New England Funds Trust I
New England Bond Income Fund, New England Government Securities Fund, New
England Tax Exempt Income Fund and New England Strategic Income Fund
New England Fund Trust II
New England Adjustable Rate U.S. Government Fund, New England High Income
Fund and New England Limited Term U.S. Government Fund
Supplement dated January 5, 1996 to the Prospectuses dated May 1, 1995 of
New England Bond Funds and New England Strategic Income Fund each as
previously supplemented by the other Supplements attached hereto
Effective January 2, 1996, the investment adviser of each Fund is New
England Funds Management, L.P. ("NEFM"). Back Bay Advisors, L.P. ("Back
Bay Advisors") serves as subadviser to New England Adjustable Rate U.S.
Government Fund, New England Bond Income Fund, New England Government
Securities Fund, New England High Income Fund, New England Limited Term
U.S. Government Fund and New England Tax Exempt Income Fund. Loomis,
Sayles & Company, L.P. ("Loomis Sayles") serves as subadviser to New
England Strategic Income Fund.
The advisory fee rates payable by each Fund to NEFM under the new
advisory arrangements described above are unchanged from the advisory fee
rates previously in effect, except that the fee rates for New England
Adjustable Rate U.S. Government Fund is 0.55% of the first $200 million of
the Fund's average net assets, 0.51% of the next $300 million of such
assets and 0.47% of such assets in excess of $500 million.
The New England Adjustable Rate U.S. Government Fund is no longer
subject to the administrative services fees referred to in its
Prospectus. The "Annual operating expenses" table relating to New
England Adjustable Rate U.S. Government Fund is restated as follows,
based on the new fee arrangements, assuming they had been in effect
during the year ended December 31, 1994:
<TABLE>
Expense Type Annual Fund Operating
Expenses
Class A Class B
<S> <C> <C>
Advisory Fees 0.33%* 0.33%*
12b-1 Fees 0.25% 1.00%
Administrative
Services Fees None None
Other Expenses 0.12% 0.12%
Total Fund Operating
Expenses 0.70%* 1.45%*
</TABLE>
* After voluntary fee waiver and expense reduction by NEFM and/or
the Distributor. Without the voluntary limitations, Advisory Fees
would be 0.52% for both Classes and Total Fund Operating Expenses
would be 0.89% for Class A shares and 1.64% 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 Adjustable Rate U.S.
Government Fund will bear the cost of certain accounting and legal
services that were formerly borne by its advisers. This change is
reflected in the "Other Expenses" and "Total Fund Operating Expenses" in
the table above.
The following paragraphs are 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.
There is no sales charge or CDSC on investments by 401(a), 401(k), 457
or 403(b) plans that have total investment assets equal to or in excess
of $5 million.
The two paragraphs above are 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; 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; and
retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code and rabbi trusts.
Investors may be charged a fee if they effect transactions through a
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.
Effective January 2, 1996, there is no longer a $5.00 fee to establish
the checkwriting service for your account.
The following information is added to the section of the Prospectus
captioned "Investment Strategy -- Fund Investments" for New England Bond
Income Fund and New England High Income Fund:
New England Bond Income Fund and New England High Income Fund may
engage in a variety of options and futures transactions with respect to
U.S. or Foreign Government Securities and corporate fixed-income
securities. See "Investment Risks -- Options and Futures" in the Bond
Funds Prospectuses for information about these kinds of transactions.
The following information is added to the section of the Prospectus
captioned "Investment Strategy -- Fund Investments" for New England Bond
Income Fund and New England Strategic Income Fund:
New England Bond Income Fund and New England Strategic Income Fund may
engage in transactions in currency forward contracts. A currency
forward contract is a contract with a major international bank that
obligates the bank and the other party to the contract to exchange
specified amounts of different currencies at a specified future date.
For example, the bank may agree to deliver a specified number of French
francs, in exchange for a specified number of U.S. dollars on a certain
date.
From time to time, a portion of New England Bond Income or New England
Strategic Income Fund's assets may be invested in securities that are
denominated in foreign currencies or that are traded in markets where
purchase or sale transactions settle in a foreign currency. Currency
forward contracts may be used both (1) to facilitate settlement of a
Fund's transactions in these securities and (2) to hedge against
possible adverse changes in the relative values of the currencies in
which the Fund's portfolio holdings (or intended future holdings) are
denominated.
Currency forward contracts involve transaction costs and the risk that
the banks with which a Fund enters into such contracts will fail
financially. Each Fund's subadviser will, however, monitor the
creditworthiness of these banks on an ongoing basis. Successful use of
currency forward contracts for hedging purposes also depends on the
accuracy of the subadviser's forecasts as to future changes in the
relative values of currencies. The accuracy of such forecasts cannot
be assured. The Fund will set aside with its custodian certain assets
to provide for satisfaction of its obligations under currency forward
contracts.
Although both Funds are permitted to use currency forward contracts,
they are not obligated to do so. Thus, the Funds will not necessarily
be fully (or even partially) hedged against the risk of adverse
currency price movements at any given time.
The following item relating to New England Tax Exempt Income Fund
supplements the Bond Funds Prospectus:
The section of the Prospectus captioned "Fund Investments" is modified as
follows:
New England Tax Exempt Income Fund's fundamental policy that it will
normally invest at least 80% of its net assets in tax exempt bonds is
deleted.
In its place is substituted a non-fundamental policy that the Fund will
normally invest at least 80% of its total assets in debt securities of
Municipal Issuers, the interest from which is exempt from regular
federal income tax but may be subject to the federal alternative
minimum tax. For this purpose, "Municipal Issuers" means states and
other political subdivisions of the United States, local governments,
and agencies, authorities and other instrumentalities of the foregoing.
In conjunction with this change in policy, the name of the Fund is
being changed to "New England Municipal Income Fund."
Supplement dated October 26, 1995 to the Prospectuses dated May 1, 1995 of
New England Bond Funds and New England Strategic Income Fund
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.)
New England Strategic Income Fund
Supplement dated October 26, 1995 to New England Bond Funds Prospectus and
New England Strategic Income Fund Prospectus dated May 1, 1995
The following financial information supplements the Prospectuses of New
England Strategic Income Fund:
The Financial Highlights presented below are for a Class A, B and C
share of New England Strategic Income Fund outstanding throughout the
indicated period.
<TABLE>
May 1, 1995(a) through
September 30, 1995
___________________________________________________
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Net asset value,
beginning of period $12.50 $12.50 $12.50
Income from investment
operations
Net investment income 0.46 0.42 0.41
Net gains or losses on
investment (both realized
and unrealized) 0.04 0.04 0.04
Total income from
investment operations 0.50 0.46 0.45
Less Distributions
Distributions (from net
investment income) (0.48) (0.44) (0.43)
Total distributions (0.48) (0.44) (0.43)
Net asset value,
end of period $12.52 $12.52 $12.52
Total Return (%) 4.08(b) 3.76(b) 3.69(b)
Ratios/Supplemental data
Net assets, end of
period (000) $29,417 $28,428 $10,575
Ratio of operating
expenses to average
net assets (%)(d) 1.04(c) 1.79(c) 1.79(c)
Ratio of net investment
income to average
net assets (%) 7.87(c) 7.12(c) 7.12(c)
Portfolio turnover
rate 16(c) 16(c) 16(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) The ratio of operating expenses to average net assets (computed on an
annualized basis) without giving effect to the voluntary expense limitations
in effect from May 1, 1995 through September 30, 1995 would have been
1.69%, 2.44% and 2.44% for Class A, B and C shares, respectively.
New England Tax Exempt Income Fund
Supplement dated July 1, 1995 to New England Bond Funds Prospectus dated
May 1, 1995
The subadvisory relationship between Back Bay Advisors, L.P. and Loomis,
Sayles & Company, L.P. described on page 21 of the Prospectus is no longer in
effect.
