the sale, exchange or disposition of securities by a person, such as
the Fund, qualifying as a resident of the United States within the meaning of
the U.S.-Israel Tax Treaty and entitled to claim the benefits afforded to such
resident by the Treaty ("Treaty U.S. Resident") will not be subject to the
Israeli capital gains tax unless such Treaty U.S. Resident holds, directly or
indirectly, shares representing 10% or more of the voting power of the
corporation whose securities the Treaty U.S. Resident sells, exchanges or
disposes of, during any part of the 12-month period preceding such sale,
exchange or dispositon. A Treaty U.S. Resident who is not exempt from Israeli
capital gains tax would be permitted to claim a credit for such taxes against
the U.S. income tax imposed with respect to such sale, exchange or disposition,
subject to the limitation in U.S. laws applicable to foreign tax credits.

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<PAGE>

Israeli law currently provides for an exemption from capital gains tax on
gains from the sale of securities (including shares, debt securities and
warrants) that are traded on the TASE, provided that the seller did not hold the
securities prior to their listing on the TASE. In addition, gains from the sale
of shares of Israeli corporations defined as "Industrial Companies" or
"Industrial Holding Companies" that are traded on certain non-Israeli (including
U.S.) exchanges or through NASDAQ are exempted from capital gains tax, provided
that the shares were not acquired by the seller prior to their listing. The
securities to which the exemption currently applies are referred to in this
section as "Exchange-Listed Securities"

The current exemptions apply only where the gains from the sale of
securities are deemed "capital gains." Persons who are engaged in the business
of buying and selling securities in Israel are subject to ordinary income tax,
and therefore the exemptions from capital gains tax are inapplicable to such
investors. Pursuant to the Treaty, business profits of U.S. Treaty Residents,
including those of Treaty U.S. Residents engaged in the business of buying and
selling securities in Israel, are exempt from Israeli income tax, unless such
U.S. Treaty Resident has a permanent establishment in Israel within the meaning
of the Treaty. The Fund has been advised it will qualify as a resident of the
U.S. within the meaning of the Treaty, and that its activities will not cause
the Fund to be deemed to have a permanent establishment in Israel pursuant to
the Treaty, and thus the Fund anticipates that it will not be subject to Israeli
income tax on the purchase and sale of securities.

Corporate Taxes. In general, Israeli companies are currently subject to
"Company Tax" at a rate of 36% of taxable income. Reduced tax rates apply to
taxable income attributable to those portions of the company's operations which
have been granted "Approved Enterprise" status under the Law for the
Encouragement of Capital Investments. A company which also qualifies as a
Foreign Investors' Company is entitled to further reductions in the Company Tax
generally applicable to Approved Enterprises.

Withholding Tax on Payments of Dividends and Interest. Non-residents of
Israel, including the Fund, are subject to income tax on income accrued or
derived from sources in Israel or received in Israel. Generally, on
distributions of dividends other than bonus shares (stock dividends), income tax
at a rate of 25% is withheld at the source. This tax is reduced to 15% with
respect to dividends distributed from income generated by an "Approved
Enterprise." Interest paid on debt securities is generally subject to income tax
a rate of 25%. However, pursuant to the Treaty, such rate is reduced to 17.5%
for Treaty U.S. Residents.

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<PAGE>

APPENDIX A
DESCRIPTION OF BOND RATINGS

STANDARD & POOR'S CORPORATION
- -----------------------------

AAA

This is the highest rating assigned by Standard & Poor's to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.

Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
interest and repay principal is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB

Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in higher rated categories.

BB, B, CCC, CC, C

Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.

The rating CI is reserved for income bonds on which no interest is being paid.

Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

Plus (+) or Minus (-); The ratings from "AA' to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

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<PAGE>

MOODY'S INVESTORS SERVICE, INC.
- -------------------------------

Aaa
Bonds that are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large, or by an exceptionally stable,
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa
Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.

A
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

Baa
Bonds that are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, if
fact, have speculative characteristics as well.

Ba
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa
Bonds which are rated Caa are of poor standing. Such issues may be in default
of there may be present elements of danger with respect to principal or
interest.

Ca
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

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<PAGE>

C
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Should no rating be assigned by Moody's, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is not longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, and B1.

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<PAGE>

APPENDIX B
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World

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<PAGE>

Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek

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<PAGE>

Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV

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<PAGE>

WEEI
WHDH
Worcester Telegram
Worth Magazine
WRKO

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<PAGE>

APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE

References may be included in New England Funds' advertising and
promotional literature to New England Investment Companies ("NEIC") and its
affiliates that perform advisory functions for New England Funds including, but
not limited to: Back Bay Advisors, L.P., Harris Associates L.P., Loomis, Sayles
and Company, L.P., Westpeak Investment Advisors, L.P., Capital Growth Management
Limited Partnership and Draycott Partners, Ltd.

References may be included in New England Funds' advertising and
promotional literature to NEIC affiliates that do not perform advisory or
subadvisory functions for the Funds including, but not limited to, New England
Investment Associates, L.P., Copley Real Estate Advisors, L.P., Marlborough
Capital Advisors, L.P., Reich & Tang Capital Management and Reich and Tang
Mutual Funds Group.

References to subadvisers unaffiliated with NEIC that perform subadvisory
functions on behalf of New England Funds may be contained in New England Funds'
advertising and promotional literature including, but not limited to, Berger
Associates, Inc., Janus Capital Corporation and Founders Asset Management, Inc.

New England Funds' advertising and promotional material will include, but
is not limited to, discussions of the following information about the above
entities:

Specific and general investment emphasis, specialties, competencies,
operations and functions

Specific and general investment philosophies, strategies, processes and
techniques

Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services

The corporate histories, founding dates and names of founders of the
entities

Awards, honors and recognition given to the firms

The names of those with ownership interest and the percentage of ownership

Current capitalization, levels of profitability and other financial
information

Identification of portfolio managers, researchers, economists, principals
and other staff members and employees

The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and duties
performed, industry experience, educational background and degrees, awards and
honors

Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing plans

Current and historical statistics about:

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<PAGE>

- total dollar amount of assets managed

- New England Funds' assets managed in total and by Fund

- the growth of assets

- asset types managed

- numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff

- the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or the subadviser

Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than New England Funds, and those
families of funds, other than New England Funds, including but not limited to,
New England Star Advisers Fund Managers Rodney L. Linafelter of Berger
Associates, Inc., and Berger Funds, who also serves as portfolio manager of
the Berger 100 Fund; Warren B. Lammert of Janus Capital Corporation and Janus
Funds, who also serves as portfolio manager of the Janus Mercury Fund; Edward
F. Keely of Founders Asset Management, Inc., and Founders Funds who also
serves as portfolio manager of Founders Growth Fund, and Barbara C. Friedman
and Jeffrey C. Petherick of Loomis, Sayles & Company, L.P. and Loomis Sayles
Funds, who also serve as portfolio managers of the Loomis Sayles Small Cap
Fund. Specific and general references may be made to the Loomis Sayles Funds,
the Loomis Sayles Bond Fund and Daniel Fuss, who serves as portfolio manager
of New England Strategic Income Fund and the Loomis Sayles Bond Fund. Any
such references will indicate that New England Funds and the other funds of
the managers differ as to performance, objectives, investment restrictions and
limitations, portfolio composition, asset size and other characteristics,
including fees and expenses.

In addition, communications and materials developed by New England Funds
will make reference to the following information about NEIC and its affiliates:

NEIC is the [seventh] largest publicly traded manager in the U.S. listed on
the New York Stock Exchange. NEIC maintains over [$60] billion in assets under
management. Clients serviced by NEIC and its affiliates, besides New England
Funds, are wealthy individuals, major corporations and large institutions.

Back Bay Advisors, L.P. employs a conservative style of management
emphasizing short and intermediate term securities to reduce volatility, adds
value through careful continuous credit analysis and has expertise in
government, corporate and tax-free municipal bonds and equity securities. Among
its clients are Boston City Retirement System, Public Service Electric and Gas
of New Jersey, Petrolite Corp. and General Mills.

Draycott Partners, Ltd. specializes in international stocks and tracks key
world markets and economic trends from offices in London and Boston. Its
investment approach is based on concentration on "blue chip" companies in
stable, growing economies and is guided by independent, non-consensus thinking.
It monitors country weightings with strict attention to risk control to promote
long-term returns.

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<PAGE>

Capital Growth Management, L.P. seeks to deliver exceptional growth for its
clients through the selection of stocks with the potential to outperform the
market and grow at a faster rate than the U.S. economy. Among its approaches are
pursuit of growth 50% above the Standard & Poor's Index of 500 Common Stocks,
prompt responses to changes in the market or economy and aggressive, highly
concentrated portfolios.

Loomis, Sayles & Company, L.P. is one of the oldest and largest investment
firms in the U.S. and has provided investment counseling to individuals and
institutions since 1926. Characteristic of Loomis Sayles is that it has one of
the largest staffs of research analysts in the industry, practices strict buy
and sell disciplines and focuses on sound value in stock and bond selection.
Among its clients are large corporations such as Chrysler, Mobil Oil and Revlon.

Westpeak Investment Advisors, L.P. ("Westpeak") employs proprietary
research and a disciplined stock selection process that seeks rigorously to
control unnecessary risk. Its investment process is designed to evaluate when
value and growth styles - two primary approaches to stock investing - hold
potential for reward. Over seventy fundamental attributes are continuously
analyzed by Westpeak's experienced analysts and sophisticated computer systems.
The results are assessed against Wall Street's consensus thinking, in pursuit of
returns in excess of appropriate benchmarks. The value/growth strategy is a
unique blend of investment styles, seeking opportunities for increased return
with reduced risk. Among the keys to Westpeak's investment process are
continuous review of timely, accurate data on over 3600 companies, analysis of
dozens of factors for excess return potential and identification of overvalued
and undervalued stocks.

Harris Associates L.P. [TO BE COMPLETED]

References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:

Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs with whom New England Funds may or may not have a relationship.

Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the New England Funds as
a 401(k) or retirement plan funding vehicle produced by, including, but not
limited to, Access Research, Dalbar, Investment Company Institute and other
industry authorities, research organizations and publications.

Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including but
not limited to, statistics, detailed explanations or broad summaries of:

-past, present and prospective tax regulation, IRS requirements and rules,
including, but not limited to reporting standards, minimum distribution
notices, Form 5500, Form

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<PAGE>

1099R and other relevant forms and documents, Department of Labor rules and
standards and other regulation. This includes past, current and future
initiatives, interpretive releases and positions of regulatory authorities
about the past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans

-information about the history, status and future trends of Social Security
and similar government benefit programs including, but not limited to,
eligibility and participation, availability, operations and administration,
structure and design, features, provisions, benefits and costs

-current and prospective ERISA regulation and requirements.

Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data, about:

-increased employee retention

-reinforcement or creation of morale

-deductibility of contributions for participants

-deductibility of expenses for employers

-tax deferred growth, including illustrations and charts

-loan features and exchanges among accounts

-educational services materials and efforts, including, but not
limited to, videos, slides, presentation materials, brochures, an
investment calculator, payroll stuffers, quarterly publications, releases
and information on a periodic basis and the availability of wholesalers and
other personnel.

Specific and general reference to the benefits of investing in mutual funds for
401(k) and retirement plans, and, in particular, New England Funds and investing
in its 401(k) and retirement plans, including but not limited to:

-the significant economies of scale experienced by mutual fund companies in
the 401(k) and retirement benefits arena

-broad choice of investment options and competitive fees

-plan sponsor and participant statements and notices

-the plan prototype, summary descriptions and board resolutions

-plan design and customized proposals

-trusteeship, record keeping and administration

-49-
<PAGE>

-the services of State Street Bank, including but not limited to, trustee
services and tax reporting

-the services of DST and BFDS, including but not limited to, mutual fund
processing support, participant 800 numbers and participant 401(k)
statements

-the services of Trust Consultants Inc. (TCI), including but not limited
to, sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.

Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:

-access to expertise on investments

-assistance in interpreting past, present and future market trends and
economic events

-providing information to clients including participants during enrollment
and on an ongoing basis after participation

-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.

-50-
<PAGE>

Registration Nos. 2-11101
811-242

NEW ENGLAND FUNDS TRUST II
PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits
---------------------------------

(b) Exhibits:

1. (A) Form of Second Amended and Restated Agreement and
Declaration of Trust is incorporated herein by reference to
Exhibit 1.(B) to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988.

(B) Amendment No. 1 to Second Amended and Restated Declaration
of Trust is incorporated herein by reference to Post-
Effective Amendment No. 87 to this Registration Statement,
filed on May 1, 1991.

(C) Amendment No. 2 to Second Amended and Restated Declaration
of Trust is incorporated herein by reference to Post-
Effective Amendment No. 90 to this Registration Statement,
filed on April 1, 1992.

(D) Form of Amended and Restated Declaration of Trust is
incorporated herein by reference to Exhibit 1.(D) to Post-
Effective Amendment No. 91 to this Registration Statement,
filed December 14, 1992.

(E) Amendments No. 2, 3 and 4 to Amended and Restated
Declaration of Trust are incorporated herein by reference to
Post-Effective Amendment No. 95 to this Registration
Statement, filed on December 2, 1993.

(F) Amendment No. 5 to Amended and Restated Declaration of Trust
is incorporated herein by reference to Post-Effective
Amendment No. 97 to this Registration Statement, filed April
18, 1994.

2. (A) Amended and Restated By-Laws of the Registrant are
incorporated herein by reference to Exhibit 2.(B) to Post-
Effective Amendment No. 83 to this Registration Statement,
filed on November 4, 1988.

(B) Amendment to the By-Laws of the Registrant is incorporated
herein by reference to Exhibit 2.(B) to Post-Effective
Amendment No. 98 to this Registration Statement, filed on
March 2, 1995.

3. Not applicable.
<PAGE>

4. Form of share certificate for series of New England Funds Trust
II is incorporated herein by reference to Exhibit 4 to Post-
Effective Amendment No. 98 to this Registration Statement, filed
in March 2, 1995.

5. (A) Form of Advisory Agreement between the Registrant, on behalf
of New England Intermediate Term Tax Free Fund of
California, and Back Bay Advisors, L.P. ("Back Bay
Advisors") is incorporated herein by reference to Exhibit
5.(A) to Post-Effective Amendment No. 91 to this
Registration Statement, filed December 14, 1992.

(B) Form of Advisory Agreement between the Registrant, on behalf
of New England Intermediate Term Tax Free Fund of New York,
and Back Bay Advisors is incorporated herein by reference to
Exhibit 5.(B) to Post-Effective Amendment No. 91 to this
Registration Statement, filed December 14, 1992.

(C) Form of Advisory Agreement between the Registrant, on behalf
of New England Adjustable Rate U.S. Government Fund, and
Back Bay Advisors is incorporated herein by reference to
Post-Effective Amendment No. 88 to this Registration
Statement, filed on August 2, 1991.

(D) (i) Form of Management Agreement between the Registrant, on
behalf of New England High Income Fund, and Back Bay
Advisors is incorporated herein by reference to Exhibit
5.(B)(i) to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988; (ii) Form
of Management Agreement between the Registrant, on behalf of
New England Massachusetts Tax Free Income Fund, and Back Bay
Advisors is incorporated herein by reference to Exhibit
5.(B)(ii) to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988; and (iii)
Form of Management Agreement between the Registrant, on
behalf of New England Limited Term U.S. Government Fund, and
Back Bay Advisors is incorporated herein by reference to
Exhibit 5.(B)(iii) to Post-Effective Amendment No. 84 to
this Registration Statement, filed on January 3, 1989.

(E) Form of Advisory Agreement between the Registrant, on behalf
of New England Growth Opportunities Fund, and New England
Funds Management, L.P. is incorporated herein by reference
to Exhibit 5(E) to Post-Effective Amendment No. 98 to this
Registration Statement, filed on March 2, 1995.

(F) Form of Subadvisory Agreement for New England Growth
Opportunities Fund between New England Funds Management,
L.P. and Westpeak
<PAGE>

Investment Advisors, L.P. is incorporated herein by
reference to Exhibit 5(F) to Post-Effective Amendment No. 98
to this Registration Statement, filed on March 2, 1995.

(G) Form of Advisory Agreement between the Registrant, on behalf
of Growth Fund of Israel, and New England Funds Management,
L.P. is filed herewith.

(H) Form of Subadvisory Agreement for Growth Fund of Israel
between New England Funds Management, L.P. and Harris
Associates L.P. is filed herewith.

6. (A) Form of Distribution Agreement between the Registrant, on
behalf of New England Intermediate Term Tax Free Fund of
California, and New England Funds, L.P. (the "Distributor")
is incorporated herein by reference to Exhibit 6.(A) to
Post-Effective Amendment No. 91 to this Registration
Statement, filed December 14, 1992.

(B) Form of Distribution Agreement between the Registrant, on
behalf of New England Intermediate Term Tax Free Fund of New
York, and the Distributor is incorporated herein by
reference to Exhibit 6.(B) to Post-Effective Amendment No.
91 to this Registration Statement, filed December 14, 1992.

(C) Form of Distribution Agreement between the Registrant, on
behalf of New England Adjustable Rate U.S. Government Fund,
and the Distributor is incorporated herein by reference to
Post-Effective Amendment No. 88 to this Registration
Statement, filed on August 2, 1991.

(D) (i) Form of Distribution Agreement between the Registrant,
on behalf of New England Growth Opportunities Fund, and the
Distributor is incorporated herein by reference to Post-
Effective Amendment No. 81 to this Registration Statement,
filed on August 4, 1988; (ii) Form of Distribution Agreement
between the Registrant, on behalf of New England High Income
Fund, and the Distributor is incorporated herein by
reference to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988; (iii)
Form of Distribution Agreement between the Registrant, on
behalf of New England Massachusetts Tax Free Income Fund,
and the Distributor is incorporated herein by reference to
Post-Effective Amendment No. 83 to this Registration
Statement, filed on November 4, 1988 and (iv) Form of
Distribution Agreement between the Registrant, on behalf of
New
<PAGE>

Registration Nos. 2-11101
811-242

England Limited Term U.S. Government Fund, and the
Distributor is incorporated herein by reference to Post-
Effective Amendment No. 83 to this Registration Statement,
filed on November 4, 1988.

(E) Form of Distribution Agreement between the Registrant, on
behalf of Growth Fund of Israel, and the Distributor is
filed herewith.

7. Not applicable.

8. (A) Letter Agreement between the Registrant and State Street
Bank and Trust Company relating to the applicability of the
Custodian Contract and the Transfer and Service Agency
Agreement to New England Adjustable Rate U.S. Government
Fund is incorporated herein by reference to Exhibit 8.(A) to
Post-Effective Amendment No. 91 to this Registration
Statement, filed December 14, 1992.

(B) Form of Letter Agreement between the Registrant and State
Street Bank and Trust Company relating to the applicability
of the Custodian Contract and the Transfer Agency and
Service Agreement to New England Intermediate Term Tax Free
Fund of California and New England Intermediate Term Tax
Free Fund of New York is incorporated herein by reference to
Exhibit 8.(B) to Post-Effective Amendment No. 91 to this
Registration Statement, filed on December 14, 1992.

(C) Form of Letter Agreement between the Registrant and State
Street Bank and Trust Company relating to the applicability
of the Custodian Contract and the Transfer Agency and
Service Agreement to Growth Fund of Israel is filed
herewith.

(D) Form of new Custodian Agreement between the Registrant and
State Street Bank and Trust Company is incorporated herein
by reference to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988.

9. (A) Form of Administrative Services Agreement between the
Registrant, on behalf of New England Intermediate Term Tax
Free Fund of California, and the Distributor is incorporated
herein by reference to Exhibit 9.(A) to Post-Effective
Amendment No. 91 to this Registration Statement, filed
December 14, 1992.
<PAGE>

Registration Nos. 2-11101
811-242

(B) Form of Administrative Services Agreement between the
Registrant, on behalf of the New England Intermediate Term
Tax Free Fund of New York and the Distributor, is
incorporated herein by reference to Exhibit 9.(B) to Post-
Effective Amendment No. 91 to this Registration Statement,
filed December 14, 1992.

(C) Form of Administrative Services Agreement between the
Registrant, on behalf of New England Adjustable Rate U.S.
Government Fund, and the Distributor is incorporated herein
by reference to Post-Effective Amendment No. 88 to this
Registration Statement, filed on August 2, 1991.

(D) Form of Service Agreement between Back Bay Advisors and the
Distributor is incorporated herein by reference to Post-
Effective Amendment No. 83 to this Registration Statement,
filed on November 4, 1988.

(E) Form of Transfer Agency Agreement between the Registrant and
State Street Bank and Trust Company is incorporated herein
by reference to Post-Effective Amendment No. 83 to this
Registration Statement, filed on November 4, 1988.

(F) Form of Dealer Agreement of New England Funds, L.P., the
Trust's Distributor, is incorporated herein by reference to
Post-Effective Amendment No. 88 to this Registration
Statement, filed on August 2, 1991.

(G) Organizational Expense Reimbursement Agreement between the
Registrant, on behalf of New England Adjustable Rate U.S.
Government Fund, and New England Funds, L.P. is incorporated
herein by reference to Post-Effective Amendment No. 89 to
this Registration Statement, filed on January 30, 1992.

(H) Form of Organizational Expense Reimbursement Agreement
between the Registrant, on behalf of New England
Intermediate Term Tax Free Fund of California and New
England Intermediate Term Tax Free Fund of New York is
incorporated herein by reference to Post-Effective Amendment
No. 91 to this Registration Statement, filed December 14,
1992.
<PAGE>

Registration Nos. 2-11101
811-242

10. (A) Opinion of Ropes & Gray with respect to New England Growth
Opportunities Fund, New England High Income Fund, New
England Limited Term U.S. Government Fund, and New England
Massachusetts Tax Free Income Fund is incorporated herein by
reference to Post-Effective Amendment No. 84 to this
Registration Statement, filed on January 3, 1989.

(B) Opinion of Ropes & Gray with respect to New England
Adjustable Rate U.S. Government Fund is incorporated by
reference to Post-Effective Amendment No. 88 to this
Registration Statement, filed on August 2, 1991.

(C) Opinions of Ropes & Gray with respect to New England
Intermediate Term Tax Free Funds of California and New York
are incorporated herein by reference to Post-Effective
Amendment No. 92 to this Registration Statement, filed on
March 2, 1993.

(D) Opinion of Ropes & Gray with respect to offering multiple
classes of shares for all series of the Registrant is
incorporated herein by reference to Post-Effective Amendment
No. 95 to this Registration Statement, filed on December 2,
1993.

(E) Opinion of Ropes & Gray with respect to the Registrant's
Rule 24e-2 Notice is incorporated herein by reference to
Exhibit 10(E) to Post-Effective Amendment No. 98 to this
Registration Statement, filed on March 2, 1995.

11. Not applicable.

12. Not applicable.

13. Not applicable.

14. Model Retirement Plans.

(A) Keogh Plan is incorporated herein by reference to Exhibit
14(a) to Post-Effective Amendment No. 78 to this
Registration Statement, filed on August 1, 1985.
<PAGE>

Registration Nos. 2-11101
811-242

(B) IRA Plan is incorporated herein by reference to Exhibit
14(b) to Post-Effective Amendment No. 78 to this
Registration Statement, filed on August 1, 1985.

15. (A) Forms of Rule 12b-1 Plans relating to New England
Massachusetts Tax Free Income Fund, New England Intermediate
Term Tax Free Fund of California, New England Intermediate
Term Tax Free Fund of New York, New England High Income
Fund, New England Growth Opportunities Fund, New England
Limited Term U.S. Government Fund and New England Adjustable
Rate U.S. Government Fund are incorporated herein by
reference to Post-Effective Amendment No. 93 to this
Registration Statement, filed on June 25, 1993.

(B) Forms of Rule 12b-1 Plans relating to the Class B shares of
New England Massachusetts Tax Free Income Fund, New England
Intermediate Term Tax Free Fund of California, New England
Intermediate Term Tax Free Fund of New York, New England
High Income Fund, New England Growth Opportunities Fund, New
England Limited Term U.S. Government Fund and New England
Adjustable Rate U.S. Government Fund are incorporated herein
by reference to Post-Effective Amendment No. 95 to this
Registration Statement, filed on December 2, 1993.

(C) Rule 12b-1 Plan relating to the Class C shares of New
England Limited Term U.S. Government Fund is incorporated
hereby reference to Exhibit 15.(C) to Post-Effective
Amendment No. 98 to this Registration Statement, filed on
March 2, 1995.

(D) Form of Rule 12b-1 Plan relating to Class C shares of New
England Growth Opportunities Fund is incorporated hereby
reference to Exhibit 15.(D) to Post-Effective Amendment No.
98 to this Registration Statement, filed on March 2, 1995.

(E) Forms of Rule 12b-1 Plans relating to the Class A, Class B
and Class C shares of Growth Fund of Israel are filed
herewith.

16. Schedule for computation of performance quotations is
incorporated herein by reference to Exhibit 16 to Post-Effective
Amendment No. 83 to this Registration Statement, filed on
November 4, 1988.

17. Not applicable.
<PAGE>

Registration Nos. 2-11101
811-242

18. Plan adopted pursuant to Rule 18f-3 under the 1940 Act is
incorporated herein by reference to Exhibit 18 to Post-Effective
Amendment No. 99 to this Registration Statement, filed on May 1,
1995.

19. Powers of Attorney designating Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly as attorneys to sign
for Kenneth J. Cowan, Peter S. Voss, Henry L.P. Schmelzer, Graham
T. Allison Jr., James H. Scott, Pendleton P. White, John A. Shane
and Sandra O. Moose are filed herewith.

Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------

None.

Item 26. Number of Holders of Securities
-------------------------------

The following table sets forth the number of record holders of
each class of securities of the Registrant as of September 30,
1995.

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------

Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
New England Adjustable Rate
U.S. Government Fund 4,313 215 0 0

New England Growth
Opportunities Fund 7,520 1,757 31 0

New England Limited Term U.S.
Government Fund 16,747 1,204 107 3

New England High
Income Fund 2,374 654 0 0

New England Massachusetts Tax
Free Income Fund 5,177 273 0 0

New England Intermediate Term
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<S> <C> <C> <C> <C>
Tax Free Fund of California 633 141 0 0

New England Intermediate Term
Tax Free Fund of New York 582 88 0 0
</TABLE>

Item 27. Indemnification
---------------

See Article 4 of the Trust's Amended and Restated By-Laws filed
as Exhibit 2(B) to Post-Effective Amendment No. 83 to
Registration Statement, filed on November 4, 1988, which is
incorporated herein by reference.

In addition, New England Mutual Life Insurance Company, the
parent company of the Trust's adviser and distributor, maintains
a directors and officers liability insurance policy with maximum
coverage of $15 million, under which the trustees and officers of
the Registrant are named insured.

Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------

(a) Back Bay Advisors, L.P. ("Back Bay Advisors"), the adviser of New
England Massachusetts Tax Free Income Fund, New England
Intermediate Term Tax Free Fund of California, New England
Intermediate Term Tax Free Fund of New York, New England High
Income Fund, New England Limited Term U.S. Government Fund and
New England Adjustable Rate U.S. Government Fund, is a registered
investment adviser that is wholly owned by New England Investment
Companies, L.P. ("NEIC"), a New York Stock Exchange listed
company.

Back Bay Advisors serves as investment adviser to a number of
other registered investment companies. Back Bay Advisors'
directors and officers have been engaged during the past two
years in the following businesses, vocations or employment of a
substantial nature (former affiliations are marked with an
asterisk):
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Back Bay Advisors Other Affiliations Connection
----------------- ------------------ ----------

<S> <C> <C>
Back Bay Advisors, Inc. None None
General Partner

Charles T. Wallis, NEF Corporation Director
President and Chief 399 Boylston Street
Executive Officer Boston, MA 02116

Back Bay Advisors, Inc. President, CEO and
399 Boylston Street Director
Boston, MA 02116

Charles G. Glueck, None None
Senior Vice President

Scott A. Millimet, Chicago Board of Trade* Senior Vice President
Executive Vice President 141 West Jackson Boulevard and Manager of
Chicago, IL 60604 Carroll, McEntee &
McGinley

Edgar M. Reed, Aetna Capital Management* Head of Fixed Income
Executive Vice President and 151 Farmington Avenue Management Group
Chief Investment Officer Hartford, CT 06156

Catherine Bunting, None None
Senior Vice President

J. Scott Nicholson, None None
Senior Vice President

Nathan R. Wentworth, None None
Vice President

Paul Zamagni, None None
Vice President and Treasurer
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242
<TABLE>
<S> <C> <C>
Peter Hanson, Draycott Partners, Ltd. Assistant Secretary and
Secretary and Clerk 8 City Road Assistant Clerk
London, England EC2Y 1HE

New England Investment Counsel and Senior
Companies, L.P. Vice President,
399 Boylston Street Assistant Secretary and
Boston, MA 02116 Assistant Clerk

Harold B. Bjornson, None None
Vice President

Peter Palfrey, None None
Vice President
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

(b) New England Funds Management, L.P. ("NEFM"), a wholly-owned
subsidiary of NEIC, serves as investment adviser to New England
Growth Opportunities Fund and will serve as investment adviser to
Growth Fund of Israel. NEFM, organized in 1995, also serves as
investment adviser to New England Strategic Income Fund.

NEFM's directors and officers have been engaged during the past
two years in the following businesses, vocations or employments
of a substantial nature (former affiliations are marked with an
asterisk):

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with NEFM Other Affiliations Connection
--------- ------------------ ----------

<S> <C> <C>
NEF Corporation None None
General Partner

Henry L.P. Schmelzer, New England Funds, L.P. President and CEO
President and Chief Executive 399 Boylston Street
Officer Boston, MA 02116

NEF Corporation President, CEO and
399 Boylston Street Director
Boston, MA 02116

Back Bay Advisors, Inc. Director
399 Boylston Street
Boston, MA 02116

New England Securities Director
Corporation*
399 Boylston Street
Boston, MA 02116

Frank Nesvet, New England Funds, L.P. Senior Vice President
Senior Vice President, Chief 399 Boylston Street and CFO
Financial Officer and Treasurer Boston, MA 02116
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with NEFM Other Affiliations Connections
--------- ------------------ -----------

<S> <C> <C>
NEF Corporation Senior Vice President,
399 Boylston Street CFO and Treasurer
Boston, MA 02116

Robert P. Connolly, NEF Corporation Senior Vice President,
Senior Vice President, General 399 Boylston Street General Counsel,
Counsel, Assistant Secretary Boston, MA 02116 Secretary and Clerk
and Clerk

New England Funds, L.P. Senior Vice President,
399 Boylston Street General Counsel,
Boston, MA 02116 Secretary and Clerk

Kroll Associates, Inc.* Managing Director and
900 3rd Avenue General Counsel
New York, NY 10022

Equitable Capital Managing Director and
Management Corporation* General Counsel
New York, NY

Bruce R. Speca, Executive Vice NEF Corporation Executive Vice
President 399 Boylston Street President
Boston, MA 02116

New England Funds, L.P. Executive Vice
399 Boylston Street President
Boston, MA 02116

Peter H. Duffy, Vice President NEF Corporation Vice President
399 Boylston Street
Boston, MA 02116

New England Funds, L.P. Vice President
399 Boylston Street
Boston, MA 02116
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with NEFM Other Affiliations Connections
--------- ------------------ -----------

<S> <C> <C>
Martin G. Dyer, Vice President NEF Corporation Vice President
399 Boylston Street
Boston, MA 02116

New England Funds, L.P. Vice President
399 Boylston Street
Boston, MA 02116

Ralph M. Greggs, Vice NEF Corporation Vice President
President 399 Boylston Street
Boston, MA 02116

New England Funds, L.P. Vice President
399 Boylston Street
Boston, MA 02116

Beatriz A. Pina NEF Corporation Assistant Comptroller
Assistant Controller 399 Boylston Street
Boston, MA 02116

New England Funds, L.P. Assistant Comptroller
399 Boylston Street
Boston, MA 02116

Sheila M. Barry, NEF Corporation Vice President, Senior
Vice President, Secretary and 399 Boylston Street Counsel, Assistant
Assistant Clerk Boston, MA 02116 Secretary and Assistant
Clerk

New England Funds, L.P. Vice President, Senior
399 Boylston Street Counsel, Assistant
Boston, MA 02116 Secretary and Assistant
Clerk
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

(c) Westpeak Investment Advisors, L.P. ("Westpeak") serves as
subadviser to New England Growth Opportunities Fund and is a
wholly-owned subsidiary of NEIC. Organized in 1991, Westpeak
provides investment management services to other mutual funds and
institutional clients.

Westpeak's directors and officers have been engaged during the
past two years in the following businesses, vocations or
employments of a substantial nature (former affiliations are
marked with an asterisk):

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with Westpeak Other Affiliations Connection
------------- ------------------ ----------

<S> <C> <C>
Westpeak Investment None None
Advisors, Inc.
General Partner

Gerald H. Scriver, None None
President, Chief Executive
Officer, Chief Investment
Officer, Director

Peter S. Voss, NEF Corporation Director
Chairman of the Board, 399 Boylston Street
Director Boston, MA 02116

NEIC Chief Executive
399 Boylston Street Officer
Boston, MA 02116

New England Funds, L.P. Chairman of the
399 Boylston Street Board and Director
Boston, MA 02116
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with Westpeak Other Affiliations Connection
------------- ------------------ ----------

<S> <C> <C>
Peter S. Voss (cont.) New England Mutual Life Director
Insurance Company
501 Boylston Street
Boston, MA 02116

TNE Investment Services Chairman and
Corp.* Director
399 Boylston Street
Boston, MA 02116

Back Bay Advisors, Inc. Chairman and
399 Boylston Street Director
Boston, MA 02116

New England Investment President, CEO and
Companies, Inc. Director
399 Boylston Street
Boston, MA 02116

Sherry A. Umberfield, NEIC Executive Vice
Director 399 Boylston Street President
Boston, MA 02116

New England Investment Director
Associates, Inc
399 Boylston Street
Boston, MA 02116

Draycott Partners, Ltd. Director
8 City Road
London, England EC2Y 1HE

NEF Corporation Director
399 Boylston Street
Boston, MA 02116
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with Westpeak Other Affiliations Connection
------------- ------------------ ----------

<S> <C> <C>
Sherry A. Umberfield (cont.) New England Investment Executive Vice
Companies, Inc. President
399 Boylston Street
Boston, MA 02116

Edward N. Wadsworth, NEIC Executive Vice
Clerk, Secretary, Chief Legal 399 Boylston Street President, Clerk,
Officer Boston, MA 02116 Secretary and
General Counsel

New England Investment Executive Vice
Companies, Inc. President, Clerk,
399 Boylston Street Secretary and
Boston, MA 02116 General Counsel

Marlborough Capital Assistant Clerk
Advisors, Inc.
399 Boylston Street
Boston, MA 02116

New England Investment Secretary
Associates, Inc.
399 Boylston Street
Boston, MA 02116

Draycott Partners, Ltd. General Counsel,
8 City Road Clerk and Secretary
London, England EC2Y 1HE

Robert A. Franz, None None
Senior Vice President

Philip J. Cooper, None None
Vice President Portfolio
Management
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Name and Office Name and Address of Nature of
with Westpeak Other Affiliations Connection
------------- ------------------ ----------

<S> <C> <C>
Beverly J. DeWitt, New England Mutual Life Attorney and
Assistant Secretary and Insurance Co. Assistant Secretary
Assistant Clerk 501 Boylston Street
Boston, MA 02117

TNE Advisers, Inc. Chief Legal
501 Boylston Street Officer,
Boston, MA 02117 Secretary and Clerk
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

(d) Harris Associates L.P. ("Harris") serves as investment subadviser
to Growth Fund of Israel and is a wholly-owned subsidiary of NEIC.

Harris's directors and officers have been engaged during the past two
years in the following businesses, vocations or employments of a substantial
nature (former affiliations are marked with an asterisk):

<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Harris Other Affiliations Connection
------ ------------------ ----------

<S> <C> <C>
Harris Associates Inc., None None
General Partner

Victor S. Morgenstern, None None
President and Chief
Executive Officer

Donald Terao, Chief None None
Financial Officer, Treasurer
and Secretary

Robert M. Levy, Vice None None
President

Roxanne M. Martino, Vice None None
President

Anita Nagler, Vice President None None
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

Item 29. Principal Underwriter
---------------------

(a) New England Funds, L.P. also serves as principal
underwriter for:

New England Funds Trust I
New England Tax Exempt Money Market Trust
New England Cash Management Trust

(b) The general partner and officers of the Registrant's
principal underwriter, New England Funds, L.P., and
their address are as follows:

<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Principal Underwriter with Registrant
---- -------------------------- ---------------

<S> <C> <C>
NEF Corporation General Partner None

Henry L.P. Schmelzer President and Chief Executive President and Trustee
Officer

J. Steven Neamtz Executive Vice President Executive Vice President

Bruce R. Speca Executive Vice President Executive Vice President

Robert P. Connolly Senior Vice President, General Secretary
Counsel, Secretary and Clerk

Frank Nesvet Senior Vice President and Chief Treasurer
Financial Officer

Manish Agrawal Vice President None

Elizabeth Burns Vice President None
</TABLE>
<PAGE>

Registration Nos. 2-11101
811-242

<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Principal Underwriter with Registrant
---- -------------------------- ---------------

<S> <C> <C>
Sheila M. Barry Vice President, Senior Counsel, Assistant Secretary
Assistant Secretary and Assistant
Clerk

James H. Davis Vice President None

Peter H. Duffy Vice President None

Martin G. Dyer Vice President None

Tracy Fagan Vice President None

William H. Finnegan Vice President None

Raymond K. Girouard Vice President Treasurer and None
Controller

Annette Golia Vice President None

Ralph M. Greggs Vice President None

Caren I. Leedom Vice President None

Marie G. McKenzie Vice President None

Bernard M. Shavelson Vice President None

Christine L. Swanson Vice President Vice President

Kristine E. Swanson Vice President Vice President

Beatriz A. Pina Assistant Comptroller None
</TABLE>

The principal business address of all the above persons or entities is
399 Boylston Street, Boston, MA 02116.
<PAGE>

Registration Nos. 2-11101
811-242

Item 30. Location of Accounts and Records
--------------------------------

The following companies maintain possession of the documents required by
the specified rules:

(a) Registrant
Rule 31a-1(b)(4)
Rule 31a-2(d)

(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(d)

(c) (i) For Funds of the Registrant advised by
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(d); and 31a-2(e)

(ii) For New England Growth Opportunities Fund:
New England Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
Rule 31a-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(d); and 31a-2(e)

Westpeak Investment Advisors, L.P.
1050 Walnut Street
Boulder, CO 80302
Rule 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(d); and 31a-2(e)

(d) New England Funds, L.P.
399 Boylston Street
<PAGE>

Registration Nos. 2-11101
811-242

Boston, Massachusetts 02116
Rule 31a-1(d)
Rule 31a-2(c)

Item 31. Management Services
-------------------

None.

Item 32. Undertakings
------------

The Registrant undertakes to provide any Fund's annual report to any person
who receives a Fund prospectus and who requests the annual report.
<PAGE>

Registration Nos. 2-11101
811-242

NEW ENGLAND FUNDS TRUST II
--------------------------

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 100 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Boston, in the Commonwealth of Massachusetts on the 11th day of October, 1995.

New England Funds Trust II

By: PETER S. VOSS*
--------------------------
Peter S. Voss
Chief Executive Officer

By: ROBERT P. CONNOLLY
--------------------------
Robert P. Connolly
Attorney-in-fact
<PAGE>

Registration Nos. 2-11101
811-242

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

<S> <C> <C>
PETER S. VOSS* Chairman of the Board; October 11, 1995
- -------------
Peter S. Voss Chief Executive Officer;
Principal Executive
Officer; Trustee

FRANK NESVET Treasurer October 11, 1995
- ------------
Frank Nesvet

GRAHAM T. ALLISON JR.* Trustee October 11, 1995
- ----------------------
Graham T. Allison Jr.

KENNETH J. COWAN* Trustee October 11, 1995
- -----------------
Kenneth J. Cowan

SANDRA O. MOOSE* Trustee October 11, 1995
- ----------------
Sandra O. Moose

JAMES H. SCOTT* Trustee October 11, 1995
- ---------------
James H. Scott

HENRY L.P. SCHMELZER* Trustee and President October 11, 1995
- ---------------------
Henry L.P. Schmelzer

JOHN A. SHANE* Trustee October 11, 1995
- --------------
John A. Shane

PENDLETON P. WHITE* Trustee October 11, 1995
- -------------------
Pendleton P. White
</TABLE>

*By: ROBERT P. CONNOLLY
--------------------------------------
Robert P. Connolly
Attorney-In-Fact
October 11, 1995
<PAGE>

Registration Nos. 2-11101
811-242

Exhibit Index

<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------

<S> <C>
5(G) Form of Advisory Agreement between New England Funds Trust
II, on behalf of Growth Fund of Israel, and NEFM

5(H) Form of Subadvisory Agreement for Growth Fund of Israel
between NEFM and Harris

6(E) Form of Distribution Agreement between the Registrant, in
respect of Growth Fund of Israel, and the Distributor

8(C) Form of Letter Agreement between the Registrant and State
Street Bank and Trust Company

15(E) Forms of Rule 12b-1 Plans relating to the Class A, Class B
and Class C shares of Growth Fund of Israel

19 Powers of Attorney
</TABLE>

<PAGE>

Registration Nos. 2-11101
811-242

EXHIBIT 5(G)

FORM OF ADVISORY AGREEMENT BETWEEN NEW ENGLAND FUNDS TRUST II, ON BEHALF OF
GROWTH FUND OF ISRAEL, AND NEFM
<PAGE>

GROWTH FUND OF ISRAEL

ADVISORY AGREEMENT

AGREEMENT made this __ day of January, 1996 by and between NEW ENGLAND
FUNDS TRUST II, a Massachusetts business trust (the "Fund"), with respect to its
Growth Fund of Israel series (the "Series"), and NEW ENGLAND FUNDS MANAGEMENT,
L.P., a Delaware limited partnership (the "Manager").

WITNESSETH:

WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;

NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:

1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided.
The Manager shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.

(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
<PAGE>

portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect, what
portion of the assets belonging to the Series shall be managed by each Sub-
Adviser.

(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by the
Manager. Any Administrator may (but need not) be affiliated with the
Manager.

2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:

(a) obtaining and evaluating such economic, statistical and financial
data and information and undertaking such additional investment research as
shall be necessary or advisable for the management of the investment and
reinvestment of the assets belonging to the Series in accordance with the
Series' investment objectives and policies;

(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and

(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.

3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:

(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;

(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);

(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company) of
the Manager, any Sub-Adviser or any Administrator; and
<PAGE>

(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series' investment
policies, restrictions and guidelines, if the Manager has delegated to one
or more Sub-Advisers any or all of its responsibilities hereunder with
respect to the provision of Portfolio Management Services.

4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:

(a) any of the costs of printing and mailing the items referred to in
sub-section (n) of this section 4;

(b) any of the costs of preparing, printing and distributing sales
literature;

(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company) of
the Manager, any Sub-Adviser or any Administrator;

(d) registration, filing and other fees in connection with
requirements of regulatory authorities;

(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;

(f) charges and expenses of independent accountants retained by the
Fund;

(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;

(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;

(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;

(j) any cost of certificates representing shares of the Fund;

(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;

(l) expenses of meetings of shareholders and trustees of the Fund;
<PAGE>

(m) interest, including interest on borrowings by the Fund;

(n) the costs of services, including services of counsel, required in
connection with the preparation of the Fund's registration statements and
prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and

(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.

5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.

6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.

7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 1.10% of the Series's average daily net
assets. Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Board of Trustees of the
Fund may from time to time determine and specify in writing to the Manager. The
Manager hereby acknowledges that the Fund's obligation to pay such compensation
is binding only on the assets and property belonging to the Series.

8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.

9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the
<PAGE>

Manager may have an interest or any organization which may have an interest in
the Manager; that the Manager, any such affiliated person or any such
organization may have an interest in the Fund; and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided in the Agreement and Declaration of Trust
of the Fund, the partnership agreement of the Manager or specific provisions of
applicable law.

10. This Agreement shall become effective as of the date of its execution,
and

(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Fund who are not interested persons of the
Fund or the Manager, cast in person at a meeting called for the purpose of
voting on, such approval;

(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of
the Series;

(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;

(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series with
said principal underwriter, this Agreement shall automatically terminate at
the time of such change unless the continuance of this Agreement after such
change shall have been specifically approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of
the trustees of the Fund who are not interested persons of the Fund or the
Manager, cast in person at a meeting called for the purpose of voting on
such approval.

Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.

11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the
<PAGE>

trustees of the Fund who are not interested persons of the Fund or the Manager,
cast in person at a meeting called for the purpose of voting on such approval.

12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.

13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.

NEW ENGLAND FUNDS TRUST II, NEW ENGLAND
on behalf of its Growth Fund of FUNDS MANAGEMENT, L.P.
Israel series
By NEF Corporation, its general partner

By: ________________________________
Name: By: ________________________________
Title: Name:
Title:

NOTICE

A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust II (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's Growth Fund of Israel series (the "Series") on behalf of
the Fund by officers of the Fund as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
trustees, officers or shareholders individually but are binding only upon the
assets and property belonging to the Series.

<PAGE>

Registration Nos. 2-11101
811-242

EXHIBIT 5(H)

FORM OF SUBADVISORY AGREEMENT FOR GROWTH FUND OF ISRAEL BETWEEN
NEFM AND HARRIS
<PAGE>

GROWTH FUND OF ISRAEL

SUB-ADVISORY AGREEMENT
(HARRIS ASSOCIATES L.P.)

This Sub-Advisory Agreement (this "Agreement") is entered into as of
January __, 1996 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Harris Associates L.P., a
_________________ limited partnership (the "Sub-Adviser").

WHEREAS, the Manager has entered into an Advisory Agreement dated January
1, 1996 (the "Advisory Agreement") with New England Funds Trust II (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to Growth Fund of Israel, a series of the Trust (the
"Series");

WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory Agreement
to one or more sub-advisers;

WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:

1. Sub-Advisory Services.
---------------------

a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of the assets of the Series. The
Sub-Adviser shall manage the Series in conformity with (1) the investment
objective, policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the Series,
(2) any additional policies or guidelines established by the Manager or by
the Trust's trustees that have been furnished in writing to the Sub-Adviser
and (3) the provisions of the Internal Revenue Code (the "Code") applicable
to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"),
and with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder. Subject to the foregoing,
the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in
any stocks,
<PAGE>

bonds and other securities and investment instruments on behalf of the
Series, without regard to the length of time the securities have been held
and the resulting rate of portfolio turnover or any tax considerations; and
the majority or the whole of the Series may be invested in such proportions
of stocks, bonds, other securities or investment instruments, or cash, as
the Sub-Adviser shall determine.

b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions and
performance of the Series in such form as may be mutually agreed upon, and
agrees to review the Series and discuss the management of it. The Sub-
Adviser shall permit all books and records with respect to the Series to be
inspected and audited by the Manager and the Administrator at all
reasonable times during normal business hours, upon reasonable notice. The
Sub-Adviser shall also provide the Manager with such other information and
reports as may reasonably be requested by the Manager from time to time,
including without limitation all material requested by or required to be
delivered to the Trustees of the Trust.

c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to
give written and/or oral instructions to custodians of assets of the
Series.

2. Obligations of the Manager.
--------------------------

a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-
Adviser regarding such matters as the composition of assets of the Series,
cash requirements and cash available for investment in the Series, and all
other information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.

b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any
revisions or supplements thereto at, or, if practicable, before the time
the revisions or supplements become effective. The Manager agrees to
furnish the Sub-Adviser with minutes of meetings of the trustees of the
Trust applicable to the Series to the extent they may affect the duties of
the Sub-Adviser, and with copies of any financial statements or reports
made by the Series to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement.

3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
---------
the Series's agreement with the custodian designated to hold the assets of the
Series (the
<PAGE>

"Custodian") and any modifications thereto (the "Custody Agreement"), copies of
such modifications to be provided to the Sub-Adviser a reasonable time in
advance of the effectiveness of such modifications. The assets of the Series
shall be maintained in the custody of the Custodian identified in, and in
accordance with the terms and conditions of, the Custody Agreement (or any sub-
custodian properly appointed as provided in the Custody Agreement). The Sub-
Adviser shall have no liability for the acts or omissions of the Custodian,
unless such act or omission is taken in reliance upon instruction given to the
Custodian by a representative of the Sub-Adviser properly authorized to give
such instruction under the Custody Agreement. Any assets added to the Series
shall be delivered directly to the Custodian.

4. Expenses. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
Neither the Sub-Adviser nor any affiliated person thereof shall be entitled to
any compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 6 hereof).

5. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
---------------------------
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser.
To the extent consistent with applicable law, the Sub-Adviser may pay a broker
or dealer an amount of commission for effecting a securities transaction in
excess of the amount of commission or dealer spread another broker or dealer
would have charged for effecting that transaction if the Sub-Adviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research products and/or services provided by such
broker or dealer. This determination, with respect to brokerage and research
services or products, may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and its
affiliates
<PAGE>

have with respect to the Series or to accounts over which they exercise
investment discretion. Not all such services or products need be used by the
Sub-Adviser in managing the Series.

6. Compensation of the Sub-Adviser. As full compensation for all
-------------------------------
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.70% of the first $50 million of the Series's average daily net assets and
0.60% of such assets in excess of $50 million. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement.

7. Non-Exclusivity. The Manager and the Series agree that the services
---------------
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the Sub-
Adviser and the Manager or the Administrator may otherwise agree from time to
time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.

8. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.

9. Effective Date and Termination. This Agreement shall become effective
------------------------------
as of the date of its execution, and
<PAGE>

a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Trust who are not interested persons of the
Trust, the Manager or the Sub-Adviser, cast in person at a meeting called
for the purpose of voting on such approval;

b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting securities
of the Series;

c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;

d. this Agreement may be terminated by the Sub-Adviser on ninety
days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.

Termination of this Agreement pursuant to this Section 9 shall be without
the payment of any penalty.

10. Amendment. This Agreement may be amended at any time by mutual
---------
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.

11. Certain Definitions. For the purpose of this Agreement, the terms
-------------------
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.

12. General.
-------

a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled
to the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-
Adviser notifies the Manager that
<PAGE>

one or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific date.

b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the
application of such provision to other persons or circumstances shall not
be affected thereby and shall be enforced to the fullest extent permitted
by law.

c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.

NEW ENGLAND FUNDS MANAGEMENT, L.P.

By NEF Corporation, its general partner

By:_______________________________________

Name:___________________________________

Title:__________________________________

HARRIS ASSOCIATES L.P.

By Harris Associates, Inc., its general partner
-----------------------

By:_______________________________________

Name:___________________________________

Title:__________________________________

<PAGE>

Registration Nos. 2-11101
811-242

EXHIBIT 6(E)

FORM OF DISTRIBUTION AGREEMENT BETWEEN THE REGISTRANT, IN RESPECT
OF GROWTH FUND OF ISRAEL, AND THE DISTRIBUTOR
<PAGE>

GROWTH FUND OF ISRAEL

DISTRIBUTION AGREEMENT

AGREEMENT made this __ day of January, 1996 by and between NEW ENGLAND
FUNDS TRUST II, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").

W I T N E S S E T H:

WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;

WHEREAS, the Trustees of the Trust recognize the importance to the Trust of
the Distributor being able to obtain financing with which to pay commissions on
Class B shares at the time of sale;

WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and

WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.

NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:

1. Distributor. The Trust hereby appoints the Distributor as general
-----------
distributor of shares of beneficial interest ("Series shares") of the
Trust's Growth Fund of Israel (the "Series") during the term of this
Agreement. The Trust reserves the right, however, to refuse at any time or
times to sell any Series shares hereunder for any reason deemed adequate by
the Board of Trustees of the Trust.

2. Sale and Payment. Under this agreement, the following provisions shall
----------------
apply with respect to the sale of and payment for Series shares:
<PAGE>

(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.

(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.

3. Fees. For its services as general distributor of the Class B Series
----
shares, the Trust shall cause the Series to pay to the Distributor (or its
designee or transferee) in addition to the sales charge, if any, referred
to in Section 4 below, the Class B Distribution Fee at the rate and upon
the terms and conditions set forth in the Class B Distribution and Service
Plan attached as Exhibit A hereto, and as amended from time to time, and
the Distributor shall also be entitled to receive any contingent deferred
sales charges that may be payable upon redemption or repurchase of Class B
Series shares. The Class B Distribution Fee shall be accrued daily and
paid monthly to the Distributor (or, at its direction, to its designee or
transferee) as soon as practicable after the end of the calendar month in
which it accrues, but in any event within five business days following the
last day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance with
their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional and
shall not be subject to any dispute, offset, counterclaim or defense
whatsoever (it being understood that nothing in this sentence shall be
deemed a waiver by the Trust or the Series of its right separately to
pursue any claims it may have against the Distributor and to enforce such
claims against any assets (other than its rights to be paid the Class B
Distribution Fee and to be paid contingent deferred sales charges with
respect to Class B Series shares) of the Distributor).

4. Public Offering Price. The public offering price shall be the net asset
---------------------
value of Series shares, plus any applicable sales charge, all as set forth
in the current prospectus and statement of additional information
("prospectus") of the Trust relating to the Series shares. In no event
shall the public offering price exceed 1000/942.50 of such net asset value,
and in no event shall any applicable sales charge or underwriting discount
exceed 5.75% of the public offering price. The net asset value of Series
shares shall be determined in accordance with the provisions of the
agreement and declaration of trust and by-laws of the Trust and the current
prospectus of the Trust relating to the Series shares.
<PAGE>

5. Trust Issuance of Series Shares. The delivery of Series shares shall be
-------------------------------
made promptly by a credit to a shareholder's open account for the Series or
by delivery of a share certificate. The Trust reserves the right (a) to
issue Series shares at any time directly to the shareholders of the Series
as a stock dividend or stock split, (b) to issue to such shareholders
shares of the Series, or rights to subscribe to shares of the Series, as
all or part of any dividend that may be distributed to shareholders of the
Series or as all or part of any optional or alternative dividend that may
be distributed to shareholders of the Series, and (c) to sell Series shares
in accordance with the current applicable prospectus of the Trust relating
to the Series shares.

6. Redemption or Repurchase. The Distributor shall act as agent for the Trust
------------------------
in connection with the redemption or repurchase of Series shares by the
Trust to the extent and upon the terms and conditions set forth in the
current applicable prospectus of the Trust relating to the Series shares,
and the Trust agrees to reimburse the Distributor, from time to time upon
demand, for any reasonable expenses incurred in connection with such
redemptions or repurchases. The Trust will remit to the Distributor any
contingent deferred sales charges imposed on redemptions or repurchases of
Series shares (other than Class B shares) upon the terms and conditions set
forth in the then current prospectus of the Trust. The Trust will also
remit to the Distributor (or its designee or transferee), in addition to
the Class B Distribution Fee, any contingent deferred sales charges imposed
on redemptions or repurchases of Class B shares, in accordance with the
Remittance Agreement attached hereto as Exhibit B.

7. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
---------------------------
to sell Series shares but does not agree hereby to sell any specific number
of Series shares and shall be free to act as distributor of the shares of
other investment companies. Series shares will be sold by the Distributor
only against orders therefor. The Distributor shall not purchase Series
shares from anyone except in accordance with Sections 2 and 6 and shall not
take "long" or "short" positions in Series shares contrary to the agreement
and declaration of trust or by-laws of the Trust.

8. Compliance. The Distributor shall conform to the Rules of Fair Practice of
----------
the NASD and the sale of securities laws of any jurisdiction in which it
sells, directly or indirectly, any Series shares. The Distributor agrees
to make timely filings, with the Securities and Exchange Commission in
Washington, D.C. (the "SEC"), the NASD and such other regulatory
authorities as may be required, of any sales literature relating to the
Series and intended for distribution to prospective investors. The
Distributor also agrees to furnish to the Trust sufficient copies of any
agreements or plans it intends to use in connection with any sales of
Series shares in adequate time for the Trust to file and clear them with
the proper authorities before they are put in use (which the Trust agrees
to use its best efforts to do as expeditiously as reasonably possible), and
not to use them until so filed and cleared.
<PAGE>

9. Registration and Qualification of Series Shares. The Trust agrees to
-----------------------------------------------
execute such papers and to do such acts and things as shall from time to
time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940 (the
"1940 Act"), to the end that there will be available for sale from time to
time such number of Series shares as the Distributor may reasonably be
expected to sell. The Trust shall advise the Distributor promptly of (a)
any action of the SEC or any authorities of any state or territory, of
which it may be advised, affecting registration or qualification of the
Trust or the Series shares, or rights to offer Series shares for sale, and
(b) the happening of any event which makes untrue any statement or which
requires the making of any change in the Trust's registration statement or
its prospectus relating to the Series shares in order to make the
statements therein not misleading.

10. Distributor Independent Contractor. The Distributor shall be an
----------------------------------
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.

11. Expenses Paid by Distributor. While the Distributor continues to act as
----------------------------
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:

(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and

(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.

12. Interests in and of Distributor. It is understood that any of the
-------------------------------
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated person of the Distributor,
any organization in which the Distributor may have an interest or any
organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have
an interest in the Trust; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder except
as otherwise provided in the agreement and declaration of trust or by-
<PAGE>

laws of the Trust, in the limited partnership agreement of the Distributor
or by specific provision of applicable law.

13. Effective Date and Termination. This Agreement shall become effective as
------------------------------
of the date of its execution, and

(a) Unless otherwise terminated, this Agreement shall continue in effect
with respect to the shares of the Series so long as such continuation
is specifically approved at least annually (i) by the Board of
Trustees of the Trust or by the vote of a majority of the votes which
may be cast by shareholders of the Series and (ii) by a vote of a
majority of the Board of Trustees of the Trust who are not interested
persons of the Distributor or the Trust, cast in person at a meeting
called for the purpose of voting on such approval.

(b) This Agreement may at any time be terminated on sixty days' notice to
the Distributor either by vote of a majority of the Trust's Board of
Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.

(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).

(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.

Termination of this Agreement pursuant to this section shall be without payment
of any penalty.

14. Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:

(a) The "vote of a majority of the votes which may be cast by shareholders
of the Series" means (1) 67% or more of the votes of the Series
present (in person or by proxy) and entitled to vote at such meeting,
if the holders of more than 50% of the outstanding shares of the
Series entitled to vote at such meeting are present; or (2) the vote
of the holders of more than 50% of the outstanding shares of the
Series entitled to vote at such meeting, whichever is less.

(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
<PAGE>

15. Amendment. This Agreement may be amended at any time by mutual consent of
---------
the parties, provided that such consent on the part of the Series shall be
approved (i) by the Board of Trustees of the Trust or by vote of a majority
of the votes which may be cast by shareholders of the Series and (ii) by a
vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Distributor or the Trust cast in person at a
meeting called for the purpose of voting on such approval.

16. Applicable Law and Liabilities. This Agreement shall be governed by and
------------------------------
construed in accordance with the laws of The Commonwealth of Massachusetts.
All sales hereunder are to be made, and title to the Series shares shall
pass, in Boston, Massachusetts.

17. Limited Recourse. The Distributor hereby acknowledges that the Trust's
----------------
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.

18. Payments to Distributor's Transferees. The Distributor may transfer its
-------------------------------------
rights to payments hereunder with respect to Class B shares (but not its
obligations hereunder) in order to raise funds to cover distribution
expenditures, and any such transfer shall be effective upon written notice
from the Distributor to the Trust. In connection with the foregoing, the
Series is authorized to pay all or a part of the Distribution Fee and/or
contingent deferred sales charges in respect of Class B shares directly to
such transferee as directed by the Distributor.

19. Liquidation etc. As long as the Class B Distribution and Service Plan is
---------------
in effect, the Series shall not change the manner in which the Distribution
Fee is computed (except as may be required by a change in applicable law
after the date hereof) or adopt a plan of liquidation without the consent
of the Distributor (or any designee or transferee of the Distributor's
rights to receive payment hereunder in respect of Class B shares) except in
circumstances where a surviving entity or transferee of the Series' assets
adopts the Class B Distribution and Service Plan and assumes the
obligations of the Series to make payments to the Distributor (or its
transferee) hereunder in respect of Class B shares.

20. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
---------------------------
that it will not pay any portion of the Class B Distribution Fee which is
calculated by reference to the "Distributor's Shares" (nor shall it pay a
Distribution Fee calculated by reference to Class B shares ("Other Class B
Shares") other than the Distributor's Shares at a rate exceeding .75% per
annum of the net assets attributable to Other Class B Shares) to any person
other than the Distributor (or its designee or transferee) without the
written consent of the Distributor. "Distributor's Shares" shall mean (i)
Class B shares of the Series that were sold by the Distributor, plus (ii)
Class B shares of the Series issued in connection with the exchange, for
Class B shares of the Series, of Class B shares of another fund in the New
England fund group that were sold by the Distributor, plus (iii) Class B
shares of the Series issued in connection with the exchange, for Class B
shares of the Series, of Class
<PAGE>

B shares of another fund in the New England fund group issued in respect
of the automatic reinvestment of dividends or capital gain distributions
in respect of Class B shares of such other fund that were sold by the
Distributor, plus (iv) Class B shares of the Series issued in respect of
the automatic reinvestment of dividends or capital gain distributions in
respect of Class B shares of the Series described in clauses (i), (ii)
and (iii). To the extent permitted under the 1940 Act, the terms of this
Section 21 shall survive the termination of this Agreement.

21. Limitation on Reduction of Class B Distribution Fee. The Trust, on
----------------------------------------------------
behalf of the Series, agrees that it will not reduce the Distribution Fee
in respect of Series' assets attributable to Class B shares below the
annual rate of 0.75% unless it has ceased (and not resumed) paying all
"service fees" (within the meaning of Section 26 of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. or any
successor provision thereto) to the Distributor, to any affiliate of the
Distributor and to any other person in circumstances where substantially
all of the services and functions relating to the distribution of Class B
Series shares have been delegated to, or are being performed by, the
Distributor or an affiliate of the Distributor. To the extent permitted
under the 1940 Act, the terms of this Section 22 shall survive the
termination of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.

NEW ENGLAND FUNDS TRUST II,
on behalf of its Growth Fund of Israel series

By________________________________

NEW ENGLAND FUNDS, L.P.

By: NEF Corporation, its general partner

By________________________________

A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust II (the "Trust") is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Trust's Growth Fund of Israel series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.

<PAGE>

Registration Nos. 2-11101

811-242
EXHIBIT 8(C)

FORM OF LETTER AGREEMENT BETWEEN THE REGISTRANT AND STATE STREET
BANK AND TRUST COMPANY
<PAGE>

January ___, 1996

State Street Bank and Trust Company
1776 Heritage Drive
Fiduciary Control 42N
North Quincy, Massachusetts 02171

Re: Growth Fund of Israel
---------------------

Gentlemen:

This is to advise you that New England Funds Trust II (the "Trust") and
formerly TNE Funds Trust) has established a new series of shares, Growth Fund of
Israel. In accordance with the Additional Funds provisions in Section 17 of the
Custodian Contract dated January 3, 1989 between the Trust and State Street Bank
and Trust Company and the provisions of Section 1.01 of the Sub-Transfer and
Service Agreement between New England Funds, L.P. and State Street Bank, the
Trust and New England Funds, L.P. hereby requests that you act as Custodian and
Sub-Transfer Agent for the new series under the terms of the respective
contracts. A revised Exhibit A to the Sub-Transfer and Service Agreement is
attached to this letter.

By:__________________________
Henry L.P. Schmelzer
President
New England Funds Trust II
New England Funds, L.P.

Agreed to this ______ day of January, 1996.

State Street Bank and Trust Company

By:__________________________
Vice President
<PAGE>

APPENDIX A
----------

NEW ENGLAND FUNDS

. New England Growth Fund
. New England International Equity Fund
. New England Capital Growth Fund
. New England Value Fund
. New England Growth Opportunities Fund
. New England Balanced Fund
. New England Star Advisers Fund
. Growth Fund of Israel
. New England Star Worldwide Fund

. New England High Income Fund
. New England Government Securities Fund
. New England Bond Income Fund
. New England Limited Term U.S. Government Fund
. New England Adjustable Rate U.S. Government Fund
. New England Strategic Income Fund

. New England Tax Exempt Income Fund
. New England Massachusetts Tax Free Income Fund
. New England Intermediate Term Tax Free Fund of California
. New England Intermediate Term Tax Free Fund of New York

. New England Cash Management Trust
. Money Market Series
. U.S. Government Series
. New England Tax Exempt Money Market Trust

<PAGE>

Registration Nos. 2-11101
811-242

EXHIBIT 15(E)

FORMS OF RULE 12B-1 PLANS RELATING TO THE CLASS A, CLASS B AND CLASS C
SHARES OF GROWTH FUND OF ISRAEL
<PAGE>

GROWTH FUND OF ISRAEL

CLASS A SERVICE PLAN

This Plan (the "Plan") constitutes the Service Plan relating to the Class A
shares of GROWTH FUND OF ISRAEL (the "Series"), a series of New England Funds
Trust II, a Massachusetts business trust (the "Trust").

Section 1. The Trust, on behalf of the Series, will pay to NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership which acts as the Principal
Distributor of the Series' shares, or such other entity as shall from time to
time act as the Principal Distributor of the Series' shares (the "Distributor"),
a fee (the "Service Fee") for expenses borne by the Distributor in connection
with the provision of personal services provided to investors in Class A shares
of the Series and/or the maintenance of shareholder accounts, at an annual rate
not to exceed .25% of the Series' average daily net assets attributable to the
Class A shares. Subject to such limit and subject to the provisions of Section
7 hereof, the Service Fee shall be as approved from time to time by (a) the
Trustees of the Trust and (b) the Independent Trustees of the Trust. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. All payments under this Service Plan are
intended to qualify as "service fees" as defined in Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. (or any
successor provision) as in effect from time to time.

Section 2. The Service Fee may be paid only to reimburse the Distributor
for expenses of providing personal services to investors in Class A shares of
the Series and/or in connection with the maintenance of shareholder accounts
including, but not limited to, (i) expenses (including overhead expenses) of the
Distributor for providing personal services to investors in Class A shares of
the Series or in connection with the maintenance of shareholder accounts and
(ii) payments made by the Distributor to any securities dealer or other
organization (including, but not limited to, any affiliate of the Distributor)
with which the Distributor has entered into a written agreement for this
purpose, for providing personal services to investors in Class A shares of the
Series and/or the maintenance of shareholder accounts, which payments to any
such organization may be in amounts in excess of the cost incurred by such
organization in connection therewith.

required by Section 12(b) of the Investment Company Act of 1940 (the "Act") or
the rules and regulations thereunder) of both (a) the Trustees of the Trust, and
(b) the Independent Trustees of the Trust, cast in person at a meeting called
for the purpose of voting on this Plan.

Section 4. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.

Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class A
shares of the Series.

Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:

A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class A shares of the Series,
on not more than 60 days' written notice to any other party to the
agreement; and

B. That such agreement shall terminate automatically in the event of its
assignment.

Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Section 1 hereof without approval by a vote of
at least a majority of the outstanding Class A shares of the Series, and all
material amendments of this Plan shall be approved in the manner provided for
continuation of this Plan in Section 3.

Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and (c) the term "majority of the outstanding Class
A shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
<PAGE>

GROWTH FUND OF ISRAEL

CLASS B DISTRIBUTION AND SERVICE PLAN

This Plan (the "Plan") dated January __, 1996 constitutes the Distribution
and Service Plan relating to the Class B shares of GROWTH FUND OF ISRAEL (the
"Series"), a series of New England Funds Trust II, a Massachusetts business
trust (the "Trust").

Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
-----------
New England Funds, L.P. ("NEF"), a Delaware limited partnership which acts as
the Principal Distributor of the Series' shares, or such other entity as shall
from time to time act as the Principal Distributor of the Series' shares (the
"Distributor"), a fee (the "Service Fee") at an annual rate not to exceed .25%
of the Series' average daily net assets attributable to the Class B shares.
Subject to such limit and subject to the provisions of Section 7 hereof, the
Service Fee shall be as approved from time to time by (a) the Trustees of the
Trust and (b) the Independent Trustees of the Trust; provided, however, that no
-------- -------
Service Fee or other fee that is a "service fee" as defined in Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(or any successor provision thereto) as in effect from time to time (the "NASD
Rule") shall be paid, with respect to Class B shares of the Series, to NEF (or
to any affiliate of NEF, or to any other person in circumstances where
substantially all of the services and functions relating to the distribution of
Class B shares of the Series have been delegated to, or are being performed by,
NEF or an affiliate of NEF), under this Plan or otherwise, if the Distribution
Fee is terminated or is reduced below the rate set forth in Section 2. The
Service Fee shall be accrued daily and paid monthly or at such other intervals
as the Trustees shall determine. The Distributor may pay all or any portion of
the Service Fee to securities dealers or other organizations (including, but not
limited to, any affiliate of the Distributor) as service fees pursuant to
agreements with such organizations for providing personal services to investors
in Class B shares of the Series and/or the maintenance of shareholder accounts,
and may retain all or any portion of the Service Fee as compensation for
providing personal services to investors in Class B shares of the Series and/or
the maintenance of shareholder accounts. All payments under this Section 1 are
intended to qualify as "service fees" as defined in the NASD Rule.

Section 2. Distribution Fee. In addition to the Service Fee, the Trust,
----------------
on behalf of the Series, will pay to the Distributor a fee (the "Distribution
Fee") at an annual rate of 0.75% (unless reduced as contemplated by and
permitted pursuant to the next sentence hereof) of the Series' average daily net
assets attributable to the Class B shares in consideration of the services
rendered in connection with the sale of such shares by the Distributor. The
Trust will not terminate the Distribution Fee in respect of Series assets
attributable to Class B shares, or pay such fee at an annual rate of less than
.75% of the Series' average daily net assets attributable to the Class B shares,
unless it has ceased, and not resumed, paying the Service Fee (or any other fee
that constitutes a "service fee" as defined in the NASD Rule) to NEF (or to any
affiliate of
<PAGE>

NEF, or to any other person in circumstances where substantially all of the
services and functions relating to the distribution of Class B shares of the
Series have been delegated to, or are being performed by, NEF or an affiliate of
NEF). Subject to such restriction and subject to the provisions of Section 7
hereof, the Distribution Fee shall be as approved from time to time by (a) the
Trustees of the Trust and (b) the Independent Trustees of the Trust. The
Distribution Fee shall be accrued daily and paid monthly or at such other
intervals as the Trustees shall determine.

The obligation of the Series to pay the Distribution Fee shall terminate
upon the termination of this Plan or the relevant distribution agreement between
the Distributor and the Trust relating to the Series, in accordance with the
terms hereof or thereof, but until any such termination shall not be subject to
any dispute, offset, counterclaim or defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Trust or the
Series of its right separately to pursue any claims it may have against the
Distributor and enforce such claims against any assets of the Distributor (other
than its right to be paid the Distribution Fee and to be paid contingent
deferred sales charges).

The right of NEF to receive the Distribution Fee (but not the relevant
distribution agreement or NEF's obligations thereunder) may be transferred by
NEF in order to raise funds which may be useful or necessary to perform its
duties as principal underwriter, and any such transfer shall be effective upon
written notice from NEF to the Trust. In connection with the foregoing, the
Series is authorized to pay all or part of the Distribution Fee directly to such
transferee as directed by NEF.

The Distributor may pay all or any portion of the Distribution Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as commissions, asset-based sales charges or other
compensation with respect to the sale of Class B shares of the Series, and may
retain all or any portion of the Distribution Fee as compensation for the
Distributor's services as principal underwriter of the Class B shares of the
Series. All payments under this Section 2 are intended to qualify as "asset-
based sales charges" as defined in the NASD Rule.

Section 3. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class B shares of the Series, and shall in no event take effect
before January __, 1996 . This Plan shall continue in effect for a period of
more than one year after January __, 1996 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.

Section 4. Any person authorized to direct the disposition of monies paid
or payable by
<PAGE>

the Trust pursuant to this Plan or any related agreement shall provide to the
Trustees of the Trust, and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.

Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class B
shares of the Series.

Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:

A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class B shares of the Series, on
not more than 60 days' written notice to any other party to the
agreement; and

B. That such agreement shall terminate automatically in the event of its
assignment.

Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Sections 1 or 2 hereof without approval by a
vote of at least a majority of the outstanding Class B shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 3.

Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and the term "majority of the outstanding Class B
shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
<PAGE>

GROWTH FUND OF ISRAEL

CLASS C DISTRIBUTION AND SERVICE PLAN

This Plan (the "Plan") constitutes the Distribution and Service Plan
relating to the Class C shares of GROWTH FUND OF ISRAEL (the "Series"), a series
of New England Funds Trust II, a Massachusetts business trust (the "Trust").

Section 1. Service Fee. The Trust, on behalf of the Series, will pay to
-----------
New England Funds, L.P., a Delaware limited partnership which acts as the
Principal Distributor of the Series' shares, or such other entity as shall from
time to time act as the Principal Distributor of the Series' shares (the
"Distributor"), a fee (the "Service Fee") at an annual rate not to exceed .25%
of the Series' average daily net assets attributable to the Class C shares.
Subject to such limit and subject to the provisions of Section 7 hereof, the
Service Fee shall be as approved from time to time by (a) the Trustees of the
Trust and (b) the Independent Trustees of the Trust. The Service Fee shall be
accrued daily and paid monthly or at such other intervals as the Trustees shall
determine. The Distributor may pay all or any portion of the Service Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as service fees pursuant to agreements with such
organizations for providing personal services to investors in Class C shares of
the Series and/or the maintenance of shareholder accounts, and may retain all or
any portion of the Service Fee as compensation for providing personal services
to investors in Class C shares of the Series and/or the maintenance of
shareholder accounts. All payments under this Section 1 are intended to qualify
as "service fees" as defined in Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (or any successor provision) as
in effect from time to time (the "NASD Rule").

Section 2. Distribution Fee. In addition to the Service Fee, the Trust
----------------
will pay to the Distributor a fee (the "Distribution Fee") at an annual rate not
to exceed .75% of the Series' average daily net assets attributable to the Class
C shares, as compensation for the Distributor's services as principal
underwriter of the Class C shares of the Series. Subject to such limit and
subject to the provisions of Section 7 hereof, the Distribution Fee shall be as
approved from time to time by (a) the Trustees of the Trust and (b) the
Independent Trustees of the Trust. The Distribution Fee shall be accrued daily
and paid monthly or at such other intervals as the Trustees shall determine.
The Distributor may pay all or any portion of the Distribution Fee to securities
dealers or other organizations (including, but not limited to, any affiliate of
the Distributor) as commissions, asset-based sales charges or other compensation
with respect to the sale of Class C shares of the Series, and may retain all or
any portion of the Distribution Fee as compensation for the Distributor's
services as principal underwriter of the Class C shares of the Series. All
payments under this Section 2 are intended to qualify as "asset-based sales
charges" as defined in the NASD Rules.
<PAGE>

Section 3. This Plan shall not take effect until it has been approved by
votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a meeting of the
outstanding Class C shares of the Series, and shall in no event take effect
before January __, 1996. This Plan shall continue in effect for a period of
more than one year after January __, 1996 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.

Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Class C
shares of the Series.

Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:

A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class C shares of the Series,
on not more than 60 days' written notice to any other party to the
agreement; and

B. That such agreement shall terminate automatically in the event of its
assignment.

Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Sections 1 or 2 hereof without approval by a
vote of at least a majority of the outstanding Class C shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 3.

Section 8. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and the term "majority of the outstanding Class C
shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.

<PAGE>

Registration Nos. 2-11101
811-242

EXHIBIT 19

POWERS OF ATTORNEY
<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet,
Henry L.P. Schmelzer and Robert P. Connolly, each of them singly, my true and
lawful attorneys, with full power to them and each of them to sign for me, and
in my name in the capacity indicated below, any and all registration statements
and any and all amendments thereto to be filed with the Securities and Exchange
Commission for the purpose of registering from time to time investment companies
of which I am now or hereafter a Director or Trustee and for which Capital
Growth Management Limited Partnership, Back Bay Advisors, Inc., Loomis, Sayles &
Company, Incorporated, Draycott Partners Limited, Westpeak Investment Advisors,
Inc. and/or any other affiliate of New England Mutual Life Insurance Company
("The New England") serves as adviser, sub-adviser or co-adviser, registering
the shares of such companies and generally to do all such things in my name and
in my behalf to enable such registered investment companies to comply with the
provisions of the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, and all requirements and regulations of the Securities
and Exchange Commission, hereby ratifying and confirming my signature as it may
be signed by my said attorneys and any and all registration statements and
amendments thereto.

Witness my hand on the 28th day of April, 1995.

/s/ KENNETH J. COWAN
-----------------------------
Kenneth J. Cowan - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ PETER S. VOSS
--------------------------
Peter S. Voss - Trustee
<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Edward A. Benjamin, Frank Nesvet and
Robert P. Connolly, each of them singly, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name in the capacity
indicated below, any and all registration statements and any and all amendments
thereto to be filed with the Securities and Exchange Commission for the purpose
of registering from time to time investment companies of which I am now or
hereafter a Director or Trustee and for which Capital Growth Management Limited
Partnership, Back Bay Advisors, Inc., Loomis, Sayles & Company, Incorporated,
Draycott Partners Limited, Westpeak Investment Advisors, Inc. and/or any other
affiliate of New England Mutual Life Insurance Company ("The New England")
serves as adviser, sub-adviser or co-adviser, registering the shares of such
companies and generally to do all such things in my name and in my behalf to
enable such registered investment companies to comply with the provisions of the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys and any and all registration statements and amendments
thereto.

Witness my hand on the 28th day of April, 1995.

/s/ HENRY L.P. SCHMELZER
-----------------------------
Henry L.P. Schmelzer - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ GRAHAM T. ALLISON
-------------------------------
Graham T. Allison, Jr. - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ JAMES H. SCOTT
----------------------------
James H. Scott - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ PENDLETON P. WHITE
-------------------------------
Pendleton P. White - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ JOHN A. SHANE
--------------------------
John A. Shane - Trustee
<PAGE>

POWER OF ATTORNEY

Witness my hand on the 28th day of April, 1995.

/s/ SANDRA O. MOOSE
----------------------------
Sandra O. Moose - Trustee