NEW ENGLAND FUNDS
New England Strategic Income
Fund New England High Income Fund
Supplement dated September 3, 1996 to the Prospectus dated May 1, 1996
of New England Bond Funds
The following item relates to New England Strategic Income Fund only:
On orders placed beginning September 16, 1996 and continuing through
October 31, 1996, the Distributor will reallow to investment dealers
100% of the sales charge on commissionable sales of Class A shares.
During the same period, the Distributor will pay participating
investment dealers a commission of 0.50% on commissionable
sales of Class B shares in addition to the commissions on sales of Class B
shares described in the prospectus under the section captioned "Buying Fund
Shares -- Sales Charges."
The following items relate to New England High Income Fund only:
On June 28, 1996, the shareholders of New England High Income Fund (the
"Fund") approved a new Sub-Advisory Agreement relating to the Fund
between New England Funds Management, L.P. ("NEFM"), the Fund's
adviser, and Loomis, Sayles & Company, L.P. ("Loomis Sayles"), which
became effective on July 1, 1996. Accordingly, Loomis Sayles became
the Fund's subadviser on that date, succeeding Back Bay Advisors, L.P.,
and is responsible for day-to-day management of the Fund's investment
operations under the oversight of NEFM.
In connection with the new sub-advisory arrangements, the management
fees payable by the Fund were reduced from the previous annual rate of
0.75% of the Fund's average daily net assets to the new annual rate of
0.70% of the first $200 million of the Fund's average daily net assets
and 0.65% of any such assets in excess of $200 million. The sub-
advisory fees payable by NEFM to Loomis Sayles under the new
arrangements are at the annual rate of 0.35% of the first $200 million
of the Fund's average daily net assets and 0.30% of any such assets
in excess of $200 million.
The Fund pays no direct fees to Loomis Sayles. Also, in connection
with the adoption of the new sub-advisory arrangements, the Rule 12b-1
fees payable by the Fund's Class A shares were reduced from 0.35% to
0.25% annually of the average daily net assets of the Class A shares.
Furthermore, NEFM has agreed, until further notice to the Fund, to
voluntarily reduce its management fees and, when necessary, bear
certain expenses in order to limit the Fund's expenses to an annual
rate of 1.40% of the average daily net assets of the Fund's Class A
shares and 2.15% of the average daily net assets of the Fund's Class B
shares. Accordingly, in the Schedule of Fees section, beginning on
page 1 of the prospectus, the tables pertaining to the Fund appearing
under the captions "Annual Fund Operating Expenses" and "Example" are
replaced with the following:
<TABLE>
Annual Fund operating expenses
(as a percentage of average net assets)
New England High Income
Fund*****
<S> <C> <C>
Class A Class B
Management Fees (after voluntary fee waiver and
expense reduction) 0.53%*** 0.53%***
12b-1 Fees 0.25% 1.00%*
Other Expenses 0.62% 0.62%
Total Fund Operating Expenses (after voluntary fee
waiver and
expense reduction) 1.40*** 2.15***
</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.
*** Without the voluntary fee waiver and expense reduction by the
Fund's adviser, Management Fees would be 0.70% for both classes
and Total Fund Operating Expenses would be 1.57% for Class A shares
and 2.32% for Class B shares. This voluntary limitation can be
terminated by the Fund's adviser at any time.
***** The expense information contained in this table and its
footnotes for New England Strategic Income Fund, New England
Adjustable Rate U.S. Government Fund and New England High Income
Fund has been restated to reflect fees and expenses currently in
effect for those Funds.
Example
<TABLE>
New England High
Income Fund
Class A Class B
<S> <C> <C> <C>
(1) (2)
1 year $59 $62 $22
3 year $87 $97 $67
5 years $118 $125 $115
10 years* $205 $229 $229
</TABLE>
(1) Assumes redemption at end of period.
(2) Assumes no redemption at end of period.
* Class B shares automatically convert to Class A shares after 8
years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
In connection with the new sub-advisory arrangements, Loomis Sayles has
agreed to waive 50% of the sub-advisory fees payable to Loomis Sayles
by NEFM under the new Sub-Advisory Agreement through June 30, 1997.
This waiver by Loomis Sayles does not reduce the Fund's expenses.
Gary L. Goodenough and Madeline E. Glick, Vice Presidents of Loomis
Sayles, have served as the Fund's portfolio managers since July 1,
1996. Mr. Goodenough served as a Managing Director at Bear Stearns and
Salomon Brothers prior to joining Loomis Sayles in 1993. Ms. Glick is
the founder of MEG Asset Management and served as its President prior
to joining Loomis Sayles in 1991.
The Fund has the ability to invest without limit in Rule 144A
securities that have been determined to be liquid under guidelines
established by the trustees of New England Funds Trust II.
