New England Fund Trust II
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
Supplement dated January 5, 1996 to the Prospectuses dated May 1, 1995 of
New England Massachusetts Tax Free Income Fund, New England Intermediate
Term Tax Free Fund of California and New England Intermediate Tax Free Fund
of New York, each as previously supplemented by the other Supplements
attached hereto
Effective January 2, 1996, the investment adviser of 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 is New England Funds Management, L.P. ("NEFM"), and Back Bay Advisors,
L.P. ("Back Bay Advisors") serves as subadviser to each Fund.
The advisory fee rates payable by New England Massachusetts Tax Free
Income Fund to NEFM under the new advisory arrangements described is
unchanged from the advisory fee rates previously in effect. The fee rates
are as follows for New England Intermediate Term Tax Free Fund of
California and New England Intermediate Term Tax Free Fund of New York:
<TABLE>
Fund Annual Fee Rates Average Net Asset
Levels
<S> <C> <C>
New England 0.525% of the first $200
Intermediate million
Term Tax Free 0.500% of the next $300
Fund of million
California 0.475% of amounts in excess
of $500 million
New England 0.525% of the first $200
Intermediate million
Term Tax Free 0.500% of the next $300
Fund of New York million
0.475% of amounts in excess
of $500 million
</TABLE>
These two Funds are no longer subject to the administrative services fees
referred to in their Prospectuses. The "Annual operating expenses" tables
relating to the two Funds are restated as follows, based on the new fee
arrangements, assuming they had been in effect during the year ended
December 31, 1994:
<TABLE>
New England New England
Intermediate Term Intermediate Term
Expense Type Tax Free Fund of Tax Free Fund of
California New York
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Advisory Fees 0.00%* 0.00%* 0.00%** 0.00%**
12b-1 Fees 0.25% 1.00% 0.25% 1.00%
Administrative None None None None
Services Fees
Other Expenses 0.45%* 0.45%* 0.45%** 0.45%**
Total Fund Operating
Expenses 0.70* 1.45%* 0.70%** 1.45%**
</TABLE>
* After voluntary fee waiver and expense reduction by NEFM and/or the
Distributor. Without the voluntary limitations, Advisory Fees and
Other Expenses would be 0.53% and 0.65%, respectively, for both
Classes, and Total Fund Operating Expenses would be 1.43% for Class A
shares and 2.18% for Class B shares. These voluntary limitations can
be terminated by NEFM or the Distributor any time.
** After voluntary fee waiver and expense reduction by NEFM and/or the
Distributor. Without the voluntary limitations, Advisory Fees and
Other Expenses would be 0.53% and 1.20%, respectively, for both
Classes, and Total Fund Operating Expenses would be 1.98% for Class A
shares and 2.73% for Class B shares. These voluntary limitations can
be terminated by NEFM or the Distributor at any time.
Also effective January 2, 1996, New England Massachusetts Tax Free Income
Fund will be bearing the cost of certain accounting and legal services that
were formerly borne by its advisers. To reflect this change, the "Other
Expenses" and "Total Fund Operating Expenses" (without giving effect to the
voluntary fee waivers and expense reductions for the Fund that are
described in its Prospectus) in the "Annual operating expenses" table for
the Fund in its Prospectus are increased by 0.03%, based on the assumption
that the change went into effect on January 1, 1994. Similar changes for
the New England Intermediate Term Tax Free Funds are reflected in the
tables above.
The following item supplements the Prospectuses of New England
Massachusetts Tax Free Income Fund and the Intermediate Term Tax Free
Funds:
The following paragraph is deleted from the section of the Prospectus
captioned "Buying Fund Shares - Reduced Sales Charges (Class A Shares
Only)":
Shares of the Fund(s) may be purchased at net asset value with no
sales charge or CDSC by advisory accounts through investment advisers
that are registered under the Investment Advisers Act of 1940 and
affiliated with broker-dealers.
The above paragraph is replaced by the following paragraphs:
Shares of the Fund(s) may be purchased at net asset value by
investment advisers, financial planners or other intermediaries who
place trades for their own accounts or the accounts of their clients
and who charge a management, consulting or other fee for their
services; and clients of such investment advisers, financial planners
or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary on the books and
records of the broker or agent.
Shares of the Fund(s) also may be purchased at net asset value
through certain broker-dealers and/or financial services
organizations without any transaction fee. Such organizations may
receive compensation, in an amount of up to 0.35% annually of the
average value of the Fund shares held by their customers. This
compensation may be paid by NEFM and/or a Fund's subadviser out of
their own assets, or may be paid indirectly by the Fund(s) in the
form of servicing, distribution or transfer agent fees.
The following paragraph is added to the section of the Prospectus
captioned "Fund Details -- Additional Facts About the Fund(s)":
Summit Cash Reserves Fund (the "Cash Fund"), a series of Financial
Institutions Series Trust, is related to the Fund(s) for purposes of
investment and investor services. Shares of all classes of the
Fund(s) may be exchanged for shares of the Cash Fund at net asset
value. If shares of the Fund(s) that are exchanged for shares of the
Cash Fund are subject to a CDSC, the holding period for purposes of
determining the expiration of the CDSC will stop and resume only when
an exchange is made back into shares of the Fund(s). If Fund shares
subject to a CDSC are exchanged for Cash Fund shares and the Cash
Fund shares are later redeemed rather than being exchanged back into
shares of any of the Funds, then a CDSC will apply at the same rate
as if the Fund shares were redeemed at the time of the exchange.
The following item supplements the Prospectuses of New England
Massachusetts Tax Free Income Fund and New England Intermediate Term Tax
Free Fund of California and New England Intermediate Term Tax Free Fund of
New York:
Effective January 2, 1996, there is no longer a $5.00 fee to establish
the checkwriting service for your account.
The following items supplement the Prospectus of New England Massachusetts
Tax Free Income Fund:
The section of the Prospectus captioned "How the Fund Pursues Its
Investment Objective" is modified as follows:
The Fund's fundamental policies that (1) at least 90% of the Fund's
income distributions will be exempt from federal income tax and
Massachusetts personal income taxes, except during times of adverse
market conditions when the Fund is investing for temporary defensive
purposes, and (2) that distributions from interest income on "private
activity bonds" (the income from which is an item of tax preference
for purposes of the federal alternative minimum tax for individuals)
together with distributions of interest income from investments other
than Massachusetts Tax Exempt Bonds, will not normally exceed 10% of
the total amount of the Fund's income distributions, are deleted.
It is now a fundamental policy of the Fund that the Fund will
normally invest at least 80% of the value of its net assets in debt
obligations the interest from which is, in the opinion of bond
counsel at the time of issuance, exempt from regular federal income
tax and Massachusetts personal income taxes and is not subject to the
federal alternative minimum tax for individuals (the "AMT"). It is
the Fund's intention, however, that, under normal market conditions,
(1) at least 90% of the Fund's net assets will be invested in debt
obligations the interest from which will be exempt from federal
income tax (other than the AMT) and Massachusetts personal income
taxes and (2) no more than 20% of the Fund's net assets will be
invested in debt obligations the interest from which is subject to
the AMT.
The Fund may purchase and sell financial futures contracts and
options for hedging purposes. Futures contracts on a Municipal Bond
Index are traded on the Chicago Board of Trade. This index is
intended to represent a numerical measure of market performance for
long-term tax-exempt bonds. An "index future" is a contract to buy
or sell units of a particular securities index at an agreed price on
a specified future date. Depending on the change in the value of the
index between the time when the Fund enters into and terminates an
index future, the Fund will realize a gain or loss. The Fund may
purchase and sell futures contracts on this Index (or any other tax-
exempt bond index approved for trading by the Commodity Futures
Trading Commission) to hedge against general changes in market values
of Massachusetts Tax Exempt Bonds which the Fund owns or expects to
purchase. The Fund may also purchase and sell put and call options
on index futures, or on an index directly, in addition to or as an
alternative to purchasing and selling financial futures contracts.
The Fund may also, for hedging purposes, purchase and sell futures
contracts and options with respect to U.S. Treasury securities,
including U.S. Treasury bills, notes and bonds. Treasury security
futures and related options would be used in a way similar to the
Fund's use of index futures and related options. The Fund will
purchase or sell Treasury security futures or related options only
when, in the opinion of Back Bay Advisors, price movements in
Treasury security futures and related options are likely to correlate
closely with price movements in the Massachusetts Tax Exempt Bonds
which are the subject of the hedge.
The use of futures and options may result in taxable income or
capital gains and involves certain special risks. Futures and
options transactions involve costs and may result in losses. The
successful use of futures and options will usually depend on whether
Back Bay Advisors forecasts interest rate movements correctly, which
cannot be assured. The Fund's ability to hedge its portfolio
positions through Treasury security futures and options also depends
on the degree of correlation between the municipal bond index or U.S.
Treasury security underlying the futures or options purchased and
sold by the Fund and the Massachusetts Tax Exempt Bonds that are the
subject of the hedge. The successful use of futures and options also
depends on the availability of a liquid secondary market to enable
the Fund to close its positions on a timely basis. There can be no
assurance that such a market will exist at a particular time.
Certain provisions of the Internal Revenue Code and certain
regulatory requirements may limit the Fund's ability to engage in
futures and options transactions.
The Fund will not purchase or sell futures contracts or related
options if, as a result, the sum of initial margin deposits on the
Fund's existing futures contracts and options plus premiums paid for
outstanding options on futures contracts would exceed 5% of the
Fund's net assets. (For options that are "in-the-money" at the time
of purchase, the amount by which the option is "in-the-money" is
excluded from this calculation.)
A more detailed explanation of futures and options transactions and
the risks associated with them is included in Part II of the
Statement.
Supplement dated October 26, 1995 to the Prospectuses dated May 1, 1995 of
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
The following paragraphs are added to the section of the Prospectuses
captioned "Buying Fund Shares" for each of the Funds:
Investment checks should be made payable to New England Funds.
New England Funds will accept second-party checks (up to $10,000) for
investments into existing accounts only. (A second-party check is a
check made payable to a New England Funds shareholder which the
shareholder has endorsed to New England Funds for deposit into an
account registered to the shareholder.)
New England Funds will NOT accept third-party checks, except certain
third-party checks issued by other mutual fund companies, broker dealers
or banks representing the transfer of retirement assets. (A third-party
check is a check made payable to a party which is not a New England
Funds shareholder, but which has been ultimately endorsed to New England
Funds for deposit into an account.)
