NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
Supplement dated November 17, 1995 to New England Stock Funds
Class Y Prospectus
dated May 1, 1995
The following paragraphs are added to the section of the
Prospectus captioned "Fund Management" for New England Capital
Growth Fund, New England Balanced Fund, New England International
Equity Fund, New England Value Fund and New England Growth
Opportunities Fund (the "Funds"):
The investment adviser of each Fund and the subadviser of New
England Growth Opportunities Fund, are wholly-owned
subsidiaries of New England Investment Companies, L.P.
("NEIC"). New England Mutual Life Insurance Company ("The New
England") owns NEIC's sole general partner and a majority of
the limited partnership interest in NEIC. The New England and
Metropolitan Life Insurance Company ("MetLife") have entered
into an agreement to merge, with MetLife to be the survivor of
the merger. The merger is conditioned upon, among other
things, approval by the policyholders of The New England and
MetLife and receipt of certain regulatory approvals. The
merger is not expected to occur until after December 31, 1995.
The merger of The New England into MetLife is being treated,
for purposes of the Investment Company Act of 1940 (the
"Act"), as an "assignment" of the existing investment advisory
agreements and the subadvisory agreements with NEIC and its
affiliate companies. Under the Act, such an "assignment" will
result in the automatic termination of those agreements,
effective at the time of the merger. Prior to the merger,
shareholders of the Funds will be asked to approve new
investment advisory and subadvisory agreements, intended to
take effect at the time of the merger. A proxy statement
describing the new agreements will be sent to shareholders of
the Funds prior to their being asked to vote on the new
agreements.
The following paragraphs are added to the section of the
Prospectus captioned "Fund Management" for New England
International Equity Fund:
NEIC, the parent company of Draycott Partners, Ltd.
("Draycott"), has agreed to sell Draycott to Cursitor
Holdings, Ltd. U.K. ("Cursitor"). Draycott serves as the
investment adviser to the Fund. The sale is expected to occur
in late December, 1995. The sale is subject to a number of
conditions, including approval by the Fund's shareholders of
new investment advisory arrangements for the Fund. Under
these new arrangements, New England Funds Management, L.P., a
subsidiary of NEIC, would become the Fund's investment
adviser, and Draycott would continue to be responsible, as
subadviser, for the day-to-day management of the Fund's
investment portfolio. A proxy statement describing the new
arrangements will be sent to shareholders of the Fund prior to
their being asked to vote on the new arrangements. No changes
in the Fund's investment objective or policies, or in the
portfolio management personnel responsible for the Fund's day-
to-day investment management, are contemplated in connection
with the sale.
Cursitor, headquartered at 66 Buckingham Gate, London, England
SW1E 6AU, is an international investment management group that
had approximately $9.4 billion of assets under management at
September 30, 1995.
On October 24, 1995, Alliance Capital Management, L.P.
("Alliance Capital") announced that it had agreed in principle
to acquire the business of Cursitor and of an affiliated
company, Cursitor-Eaton Asset Management Company. If
consummated, this acquisition would result in Draycott
becoming a wholly-owned subsidiary of a new entity, Cursitor
Alliance LLC, in which Alliance Capital would own a 93%
interest. Alliance Capital Management Corporation ("ACMC"),
the sole general partner of, and the owner of a 1% general
partnership interest in, Alliance Capital, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance
Society of the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding
company controlled by AXA, a French insurance holding company.
The following paragraphs are added to the section of the
Prospectus captioned "Ways to Buy 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.)
<PAGE>
NEW ENGLAND FUNDS - STOCK FUNDS
Class Y Shares of:
New England Capital Growth Fund
New England Value Fund
New England Balanced Fund
New England International Equity Fund
New England Growth Opportunities Fund
May 1, 1995
New England Capital Growth Fund, New England Value Fund, New
England Balanced Fund and New England International Equity Fund,
series of New England Funds Trust I, and New England Growth
Opportunities Fund, a series of New England Funds Trust II, are
separate, diversified mutual funds (the "Funds" and each a
"Fund"). New England Funds Trust I and New England Funds Trust
II are referred to in this prospectus as the "Trusts."
The Funds offer four classes of shares: Class Y (for qualified
institutional investors) and Classes A, B and C (for other
investors). This prospectus sets forth information investors
should know before investing in Class Y shares. Please read it
carefully and keep it for future reference. A Statement of
Additional Information in two parts (the "Statement") about the
Funds dated May 1, 1995 has been filed with the Securities and
Exchange Commission (the "SEC") and is available free of charge.
Write to New England Funds, L.P. (the "Distributor"), SAI
Fulfillment Desk, 399 Boylston Street, Boston, MA 02116 or call
toll free at 1-800-225-7670. The Statement contains more
detailed information about the Funds and is incorporated into
this prospectus by reference. Class A and B shares are described
in a separate prospectus.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Schedule of Fees
Financial Highlights
Investment Objectives
How the Funds Pursue Their Objectives
Fund Investments
Investment Risks
Fund Management
Minimum Investment
Ways to Buy Fund Shares
Exchanging Among New England Funds
Ways to Sell Fund Shares
Determination of Net Asset Value
Dividends
Federal Income Taxes
Performance Criteria
Additional Facts About the Funds
<PAGE>
FUND EXPENSE AND FINANCIAL INFORMATION
Schedule of Fees
Expenses are one of several factors to consider when you invest in the
Funds. The following table summarizes your maximum transaction costs from
investing in the Funds and estimated annual expenses for the Funds' Class Y
shares. The Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class Y shares of the Funds for the
periods specified.
Shareholder transaction expenses
New England Capital Growth Fund
New England Value Fund
New England Balanced Fund
New England International Equity Fund
New England Growth Opportunities Fund
-------------------------------------
Maximum Initial Sales Charge None
Imposed on a Purchase (as a
percentage of offering price)
Maximum Contingent Deferred Sales None
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)
Deferred Sales Charge None
Redemption Fees None
Exchange Fees None
Annual operating expenses +
(as a percentage of net assets)
New New New
England New New England England
Capital England England International Growth
Growth Value Balanced Equity Opportunities
Fund Fund Fund Fund Fund
----- ----- ----- ------ -----------
Management 0.75% 0.75% 0.75% 0.75%* 0.70%
Fees
12b-1 Fees None None None None None
Administra- None None None 0.05% None
tive
Services
Fees
Other 0.63% 0.37% 0.40% 0.20% 0.43%
Expenses
Total 1.38% 1.12% 1.15% 1.00%* 1.13%
Expenses
The percentages shown for Management Fees, Administrative Service Fees
(in The case of New England International Equity Fund) and Other Expenses
are annualized amounts based on the Distributor's estimates of the
average combined net assets of the Class A, B, C and Y shares of each
Fund for the Class Y shares' first fiscal year.
* After fee waiver and expense reduction by Fund's adviser and/or
distributor. Without the expense limitations, New England International
Equity Fund's Management Fees and Total Fund Expenses would be 0.80% and
1.05%, respectively.
Example
A $1,000 investment would incur the following dollar amount of transaction
costs and operating expenses assuming a 5% annual return and, unless
otherwise noted, redemption at period end. The 5% return and expenses in
the Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary.
New New New
England New New England England
Capital England England International Growth
Growth Value Balanced Equity Opportunities
Fund Fund Fund Fund Fund
----- ----- ----- ----- -----
1 year $ 14 $ 11 $ 12 $ 10 $ 12
3 years $ 44 $ 36 $ 37 $ 32 $ 36
5 years $ 76 $ 62 $ 63 $ 55 $ 62
10 years $ 166 $ 136 $ 140 $ 122 $ 137
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Funds.
For information about the expenses of the Funds' Class A, B and C shares,
which differ from the expenses of the Class Y shares, see "Additional Facts
About the Funds." To obtain more information about Class A, B and C
shares, please call the Distributor toll-free at 1-800-0225-5478.
For additional information about the Funds' fees and other expenses, please
see "Fund Management," "Additional Facts about the Funds" and "The Funds'
Expenses."
A wire fee (currently $5.00) will be deducted from your proceeds if you
elect to receive redemption proceeds by wire.
Please keep in mind that the Example shown above is hypothetical. The
information above should not be considered a representation of past or
future return or expenses; actual return or expenses may be more or less
than those shown.
FINANCIAL HIGHLIGHTS
(For a Class Y share of each Fund, except New England Capital Growth and
New England Growth Opportunities Funds, outstanding throughout the
indicated period. In the case of New England Capital Growth and New
England Growth Opportunities Funds which had no Class Y shares outstanding
during 1994, financial highlights are presented for a Class A and Class B
share of each Fund outstanding throughout the indicated period.)
The Financial Highlights presented on pages 4 through 8 have been included
in financial statements for the Funds. The financial statements for the
Value, Balanced, International Equity and Capital Growth Funds for periods
through December 31, 1994 have been examined by Price Waterhouse LLP,
independent accountants. The financial statements for the Growth
Opportunities Fund's Class A shares for the years ended May 31, 1986, 1987
and 1988, the seven month period ended December 31, 1988 and the years
ended December 31, 1989, 1990, 1991, 1992, 1993 and 1994 and the Fund's
Class B shares for the period September 13, 1993 through December, 1993 and
the year ended December 31, 1994 have been examined by Coopers & Lybrand
LLP, independent accountants. The Financial Highlights should be read in
conjunction with the financial statements and the notes thereto
incorporated by reference in Part II of the Statement.
<PAGE>
New England Capital Growth Fund
Class A Class B
----------------------------- -------------------
August 3, Sept. 13, Year
(a) (a) Ended
through Year Ended through Dec.
Dec. 31, December 31, Dec. 31, 31,
--------- ------------------ --------- --------
1992 1993 1994 1993 1994
--------- -------- -------- --------- --------
Net Asset
Value, $12.50 $14.23 $15.27 $14.79 $15.24
Beginning of
Period
--------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment 0.02 0.00 (0.08) 0.00 (0.08)
Income
Net Gains or
Losses on
Investments
(both realized 1.84 1.12 (0.17) 0.53 (0.27)
and
unrealized)
------- -------- -------- -------- --------
Total Income
From 1.86 1.12 (0.25) 0.53 (0.35)
Investment
Operations
------- -------- -------- -------- --------
Less
Distributions
Distributions
(from net (0.02) 0.00 0.00 0.00 0.00
investment
income)
Distributions
(from net (0.11) (0.08) 0.00 (0.08) 0.00
realized
capital gains)
------- -------- -------- -------- --------
Total (0.13) (0.08) 0.00 (0.08) 0.00
Distributions
Net Asset
Value, End of $14.23 $15.27 $15.02 $15.24 $14.89
Period
======= ======= ======= ======= =======
Total Return 14.9 7.9 (1.6) 3.6 (2.3)
(%) (c)
Ratios/Supplemental Data
Net Assets,
End of Period $34,722 $98,735 $95,803 $6,748 $15,390
(000)
Ratio of
Operating
Expenses to
Average Net
Assets (%)(d) 1.00(b) 1.23 1.63 2.29(b) 2.38
Ratio of Net
Investment
Income (Loss)
to Average Net
Assets (%) 0.74(b) (0.03) (0.45) (1.15)(b) (1.20)
Portfolio
Turnover Rate
(%) 15 77 82 77 82
(a) The Fund commenced operations on August 3, 1992. Class B shares were
first offered on September 13, 1993.
(b) Computed on an annualized basis.
(c) A sales charge in the case of Class A shares and contingent deferred
sales charge in the case of Class B shares are not reflected in total
return calculations. Periods of less than one year are not annualized.
(d) The ratio of operating expenses to average net assets without giving
effect to the voluntary expense limitations in effect from August 3, 1992
through September 30, 1993 would have been: (%)
2.20(b) 1.58 2.97(b)
<PAGE>
New England Value Fund
Class Y shares
--------------
March 8, (a)
through
December 31,
1994
----------
Net asset value, beginning of period $7.57
---------------
Income from investment operations
Net investment income 0.10
Net gains or losses on investments
(both realized and unrealized) 0.08
---------------
Total income from investment 0.18
operations
--------------
Less distributions
Distributions (from net investment (0.10)
income)
Distributions (from capital gains) (0.41)
---------------
Total distributions (0.51)
---------------
Net asset value, end of period $7.24
===============
Total return (%) 2.4 (c)
Ratios/Supplemental data
Net assets, end of period (000) $4,001
Ratio of operating expenses to 1.54 (b)
average net assets (%)
Ratio of net investment income to 1.05 (b)
average net assets (%)
Portfolio turnover rate (%) 29
(a) Commencement of offering of Class Y shares.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
<PAGE>
New England Balanced Fund
Class Y shares
-------------
March 8, (a)
through
December 31,
1994
------------
Net asset value, beginning of period $12.20
---------------
Income from investment operations
Net investment income 0.38
Net gains or losses on investments
(both realized and unrealized) (0.72)
---------------
Total income from investment (0.34)
operations
------------
Less distributions
Distributions (from net investment (0.38)
income)
Distributions (from net realized (0.21)
capital gains)
-------------
Total distributions (0.59)
-------------
Net asset value, end of period $11.27
=============
Total return (%) (2.8)(c)
Ratios/Supplemental data
Net assets, end of period (000) $39,183
Ratio of operating expenses to 0.99 (b)
average net assets (%)
Ratio of net investment income to 3.69 (b)
average net assets (%)
Portfolio turnover rate (%) 36
(a) Commencement of offering of Class Y shares.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
<PAGE>
New England International Equity Fund
Class Y shares
------------------------
Sept. 9,
(a) Year
through Ended
December December
31, 31,
--------- ---------
1993 1994
--------- ---------
Net asset value, beginning $15.19 $14.86
of period
--------- ---------
Income from investment
operations
Net investment income 0.13 0.00
Net gains or losses on (0.01) 1.32
investments (both realized
and unrealized)
----------- ---------
Total income from investment 0.12 1.32
operations
---------- ---------
Less distributions
Distributions (from net (0.13) 0.00
investment income)
Distributions (from net (0.32) (0.53)
realized capital gains)
Distributions (from paid in 0.00 (0.01)
capital)
---------- ---------
Total distributions (0.45) (0.54)
Net asset value, end of $14.86 $15.64
period
========== =========
Total return (%) 0.7 (c) 8.9
Ratios/Supplemental data
Net assets, end of period $7,006 $56,561
(000)
Ratio of operating expenses 1.00 (b) 1.00
to average net assets (%)
(d)
Ratio of net investment 0.33 (b) 0.76
income to average net assets
(%)
Portfolio turnover rate (%) 101 (c) 123
(a) Commencement of offering of Class Y shares.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving
effect to the voluntary expense limitations would have been 1.35 (b) and
1.04%, respectively.
<PAGE>
<TABLE>
New England Growth Opportunities Fund (a)
Class A Class B
------------------------------------------------------------------------------------------------- ----------------
Sept.
13,(c) Year
Seven through Ended
Months Dec. Dec.
Year Ended May 31, Ended Year Ended December 31, 31, 31,
---------------------------------- -------- ------------------------------------------------- ------- ------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988(b) 12/31/ 1989 1990 1991 1992 1993* 1994 1993* 1994
88(b)
------ ------ ------ ------ ------ ---- ----- ---- ----- ----- ------ ----- ------
Net
asset
value,
begin-
ning
of
period $8.58 $10.77 $12.70 $11.92 $10.37 $9.55 $10.88 $9.54 $11.79 $12.20 $12.67 $12.95 $12.66
------ ------ ------ ------ ------ ----- ------ ----- ------ ------ ------ ------ ------
Income from investment operations
Net
invest-
ment
income 0.30 0.35 0.35 0.33 0.19 0.29 0.30 0.26 0.23 0.21 0.22 0.06 0.16
Net
gains
or
losses
on
invest-
ments
(both
realiz-
ed and
un-
realiz-
ed)
2.43 2.97 0.73 (1.22) 0.25 2.32 (0.76) 2.63 0.86 0.75 (0.10) 0.01 (0.09)
------ ------ ------ ------ ------ ----- ------ ----- ------ ------ ------ ------ ------
Total
income
from
invest-
ment
opera-
tions 2.73 3.32 1.08 (0.89) 0.44 2.61 (0.46) 2.89 1.09 0.96 0.12 0.07 0.07
------ ------ ------ ------ ------ ----- ------ ----- ------ ------ ------ ------ ------
Less distributions
Distri
bu-
tions
(from
net
invest-
ment
income
) (0.29) (0.34) (0.34) (0.35) (0.18) (0.29) (0.30) (0.26) (0.23) (0.21) (0.21) (0.03) (0.14)
Distri
bu-
tions
in
excess
of net
invest-
ment
income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 (0.06) 0.00
New England Growth Opportunities Fund (a) [continued]
Class A Class B
-------------------------------------------------------------------------------------------- ----------------
Sept.
13,
(c) Year
Seven throug Ended
Months h Dec. Dec.
Year Ended May 31, Ended Year Ended December 31, 31, 31,
------------------------------- ------ --------------------------------------------- ------ -----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 12/31/8 1989 1990 1991 1992 1993* 1994 1993* 1994
(b) 8(b)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Distribution
(from
net
realized
capital
(0.25) (1.05) (1.52) (0.30) (1.08) (0.95) (0.56) (0.38) (0.45) (0.27) (0.17) (0.27) (0.17)
gains)
Distribution
(from
paid
in 0.00 0.00 0.00 (0.01) 0.00 (0.04) (0.02) 0.00 0.00 0.00 0.00 0.00 0.00
capital)
------ ------ ------ ------ ------ ----- ------ ----- ------ ------ ------ ------ ------
Total
dis
tri
bu-
tio
ns (0.54) (1.39) (1.86) (0.66) (1.26) (1.28) (0.88) (0.64) (0.68) (0.49) (0.38) (0.36) (0.31)
Net
ass
et
val $10.77 $12.70 $11.92 $10.37 $9.55 $10.88 $9.54 $11.79 $12.20 $12.67 $12.41 $12.66 $12.42
ue,
end
of
per
iod
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======
Tot
al
ret
urn
(%)
(f) 32.2 31.3 8.9 (7.3) 7.3(e) 27.6 (4.3) 30.6 9.3 8.0 1.00 0.60 0.60
Ratios/Supplemental data
Net
ass
ets
,
end
of
per
iod
(00 $61,688 $72,862 $70,427 $58,552 $55,041 $62,688 $55,726 $70,263 $90,945 $109,168 $104,081 $1,498 $5,185
0)
Rat
io
of
ope
rat
ing
exp
ens
es
to
ave
rag
e
net 0.97 1.00 1.24 1.25(d) 1.33(e) 1.15 1.18 1.23 1.94 1.21 1.28 2.08(e) 1.93
ass
ets
(%)
New England Growth Opportunities Fund (a) [continued]
Class A Class B
---------------------------------------------------------------------------------- ----------------
Sept.
13,
(c) Year
Seven through Ended
Months Dec. Dec.
Year Ended May 31, Ended Year Ended December 31, 31, 31,
-------------------------- ------- ------------------------------------------ ------ -----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 12/31/ 1989 1990 1991 1992 1993 1994 1993* 1994
(b) 88(b) *
---- ---- ---- ---- ------ ---- ---- ---- ---- ---- ---- ------- -----
Ratio
of
net
inves
t-
ment
incom
e to
avera
ge
net
asset
s (%) 3.08 3.01 2.65 2.90 3.10(e) 2.68 2.92 2.28 1.18 1.70 1.75 0.71(e) 1.10
Portf
olio
turno
ver
rate
(%) 26 21 25 8 83(e) 17 6 12 10 4 6 4 6
(a) Information shown for all years is audited. The accountants' report
incorporated by reference in the Statement covers years ended May 31, 1987
through December 31, 1994. Accountants' reports for years ended May 31, 1985
through May 31, 1986 are on file with the SEC.
(b) Fiscal year end changed in 1988 from May 31 to December 31. The Fund's
former adviser, Back Bay Advisors, L.P., assumed that function on July 27, 1988.
(c) Commencement of offering of Class B shares.
(d) Until May 18, 1988, the Fund's former adviser, Back Bay Advisors, L.P.,
voluntarily agreed to limit total Fund expenses to 1.25% of the Fund's average
annual net assets. Without such limitation, Fund expenses would have been 1.31%
of average net assets.
(e) Computed on an annualized basis.
(f) A sales charge of 5.75% (maximum) in the case of the Class A shares and a
contingent deferred sales charge in the case of the Class B shares are not
reflected in total return calculations. Unless otherwise indicated, periods of
less than one year are not annualized.
* As of January 1, 1993, the Fund discontinued the use of equalization
accounting.
The Fund's current adviser and subadviser assumed those functions on May 1,
1995. These financial highlights reflect results achieved by earlier
advisers under investment policies that are no longer in effect.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES
New England Capital Growth Fund (the "Capital Growth Fund") seeks long-term
growth of capital.
New England Value Fund (the "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 (the "Balanced Fund") seeks a reasonable long-
term investment return from a combination of long-term capital appreciation
and moderate current income.
New England International Equity Fund (the "International Equity Fund")
seeks total return, from long-term growth of capital and dividend income,
primarily through investment in international equity securities.
New England Growth Opportunities Fund (the "Growth Opportunities Fund")
seeks opportunities for long-term growth of capital and income.
HOW THE FUNDS PURSUE THEIR OBJECTIVES
Investments in each Fund will be pooled with money from other investors in
that Fund to invest in a managed and diversified portfolio consisting of
securities appropriate to each Fund's investment objective and policies, as
described below. There can be no assurance that any Fund will achieve its
objective.
Except for matters that are explicitly identified as "fundamental" in this
prospectus or the Statement, the investment policies of each Fund may be
changed without shareholder approval or prior notice. The investment
objectives of the Capital Growth, Growth Opportunities and International
Equity Funds are not fundamental. The investment objectives of the Value
and Balanced Funds are fundamental and may be changed only with shareholder
approval. As a matter of policy, the Trustees of New England Funds Trust
II would not change the objective of the Growth Opportunities Fund without
shareholder approval.
If there is a change in the investment objective of the Capital Growth,
International Equity or Growth Opportunities Funds, you should consider
whether the Fund remains an appropriate investment in light of your then
current financial position and needs.
FUND INVESTMENTS
[]Capital Growth Fund
The Capital Growth Fund seeks to attain its objective by investing
substantially all of its assets in equity securities. Investments are
selected based on their growth potential; current income is not a
consideration. The Fund normally will invest primarily in equity
securities of companies with medium to large market capitalization
(capitalization of $1 billion to $5 billion and over $5 billion,
respectively), but will also invest a portion of its assets in equity
securities of companies with relatively small market capitalization (under
$1 billion).
The Fund's adviser selects investments based upon fundamental research and
analysis of individual companies and industries. The adviser selects
investments for the Fund based on qualitative and quantitative criteria
including, among others, industry dominance and competitive position,
consistent earnings growth, a history of high profitability, the adviser's
expectation of continued high profitability and overall financial strength,
although not every investment will have all of these characteristics. The
Fund may also invest in foreign securities.
[]Value Fund
Substantially all of the Value Fund's investments are normally in equity
securities. In selecting investments for the Fund, the emphasis is
ordinarily place on undervalued securities. Although long-term market
appreciation is ordinarily the basis for security selection, current income
may be a significant consideration when yields appear to be favorable
compared to overall opportunities for capital appreciation. The Fund also
may invest in foreign securities.
[]Balanced Fund
The Balanced Fund is "flexibly managed" in that sometimes it invests more
heavily in equity securities and at other times it invests more heavily in
fixed-income securities, depending on management's view of the economic and
investment outlook. Most of the Fund's equity investments are normally in
dividend-paying common stocks of recognized investment quality that are
expected to achieve growth in earnings and dividends over the long term.
In selecting investments for the Fund, an emphasis is ordinarily place on
undervalued securities. Fixed-income securities include notes, bonds, non-
convertible preferred stock and money market instruments. The Fund invests
at least 25% of its assets in fixed-income, senior securities and, under
normal market conditions, more than 50% of its assets in equity securities.
The Fund also may invest in foreign securities.
[]International Equity Fund
The International Equity Fund seeks to achieve its objective by investing
primarily in common stocks, although the Fund may invest in any type of
equity securities. Normally the Fund will invest at least 65% of its total
assets in equity securities of issuers headquartered outside the United
States. Under normal conditions the Funds' portfolio will contain equity
securities of issuers from at least three countries outside the United
States. The Fund may also engage in certain options and futures
transactions.
The Fund's adviser will make investment decisions on behalf of the Fund by,
first, selecting countries where it anticipates sustainable growth that
will exceed current market expectations. Within the selected countries,
the adviser will identify economic sectors that appear to present the most
potential for risk-adjusted growth and, finally, within the chosen economic
sectors, the adviser will select securities that are expected to offer the
best value.
[]Growth Opportunities Fund
It is normally the policy of the Growth Opportunities Fund to invest in a
diversified portfolio of common stocks considered by Westpeak Investment
Advisors, L.P. ("Westpeak"), the Fund's subadviser, to have possibilities
for long-term appreciation of capital and income. Emphasis will be given
to both undervalued securities ("value" style) and securities of companies
with growth potential ("growth" style). The Fund will ordinarily invest
substantially all of its assets in equity securities.
[]Additional Information
Equity securities are securities that represent an ownership interest (or
the right to acquire such an interest) in a company, and include common and
preferred stocks and securities exercisable for or convertible into common
or preferred stocks (such as warrants, convertible debt securities and
convertible preferred stock). The Capital Growth, Value, Growth
Opportunities and International Equity Funds seek to attain their
objectives by normally investing substantially all of their assets in
equity securities. When the particular Fund's adviser or subadviser deems
it appropriate, however, the Capital Growth, Value and Growth Opportunities
Funds may, for temporary defensive purposes, hold a substantial portion of
their assets in cash or fixed-income investments, including U.S. Government
obligations, investment grade (and comparable unrated) corporate bonds or
notes, money market instruments and repurchase agreements. Corporate
obligations in the lowest investment grade category (rated BBB by Standard
& Poor's Corporation ["S&P"] or Baa by Moody's Investors Services Inc.
["Moody's"]) have some speculative characteristics and may be more
adversely affected by changing economic conditions than are higher grade
obligations. The International Equity Fund may, for temporary purposes,
hold all or any portion of its assets in cash, repurchase agreements, short-
term debt obligations of U.S. or foreign corporate issuers or U.S. or
foreign government obligations of any maturity rated AAA, AA, A or BBB by
S&P, Aaa, Aa, A or Baa by Moody's, or unrated but determined by the Fund's
adviser to be of comparable quality to securities in those rating
categories. No estimate can be made as to when or for how long a Fund will
employ these defensive strategies . Under some market conditions, the
Balanced Fund may, for temporary purposes, invest less than 50% of its
assets in equity securities and the balance in cash and fixed-income
investments.
INVESTMENT RISKS
[]Equity Securities
While offering greater potential for long-term growth, equity securities
are more volatile and more risky than some other forms of investment.
Therefore the value of your investment in a Fund may sometimes decrease
instead of increase. Each Fund may invest in equity securities of
companies with relatively small market capitalization. Securities of such
companies may be more volatile than the securities of larger, more
established companies and the broad equity market indices. Each Fund's
investments may include securities traded "over-the-counter" as well as
those traded on a securities exchange. Some over-the-counter securities
may be more difficult to sell under some market conditions.
Each Fund may invest in convertible securities, including corporate bonds,
notes or preferred stocks that can be converted into common stocks or other
equity securities. Convertible securities also include other securities,
such as warrants, that provide an opportunity for equity participation.
Because convertible securities can be converted into equity securities,
their values will normally vary in some proportion with those of the
underlying equity securities. The value of convertible securities that pay
dividends or interest, like the value of all fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants
have no voting rights, pay no dividends and have no rights with respect to
the assets of the corporation issuing them. They do not represent
ownership of the securities for which they are exercisable, but only the
right to buy such securities at a particular price. The credit risk
associated with convertible securities is generally reflected by their
being rated, if at all, below investment grade by organizations such as
Moody's and S&P. All convertible securities purchased by any Fund will, at
the time of purchase, either be rated investment grade by at least one
major rating agency or be unrated but determined to be of investment grade
quality by the Fund's adviser or subadviser.
[]Fixed-Income Securities
Because interest rates vary, it is impossible to predict the income of a
Fund that invests in fixed-income securities for any particular period.
The net asset value of Fund shares will vary as a result of changes in the
value of the securities in a Fund's portfolio, including fixed-income
securities.
Fixed-income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. Credit risk relates to the ability of the issuer to make
payments of principal and interest. All fixed-income securities (including
convertible bonds or notes) purchased by any Fund, except the Balanced
Fund, will, at the time of purchase, either be rated investment grade by at
least one major rating agency or be unrated but determined to be of
investment grade quality by the Fund's adviser or subadviser.
[]Repurchase Agreements
In repurchase agreements, a Fund buys securities from a seller, usually a
bank or brokerage firm, with the understanding that the seller will
repurchase the securities at a higher price at a later date. Such
transactions afford an opportunity for a Fund to earn a return on available
cash at minimal market risk, although the Fund may be subject to various
delays and risks of loss if the seller is unable to meet its obligation to
repurchase.
[]Short-Term Trading
Although each Fund seeks long-term growth or return, each Fund may,
consistent with its investment objective, engage in portfolio trading in
anticipation of or in response to changing economic or market conditions
and trends. These policies may result in higher turnover rates in the
Funds' portfolios which may produce higher transaction costs and a higher
level of taxable capital gains. Portfolio turnover considerations will not
limit any Fund's adviser's or subadviser's investment discretion in
managing the Fund's assets.
Recent portfolio turnover rates of each Fund are set forth above under
"Financial Highlights."
[]Small Companies
Investments in companies with relatively small capitalization involve
greater risk than is customarily associated with more established
companies. These companies often have sales and earnings growth rates
which exceed those of companies with larger capitalization. Such growth
rates may in turn be reflected in more rapid share price appreciation.
However, companies with smaller capitalization often have limited product
lines, markets or financial resources and they may be dependent upon a
relatively small management group. The securities may have limited
marketability and may be subject to more abrupt or erratic movements in
price than securities of companies with larger capitalization or the market
averages in general. The net asset value of funds that invest in companies
with smaller capitalization therefore may fluctuate more widely than market
averages.
[]Lower Rated Fixed-Income Securities (Balanced Fund)
Lower rated fixed-income securities generally provide higher yields, but
are subject to greater credit and market risk than higher quality fixed-
income securities. Lower rated fixed-income securities are considered
predominantly speculative with respect to the ability of the issuer to meet
principal and interest payments. Achievement of the investment objective
of a fund investing in lower rated fixed-income securities may be more
dependent on the investment adviser's own credit analysis than for a fund
investing in higher quality bonds. The market for lower rated fixed-income
securities may be more severely affected than some other financial markets
by economic recession or substantial interest rate increases, by changing
public perceptions of this market or by legislation that limits the ability
of certain categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid for lower
rated fixed-income securities. This lack of liquidity at certain times may
affect the valuation of these securities and may make the valuation and
sale of these securities more difficult. During the fiscal year ended
December 31, 1994, the Balanced Fund had on average less than 5% of its
assets invested in fixed-income securities rated BB or Ba, the rating
categories just below investment grade, and B. The Fund has no assets
invested in securities rated below these rating categories. Securities of
below investment grade are commonly known as "junk bonds."
[]Foreign Securities (Value, Balanced, Capital Growth and International
Equity Funds)
Investments in foreign securities present risks not typically associated
with investments in comparable securities of U.S. issuers.
There may be less information publicly available about a foreign corporate
or government issuer than about a U.S. issuer, and foreign corporate
issuers are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the United States.
The securities of some foreign issuers are less liquid and at times more
volatile than securities of comparable U.S. issuers. Foreign brokerage
commissions and securities custody costs are often higher than those in the
United States, and judgments against foreign entities may be more difficult
to obtain and enforce. With respect to certain foreign countries, there is
a possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments
that could affect the value of investments in those countries. The receipt
of interest on foreign government securities may depend on the availability
of tax or other revenues to satisfy the issuer's obligations.
The International Equity Fund's investments in foreign securities may
include investments in countries whose economies or securities markets are
not yet highly developed. Special considerations associated with these
investments (in addition to the considerations regarding foreign
investments generally) may include, among others, greater political
uncertainties, an economy's dependence on revenues from particular
commodities or on international aid or development assistance, currency
transfer restrictions, highly limited numbers of potential buyers for such
securities and delays and disruptions in securities settlement procedures.
Most foreign securities in the Value, Balanced, Capital Growth and
International Equity Funds' portfolios will be denominated in foreign
currencies or traded in securities markets in which settlements are made in
foreign currencies. Similarly, any income on such securities is generally
paid to the Fund in foreign currencies. The value of these foreign
currencies relative to the U.S. dollar varies continually, causing changes
in the dollar value of the Funds' portfolio investments (even if the price
of the investments is unchanged) and changes in the dollar value of the
Funds' income available for distribution to its shareholders. The effect
of changes in the dollar value of a foreign currency on the dollar value of
the Funds' assets and on the net investment income available for
distribution may be favorable or unfavorable.
The Value, Balanced, Capital Growth and International Equity Funds may
incur costs in connection with conversions between various currencies. In
addition, those Funds may be required to liquidate portfolio assets, or may
incur increased currency conversion costs, to compensate for a decline in
the dollar value of a foreign currency occurring between the time when the
Fund declares and pays a dividend, or between the time when the Fund
accrues and pays an operating expense in U.S. dollars.
[]Options (International Equity Fund)
The Fund may seek to increase its current return by writing covered call
options and covered put options, with respect to securities it holds or
intends to buy, through the facilities of options exchanges and directly
with market makers in the over-the-counter market. The Fund receives a
premium from writing a call or put option, which increases the Fund's
current return if the option expires unexercised or is closed out at a net
profit.
At times when the Fund has written call options on a substantial portion of
its portfolio, the Fund's ability to profit and its risk of loss from
changes in market prices of portfolio securities will be limited.
Appreciation in securities covering the options would likely be partially
or wholly offset by losses on the options. The termination of options
positions under such conditions would generally result in the realization
of short-term capital losses, which would reduce the Fund's current return.
Accordingly, the Fund may seek to realize capital gains to offset realized
losses by selling securities.
As described in Part II of the Statement, over-the-counter options involve
certain special risks (including liquidity and credit risks) not
necessarily present with exchange-listed options. The Fund will treat as
illiquid any over-the-counter options and assets maintained as "cover" for
over-the-counter options that the Fund has written.
The options markets of foreign countries are small compared to those of the
United States and consequently are characterized in most cases by less
liquidity than are the U.S. markets. In addition, foreign markets may be
subject to less detailed reporting requirements and regulatory controls
than U.S. markets. See "Foreign Securities" above.
[]Hedging Transactions (International Equity Fund)
The Fund may, at the discretion of its adviser, engage in foreign currency
exchange transactions, in connection with the purchase and sale of
portfolio securities, to protect the value of specific portfolio positions
or in anticipation of changes in relative values of currencies in which
current or future Fund portfolio holdings are denominated or quoted.
For hedging purposes, the Fund may also buy put or call options on
securities that it holds or intends to buy. In addition to engaging in
options transactions on established exchanges, the Fund may also purchase
over-the-counter options from brokerage firms and other financial
institutions.
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 5% of its net assets in stock
index futures or options on stock index futures that are traded on a U.S.
commodities exchange.
Certain asset segregation requirements apply when the Fund becomes
obligated under a hedging instrument. There is no assurance that the
Fund's hedging strategies will be effective. These strategies involve
costs and the risk of loss to the Fund. See Part II of the Statement for
more information.
[]Miscellaneous (Balanced and International Equity Funds)
The Fund may invest up to 10% of its assets in securities of investment
companies. As a shareholder of an investment company, the Fund may
indirectly bear investment management fees of that investment company,
which are in addition to the management fees the Fund pays its own adviser.
No Fund will invest more than 15% of its assets in "illiquid securities,"
that is, securities which are not readily marketable, which include
securities whose disposition is restricted by federal securities laws.
The Balanced and International Equity Funds may purchase Rule 144A
securities. These are privately offered securities that can be resold only
to certain qualified institutional buyers. Rule 144A securities are
treated as illiquid, unless an adviser has determined, under guidelines
established by New England Funds Trust I's trustees, that the particular
issue of Rule 144A securities is liquid. Investment in restricted or other
illiquid securities involves the risk that a Fund may be unable to sell
such a security at the desired time. Also, a Fund may incur expenses,
losses or delays in the process of registering restricted securities prior
to resale.
The International Equity Fund may purchase securities for its portfolio on
a "when-issued" or "delayed-delivery" basis. This means that the Fund will
enter 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.
FUND MANAGEMENT
The adviser of the Balanced Fund, Capital Growth Fund and the Value Fund is
Loomis, Sayles & Company, L.P., One Financial Center, Boston, Massachusetts
02111 ("Loomis Sayles"). Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment counsel firms.
Loomis Sayles is paid a fee for the Capital Growth Fund at the annual rate
of 0.75% of the first $200 million of the average daily net assets of the
Fund, 0.70% of the next $300 million of such assets and 0.65% of such
assets in excess of $500 million. Richard W. Hurckes, Director and
Managing Partner of Loomis Sayles and Vice President of New England Funds
Trust I, and Scott S. Pape, Vice President of Loomis Sayles and New England
Funds Trust I, have served as the portfolio managers of the Capital Growth
Fund since its inception in 1992. In 1994, the Balanced Fund and the Value
Fund each paid 0.75% of its net assets in advisory fees to Loomis Sayles.
Tricia H. Mills, Carol C. McMurtrie and Douglas D. Ramos, Vice Presidents
of Loomis Sayles and New England Funds Trust I, have served as portfolio
managers of the Value Fund since March 1993. Douglas D. Ramos and Meri
Anne Beck have served as portfolio managers of the Balanced Fund since
1990; Ms. Beck is also a Vice President of Loomis Sayles and New England
Funds Trust I. All of the foregoing persons have been employed by Loomis
Sayles for at least five years except Ms. McMurtrie and Mr. Pape who, prior
to joining Loomis Sayles, were Vice President of Addison Capital Management
and Equity Portfolio Manger of the Illinois State Board of Investment,
respectively.
New England Funds Management, L.P. ("NEFM"), 399 Boylston Street, Boston,
Massachusetts 02116 is the adviser of the Growth Opportunities Fund and has
entered into subadvisory arrangements for this Fund with Westpeak, 1050
Walnut Street, Boulder, Colorado 80302. NEFM oversees, evaluates and
monitors subadvisory services provided to the Fund and furnishes general
business management and administration to the Fund. NEFM has not
previously served as investment adviser to a mutual fund. The Fund pays
NEFM a management fee at the annual rate of 0.70% of the first $200 million
of the Fund's average net assets, 0.65% of the next $300 million of such
assets and 0.60% of such assets in excess of $500 million. NEFM pays
Westpeak for providing subadvisory services at the annual rate of 0.50% of
the first $25 million of the Fund's average net assets, 0.40% of the next
$75 million of such assets, 0.35% of the next $100 million of such assets
and 0.30% of such assets in excess of $200 million. The portfolio manager
of the Growth Opportunities Fund is Gerald H. Scriver, President and Chief
Executive Officer of Westpeak and Senior Vice President of New England Fund
Trust II. Mr. Scriver has been with Westpeak since its inception in 1991.
Mr. Scriver was Director of Quantitative Strategies of INVESCO from 1989
through 1991. Prior to May 1, 1995, the Fund was advised by a different
adviser and paid a lower rate of advisory fees.
The International Equity Fund is advised by Draycott Partners, Ltd.
("Draycott"), 8 City Road, London EC2Y 1HE. Draycott was organized in 1991
to provide investment advice and management services to institutional
investors' accounts and to mutual funds distributed to both institutional
and retail customers. Draycott is a member of the Investment Management
Regulatory Organization Limited (IMRO), the U.K. regulator of investment
advisers. In addition to the Fund, Draycott currently manages three
separate investment accounts of The New England that invest substantially
all of their assets in international equity securities. The International
Equity Fund pays 0.80% of its average daily net assets annually to
Draycott. Nicholas D.P. Carn, Chief Investment Officer, President and
Chief Executive Officer of Draycott, Timothy S. Griffen, Senior Portfolio
Manager and Pacific Rim Specialist of Draycott, Gregory D. Eckersley,
Portfolio Manager and United Kingdom Specialist of Draycott, and Nigel
Hankin, Portfolio Manager and European Specialist of Draycott, have served
as the portfolio managers of the International Equity Fund since the Fund's
inception in 1992. Until 1991, Mr. Carn was Managing Director,
International Equities Group, Mr. Griffen was a Vice President and
Portfolio Manager, Mr. Eckersley was Investment Manager and Mr. Hankin was
European Fund Manager, all at CIGNA International Investment Advisors, Ltd.
The advisory fee rates payable by the Capital Growth, Value, Balanced and
International Equity Funds are higher than those paid by most other mutual
funds but are comparable to fee rates paid by many funds that have
investment objectives similar to the Funds'.
Short-term U.S. cash management services for the International Equity Fund
are provided by Back Bay Advisors, L.P. ("Back Bay Advisors") as subadviser
to Draycott. For these services, Draycott has agreed to compensate Back
Bay Advisors at the annual rate of .08% of the value of the Funds' average
daily net assets.
The general partners of each of Loomis Sayles, Back Bay Advisors and the
Distributor are special purpose organizations. These corporations are
wholly-owned subsidiaries of NEIC, whose sole general partner, New England
Investment Companies, Inc., is a wholly-owned subsidiary of The New
England.
In placing portfolio transactions for the Funds, each adviser or subadviser
seeks the most favorable price and execution available. Subject to this
policy, the advisers and subadvisers may consider sales of shares of the
Trusts as a factor in the selection of broker dealers. Subject to
procedures adopted by the trustees of the Trusts, Fund brokerage
transactions may be executed by brokers that are affiliated with any
adviser or subadviser.
In addition to selecting and reviewing the investments of the respective
Funds, Draycott, Westpeak, Loomis Sayles and NEFM provide executive and
other personnel for the management of the Trusts. Each Trust's Board of
Trustees supervises the affairs of the Trust as conducted by the Trust's
advisers.
Under agreements between the adviser and the Distributor or New England
Securities Corporation ("New England Securities"), an affiliate of the
Distributor, either the Distributor or New England Securities provides
certain administrative services to the Capital Growth, Balanced, Value and
Growth Opportunities Funds, at no extra cost to those Funds.
Under an Administrative Services Agreement between the International Equity
Fund and the Distributor, the Distributor provides the Fund with office
space, facilities and equipment, services of executive and other personnel
and certain administrative services. Under this agreement, the Fund pays
the Distributor a fee at the annual rate of 0.05% of the average daily net
assets of the Fund's Class Y shares.
In addition to the management fee paid to its adviser and (in the case of
the International Equity Fund) the administrative services fee paid to the
Distributor, each Fund pays all expenses not borne by its adviser,
subadviser or the Distributor, including, but not limited to, the charges
and expenses of the Funds' 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 preparing, printing and mailing prospectuses and
reports to shareholders and the compensation of trustees who are not
directors, officers or employees of The New England or its affiliates,
other than affiliated registered investment companies.
All expenses of the Funds are borne by the Class A, Class B, Class C and
Class Y shares on a pro rata basis, except for the administrative services
fee (which applies to the International Equity Fund only and is charged at
a separate rate to each Class), 12b-1 fees (which are borne only by Class
A, Class B and Class C are charged separately to those classes), transfer
agency fees and expenses of printing and mailing prospectuses to
shareholders which are separately allocated to each class.
Until further notice, Draycott and the Distributor have agreed to reduce
their fees and to bear certain operating expenses charged to the
International Equity Fund to the extent that the total of such fees and
expenses would exceed 1.00% annually of the average daily net asset value
of the Class Y shares. Draycott and the Distributor may terminate this
expense limitation at any time.
Pursuant to the rules of the SEC, the Growth Opportunities Fund may pay
brokerage commissions to New England Securities on purchases and sales of
securities for that Fund.
MINIMUM INVESTMENT
Class Y shares of the Funds may be purchased by endowments and foundations.
The minimum initial investment is $1 million for these entities and
$100,000 for each subsequent investment. 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,
any other insurance company affiliated with The New England ("Separate
Accounts") and, in the case of the International Equity Fund, by bank
common trust, bank collective trust funds and dedicated corporate or
trusted funds, such as nuclear decommissioning trusts and hospital
depreciation funds (the "Special Accounts"). There is no minimum initial
or subsequent investment amount for the Retirement Plans, Separate Accounts
or Special Accounts. Investments in the Funds may also be made by certain
individual retirement accounts if the amounts invested represent rollover
distributions from investments by any of the foregoing plans of amounts
invested in the Funds. The Distributor serves as the principal underwriter
on the Fund's shares. Shares may be purchased on any day when the New York
Stock Exchange (the "Exchange") is open for business (a "business day").
Investors should contact New England Funds before attempting to place an
order for Fund shares. The Fund and the Distributor reserve the right at
any time to reject a purchase order.
WAYS TO BUY FUND SHARES
A shareholder may purchase Class Y shares for cash on any business day by
the two methods described below:
BY WIRE TRANSFER: Prior to an initial investment, obtain an account number
and wire transfer instructions by calling 1-800-225-5478. All funds should
be transmitted to State Street Bank and Trust Company, ABA #011000028, DDA
#99011538, Credit [Fund Name] Class Y shares, Shareholder Name, and
Shareholder Account Number.
BY MAIL: For an initial investment, complete the attached application and
return it with a check payable to New England Funds and mailed to New
England Funds, L.P. 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.
Class Y shares may also be purchased by exchanging securities on deposit
with a custodian acceptable to the adviser or subadviser of the Fund or by
a combination of such securities and cash. Purchase of shares of the Funds
in exchange for securities is subject in each case to the determination by
the Fund's adviser or subadviser that the securities to be exchanged are
acceptable for purchase by the Fund. Securities accepted by the Fund's
adviser or subadviser in exchange for Fund shares will be valued in the
same manner as the Fund's assets (generally the last quoted sales price),
as described below under "Determination of Net Asset Value," as of the time
of the Fund's next determination of net asset value after such acceptance.
All dividends and subscription or other rights which are reflected in the
market price of accepted securities at the time of valuation become the
property of the Funds and must be delivered to the Funds upon receipt by
the investor from the issuer. A gain or loss for federal income tax
purposes would be realized upon the exchange by an investor that is subject
to federal income taxation, depending upon the investor's basis in the
securities tendered. A shareholder who wishes to purchase shares by
exchanging securities on deposit with a custodian and acceptable to the
Fund's adviser or subadviser should obtain instructions by calling 1-800-
225-5478.
An adviser or subadviser will not approve the acceptance of securities in
exchange for shares of a Fund it advises unless (1) the adviser or
subadviser, in its sole discretion, believes the securities are appropriate
investments for the Fund; (2) the investor represents and agrees that all
securities offered to the Fund are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933, or otherwise; (3)
the securities are eligible to be acquired under the Fund's investment
policies and restrictions; and (4) the securities have a value which is
readily ascertainable (not established by evaluation procedures alone) as
evidenced by a listing on the New York Stock Exchange, the American Stock
Exchange, NASDAQ or the principal securities exchange of countries in which
the Fund may invest. No investor owning 5% or more of the Fund's shares
may purchase additional Fund shares by exchange of securities (other than
shares of other funds in the New England Funds).
General
The purchase price of shares of each Fund is the net asset value next
determined after a purchase order is received in good order by New England
Funds. For purposes of calculating the purchase price of Fund shares, a
purchase order is considered received by the Fund on the day that it is "in
good order" unless it is rejected by the Fund. For a purchase order to be
in "good order" on a particular day, the investor's securities must be
placed on deposit at a depository acceptable to the Fund's adviser or
subadviser or, in the case of cash investments, Federal funds must be wired
to the Fund between 9:00 a.m. and 4:00 p.m. (Eastern Time) or a check for
the purchase price of the shares, accompanied by a completed application,
must have been received by New England Funds before 4:00 p.m. (Eastern
Time) on that day. In the case of an order being paid for by exchange of
other securities, the deadline for transferring securities to a depository
acceptable to the Fund's adviser or subadviser is 4:00 p.m. (Eastern Time).
Orders received after 4:00 p.m. (Eastern Time) will receive the next day's
price.
Purchases will be made in full and fractional Class Y shares calculated to
three decimal places. The shareholder will receive a statement of Fund
shares owned following each transaction. Investors will not receive
certificates representing Class Y shares. The Trusts and the Distributor
reserve the right at any time to reject a purchase order.
EXCHANGING AMONG NEW ENGLAND FUNDS
A shareholder may exchange investments from the Class Y shares of one
series of the Trusts to the Class Y shares of another series of the Trusts
or to the Class A shares of New England Cash Management Trust or New
England Tax Exempt Money Market Trust (the "Money Market Funds").
WAYS TO SELL FUND SHARES
BY TELEPHONE: A shareholder may redeem shares of the Funds on any business
day in cash by the two methods described below:
1. Mailed to your address of record - Shares may be redeemed by calling 1-
800-225-5478.
2. Wired to your bank account - If you have previously selected the
telephone redemption privilege, shares may be redeemed by calling 1-800-225-
5478 between 8 a.m. and 6 p.m. (Eastern Time). The proceeds generally will
be wired on the next business day to the bank account previously designated
on a shareholder's account application. The bank must be a member of the
Federal Reserve System or have a correspondent bank that is a member.
Savings bank accounts must have only one correspondent bank that is a
member of the System. A wire fee (currently $5.00) will be deducted from
the proceeds. A telephone redemption request must be received by the close
of regular trading on the New York Stock Exchange. If the request is
received after that time or on a day when the Exchange is not open for
business, the request will be processed on the next business day.
New England Funds, L.P. will employ reasonable procedures to confirm that a
shareholder's 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
identification prior to acting upon telephone instructions, will provide
shareholders with written confirmations of such transactions and will
record a shareholders' instructions.
BY MAIL: A shareholder may also redeem shares at their net asset value
next determined after receipt of the 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, the account number, the
exact name in which the shares are registered and the number of shares or
the dollar amount to be redeemed and must be signed exactly in accordance
with the form of registration. Persons acting in a fiduciary capacity, or
on behalf of a corporation, partnership or trust, must specify the capacity
in which they are acting. The signature must be guaranteed by an eligible
institution in accordance with procedures established by New England Funds,
L. P. Signature guarantees by notaries public are not acceptable.
General
If the Fund's adviser or subadviser determines, in its sole discretion,
that it would be detrimental to the best interests of the remaining
shareholders of the Fund to make payment wholly or partly in cash, the Fund
may pay the redemption price in whole or in part by a distribution in kind
of readily marketable securities held by the Fund in lieu of cash.
Securities used to redeem Fund shares in kind will be valued in accordance
with the Funds' procedures for valuation described under "Determination of
Net Asset Value." Securities distributed by a Fund in kind will be
selected by the Fund's adviser or subadviser in light of the Fund's
objective and will not generally represent a pro rata distribution of each
security held in the Fund's portfolio. Investors may incur brokerage
charges on the sale of any such securities so received in payment of
redemptions. The Funds' right to pay redemptions in kind is limited by an
election made by the Funds under Rule 18f-1 under the Investment Company
Act of 1940. See Part II of the Statement.
Payment on redemption will be made as promptly as possible and in any event
within seven days after a written request for redemption is received by the
Fund in good order. The Trusts may suspend the right of redemption and may
postpone payment for more than seven days when the Exchange is closed for
other than weekends or holidays, or if permitted by the rules of the SEC
during periods when trading on the Exchange 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 the net assets of the Fund,
or during any other period permitted by the SEC for the protection of
investors.
DETERMINATION OF NET ASSET VALUE
The price of each Fund's shares varies, depending on the value of that
Fund's assets and liabilities.
Each Fund's holdings of equity securities are valued at the most recent
sales prices on an applicable exchange or NASDAQ, or, in the case of
unlisted securities or listed securities which were not traded during the
day, at the last quoted bid prices. Price information on listed securities
is generally taken from the closing price on the exchange where the
security is primarily traded. Short-term notes are stated at cost, or,
where applicable, amortized cost, which method is intended to approximate
market value. Loomis Sayles, under the supervision of New England Funds
Trust I's Board of Trustees, determines the value of the fixed-income
securities held by the Balanced Fund, and is authorized to delegate certain
price determination functions to pricing services or facilities selected by
Loomis Sayles. All other securities and assets of each Fund are valued at
their fair market value as determined in good faith by the Fund's adviser
or subadviser (or a pricing service selected by the adviser or subadviser)
under the supervision of the relevant Trust's Board of Trustees. The net
asset value of each Fund's shares is determined as of the close of regular
trading (normally 4:00 p.m. Eastern time) on the Exchange each day it is
open.
The net asset value per share of each class is determined by dividing the
value of each class's net 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 each
Fund's Class Y shares is the net asset value per share.
DIVIDENDS
The Capital Growth Fund, the Value Fund and the International Equity Fund
pay dividends annually and the Balanced Fund and the Growth opportunities
Fund pay dividends quarterly. Each Fund pays as dividends substantially
all of its net investment income, including dividends and interest, each
year and distributes annually all realized capital gains, if any, after
applying any available capital loss carryovers. The trustees of the Trusts
may adopt a different schedule as long as payments are made at least
annually. If a shareholder intends to purchase shares of a Fund before it
declares a dividend, he or she should be aware that a portion of the
purchase price may be returned as a taxable dividend.
A shareholder has the option to reinvest all distributions in additional
Class Y shares of the Fund in which it has invested, to receive
distributions in cash or to receive distributions from dividends and
interest in cash while reinvesting distributions from capital gains in
additional Class Y shares of the Fund.
FEDERAL INCOME TAXES
Each Fund intends to qualify as a regulated investment company and thus
does not expect to pay any federal income tax on investment income and
capital gains distributed. Unless a shareholder is a tax-exempt entity,
its distributions derived from a Fund's short-term capital gains and
ordinary income are taxable to it as ordinary income. (A portion of these
distributions may qualify for the dividends-received deduction for
corporations.) Distributions derived from a Fund's long-term capital gains
("capital gains distributions"), if designated as such by a Fund, are
taxable to a shareholder as long-term capital gains, regardless of how long
a shareholder has owned shares in a Fund. Both dividends and capital gains
distributions are taxable whether a shareholder elected to receive them in
cash or additional shares.
To avoid an excise tax, each Fund intends to distribute prior to calendar
year end virtually all that Fund's ordinary income and net capital gains
earned during that calendar year. If declared in December to shareholders
of record in that month, and paid the following January, these
distributions will be considered for federal income tax purposes to have
been received by shareholders on December 31.
Each Fund is required to withhold 31% of all income dividends and capital
gains distributions it pays to a shareholder if it does not provide a
correct, certified taxpayer identification number, if a Fund is notified
that a shareholder has underreported income in the past, or if a
shareholder fails to certify to a Fund that it is not subject to such
withholding. In addition, each Fund will be required to withhold 31% of
the gross proceeds of Fund shares a shareholder redeems if a shareholder
has not provided a correct, certified taxpayer identification number. If a
shareholder is a tax-exempt shareholder, however, these back-up withholding
rules will not apply so long as the shareholder furnishes the Fund with an
appropriate certification.
The International Equity Fund may be liable to foreign governments for
taxes relating primarily to investment income or capital gains on foreign
securities in the Fund's portfolio. The Fund may in some circumstances be
eligible to, and in its discretion may, make an election under the Internal
Revenue Code which would allow Fund shareholders who are U.S. citizens or
U.S. corporations to claim a foreign tax credit or deduction (but not both)
on their U.S. income tax return. If the Fund makes the election, the
amount of each shareholder's distribution reported on the information
returns filed by the Fund with the Internal Revenue Service must be
increased by the amount of the shareholder's portion of the Fund's foreign
tax paid.
The International Equity Fund may limit its investments in certain "passive
foreign investment companies" in order to avoid certain taxes that arise as
a result of such investments.
The foregoing is a summary of certain federal income tax consequences of an
investment in a Fund for shareholders who are U.S. citizens or
corporations. Shareholders should consult a competent tax adviser as to
the effect of an investment in a Fund on their particular federal, state
and local tax situations. Shareholders of the International Equity Fund
should also consult their tax adviser about consequences of their
investment under foreign laws.
PERFORMANCE CRITERIA
The Funds may include total return information in advertisements or other
written sales material. The Funds will show their average annual total
return for the one-, five- and ten-year periods (or the life of the
particular Fund, 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 automatic
reinvestment of all dividends and capital gains distributions). The Funds
may also show total return over other periods.
The Balanced Fund may also include its yield, accompanied by its total
return, in advertising and other written material. Yield will be computed
in accordance with the SEC's standardized formula by dividing the adjusted
net investment income per share earned during a recent thirty-day period by
the maximum offering price of a Fund share (reduced by any earned income
expected to declared shortly as a dividend) on the last day of the period.
Yield calculations will reflect any voluntary expense limitations in effect
for the Fund during the relevant period.
The Balanced Fund may also present one or more distribution rates in its
sales literature. These rates will be determined by annualizing the Fund's
distributions from net investment income and net short-term capital gain
over a recent twelve-month, three-month or thirty-day period and dividing
that amount by the maximum offering price or the net asset value on the
last day of such period. If the net asset value rather than the maximum
offering price is used to calculate the distribution rate, the rate will be
higher.
All performance information is based on past results and is not an
indication of likely future performance. See the Statement for more
detail. As a result of their lower operating expenses, Class Y shares of
each Fund can be expected to achieve higher investment returns than the
same Fund's Class A, Class B and Class C shares. For Class A shares, if
the sales charge is excluded in calculating the total return, yield or
distribution rate, the rate or rates will be higher.
ADDITIONAL FACTS ABOUT THE FUNDS
[]The transfer and dividend paying agent for the Funds is New England
Funds, L.P., 399 Boylston Street, Boston, MA 02116. New England Funds,
L.P. has subcontracted certain responsibilities to State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110.
[]The New England Funds Trust II was organized in 1985 as a Massachusetts
business trust and is authorized to issue an unlimited number of full and
fractional shares in multiple series. The Value and Balanced Funds were
organized prior to 1985 and conducted investment operations as separate
corporations until their reorganization as series of The New England
Funds in January 1987. The International Equity Fund and the Capital
Growth Fund were organized in 1992.
[]New England Funds Trust II was organized in 1931 as a Massachusetts
business trust and is authorized to issue an unlimited number of full and
fractional shares in multiple series. The Growth Opportunities Fund
represents the original series of the Trust and has conducted operations
since 1931.
[]An investor in a Fund acquires freely transferable shares of beneficial
interest that entitle the investor to receive annual or quarterly
dividends as determined by the Trust's trustees and to cast a vote for
each share owned at shareholder meetings. Shares of each series of the
Trusts vote separately from shares of other series of the Trusts, except
as otherwise required by law. Shares of all classes of a Fund vote
together, except that only Class A, Class B and Class C shares may vote
with respect to the Rule 12b-1 plans that apply to those classes. No
Rule 12b-1 plan applies to the Class Y shares of any Fund.
[]Class A, Class B and Class C shares are identical to Class Y shares,
except that Class A and Class B shares are subject to a sales load or
CDSC, Class A, Class B and Class C shares bear a service fee at the
annual rate of .25% of average net assets (and in the case of Class B and
Class C shares a .75% distribution fee; also Class A shares of the Growth
Opportunities Fund bears an additional 0.10% distribution fee) and have
separate voting rights in certain circumstances. Class Y bears its own
transfer agency and prospectus printing costs. The minimum investment in
Class A, Class B and Class C shares is $2,500 (but lower minimums apply
to purchases under certain special programs).
Sales charges for Class A and Class B shares are as follows:
Class A Shares
The sales charge imposed on purchases of Class A shares of the Funds is
5.75% of investments less than $50,000, 4.50% on investments of $50,000
or more but less than $100,000, 3.50% on investments of $100,000 or more
but less than $300,000, 2.50% on investments more than $250,000 but less
than $500,000 and 2.00% on investments more than $500,000 but less than
$1,000,000. No sales charge applies at the time of purchase to purchases
of $1,000,000 or more, but certain redemptions by such purchasers within
one year after purchase are subject to a contingent deferred sales charge
("CDSC") of 1%. Also, the Class A shares of the Growth Opportunities
Fund are subject to a 0.10% annual distribution fee.
Class B Shares
Class B shares of the Funds are offered at net asset value, without an
initial sales charge, subject to 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 CDSC is 4%
on redemptions made within the first year of investment, 3% in the second
and third years, 2% in the fourth year and 1% in the fifth year.
Class C Shares
Class C Shares are offered at net asset value, without an initial sales
charge or CDSC; are subject to a 0.25% annual service fee and a 0.75%
annual distribution fee; and do not convert into another class.
Class A shares of a Fund may be purchased without paying a sales charge
by exchanging (i) Class A shares of any other series of the Trusts or
(ii) Class A shares of the Money Market Funds acquired through exchanges
from any of the series of the Trusts. Class A shares of New England
Intermediate Term Tax Free Funds of California and New York (and shares
of the Money Market Funds acquired through exchanges of such shares) may
be exchanged for Class A shares of the Funds at net asset value only if
they have been held for at least six months; otherwise, sales charges
apply to the exchange. If you exchange your Class A shares of the New
England Adjustable Rate U.S. Government Fund ("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, shares redeemed from any Money
Market Fund that were not acquired through exchanges from any series of
the Trusts may be redeemed and the proceeds applied directly to the
purchase of Class A shares of the Funds at the applicable sales charge.
Class B shares of a Fund may be purchased by exchanging Class B shares of
any other series of the Trusts, Class B shares of the Money Market Funds
or Class A shares of the Money Market Funds (which have not been subject
to a sales charge). Such exchanges will be made at the next determined
net asset value of the shares. The holding period for the purposes of
timing the conversion to Class A shares and determining the CDSC will
continue to run after the exchange to the Class B shares of series of the
Trusts. If the exchange is made to the Class B shares of a Money Market
Fund, then the holding period will stop and resume only when an exchange
is made back into Class B shares of a series of the Trusts.
Class C shares of a Fund may be purchased by exchanging Class C shares of
any other series of the Trusts which offer Class C shares or Class A
shares of the Money Market Funds.
All exchanges of Class A, B and C shares must be for a minimum of $500 or
the total net asset value of the shareholder's account, whichever is
less, except that, under an Automatic Exchange Privilege, the minimum is
$50.
Class A, Class B and Class C Fund shares may be purchased by mail, by
wire transfer, by automatic investment plan, by electronic purchase
through Automated Clearing House (ACH) and by exchange as described
above. Class A, Class B and Class C shares may be redeemed by mail and
by telephone. Class A and Class C shares may also be redeemed under a
systematic withdrawal program.
[]The Trusts generally do not hold shareholder meetings and will do so only
when required by law. Shareholders may remove the trustees of the Trusts
from office by votes cast at a shareholder meeting or by written consent.
[]The Distributor has entered into a selling agreement with investment
dealers, including a broker-dealer that is an affiliate of the
Distributor, for the sale of the Funds' Class Y Shares. 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.
Registered representatives of the affiliated broker-dealer are also
employees of New England Investment Associates, Inc. ("NEIA"), an
indirect, wholly owned subsidiary of NEIC. NEIA may receive compensation
with respect to certain sales of each Fund's Class Y shares from the
Fund's adviser or subadviser.
[]The Funds' annual reports contain 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.
[]Each Trust offers only its own Funds' shares for sale, but it is possible
that a Trust might become liable for any misstatements in this prospectus
that relate to the other Trust. The trustees of each Trust have
considered this possible liability and approved the use of this combined
prospectus for Funds of both Trusts.
