-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VaMb7Sm1GxAQp+rXXQteMi5jricq5HaNM7+QSGqErQkl84cTnjiue+vDmqJ326LM 6IK+n6UgFqKKC8T2BNYxcw== 0000950156-96-000790.txt : 19960910 0000950156-96-000790.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950156-96-000790 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960906 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 96626875 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 4TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8002831155 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 4TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: INVESTMENT TRUST OF BOSTON FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WORLD INVESTMENT TRUST DATE OF NAME CHANGE: 19680529 N-30D 1 NEF TRUST II - GROWTH OPPORTUNITIES FUND - -------------------------------------------------------------------------------- [LOGO] NEW ENGLAND FUNDS Where The Best Minds Meet(TM) - -------------------------------------------------------------------------------- SEMIANNUAL REPORT AND PERFORMANCE UPDATE - -------------------------------------------------------------------------------- NEW ENGLAND GROWTH OPPORTUNITIES FUND - ------------- JUNE 30, 1996 - ------------- July 25, 1996 DEAR SHAREHOLDER, New England Funds welcomes the opportunity to present you with the 1996 Semiannual Report for New England Growth Opportunities Fund, containing your portfolio manager commentary and complete financial information. ECONOMIC GROWTH IN THE FIRST HALF OF 1996 Moderate growth with low inflation was the economic story during the first half of 1996. U.S. Gross Domestic Product (GDP), a bellwether of economic growth, remained strong at 2.3% through June, just shy of what most economists consider optimal growth. As a result, the Federal Reserve Board opted not to tinker with interest rates through the first half of the year, save for a quarter-point ease in short-term rates in late January. The relatively calm economic waters had a stimulating effect on the domestic equity market, boosting stocks 537 points to 5,654 at the end of June, as measured by the Dow Jones Industrial Average. Bond yields did not fare as well, rising to 7.00% at the end of June from 6.65% earlier in the year. Money market yields remained stable, falling back only slightly during the past six months. THE BENEFITS OF MAINTAINING A LONG-TERM FOCUS But the market volatility of the first three weeks in July claimed 5.5% of the Dow Jones Industrial Average's first-half gains. Again, we are reminded that no bull market lasts forever. Long-term financial goals are key in times like these and it's important to anticipate this type of market volatility and remain committed to your financial plan. It's also a good idea to ask your financial representative for help. A financial representative can guide you through volatile markets and help you meet your long-term financial goals. A recent study by Dalbar, Inc., a mutual fund monitoring and analytical service, shows that, on average, mutual fund investors who bought and held shares, with the assistance of a financial representative, enjoyed the benefits of a long-term commitment. Consequently, they benefitted from higher returns than direct investors and others who bought and sold, although this does not occur in every case. CELEBRATING THE BIRTHDAYS OF THREE NEW ENGLAND FUNDS During the past two months, we've celebrated the birthdays of three of our most popular funds: New England Growth Opportunities Fund; New England Strategic Income Fund and New England Star Advisers Fund. Demonstrating the remarkable scope and breadth of our funds, the Growth Opportunities Fund celebrated its 65th birthday in May while the fast-growing Strategic Income and Star Advisers Funds marked their first and second birthdays, respectively. We're proud of all of our funds, but take special pride in recognizing that, whether six months or 65-years-old, all New England Funds are designed to help investors achieve their goals. NEW ENGLAND FUNDS: THE PLACE "WHERE THE BEST MINDS MEET"(TM) The longevity of our more seasoned funds and the potential for growth of our newer ones illustrates the ongoing progress of New England Funds. Our unique multiple-adviser approach brings together some of the best minds in the investment business. The ability to attract top-notch investment advisers and our multiple-adviser approach to fund management are the cornerstones of New England Funds' investment philosophy and the essence of our corporate logo, Where The Best Minds Meet(TM). OUTLOOK FOR THE REST OF 1996 Going forward, we anticipate that the economy will continue to grow moderately and that inflationary pressures will not be excessive. While we estimate the GDP may rise somewhat from its current level of 2.3%, the Federal Reserve should be reluctant to tighten the money supply by raising short-term interest rates. We also believe that the equity markets will continue to be volatile through the rest of the year. We believe that you will find your portfolio manager commentary informative. If you have any questions or comments, please contact your financial representative or New England Funds directly at 800-225-5478. Sincerely, /S/Henry L.P. Schmelzer - ---------------------------------- Henry L.P. Schmelzer, President - -------------------------------------------------------------------------------- NEW ENGLAND GROWTH OPPORTUNITIES FUND - -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 1966 Putting Performance into Perspective The graph comparing your Fund's performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. Your Fund's total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction costs and other expenses. [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class A Shares for New Growth Opportunities Fund's since 6/30/86, compared to the S&P 500 Index(4). The data points for the graph are as follows:] -------------------------------------- A $10,000 INVESTMENT IN CLASS A SHARES -------------------------------------- Growth Opportunities Year NAV POP S&P 500 - ------- ------- ------- ------- 6/30/86 $10,000 $9,425 $10,000 1987 $11,212 $10,567 $12,509 1988 $10,249 $9,660 $11,646 1989 $11,916 $11,231 $14,035 1990 $13,629 $12,845 $16,337 1991 $14,650 $13,807 $17,544 1992 $16,778 $15,813 $19,907 1993 $18,880 $17,795 $22,611 1994 $18,988 $17,896 $23,011 1995 $23,465 $22,116 $28,992 1996 $27,790 $26,192 $36,510 - -------------------------------------------------------------------------------- This illustration represents past performance of Class A shares and cannot predict future results. Investment return and principal value may vary, resulting in a gain or loss on the sale of shares. Class B and Class C share performance will be greater or less than that shown based on differences in inception date, fees and sales charges. All Index and Fund performance assumes reinvested distributions. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 6/30/96 - -------------------------------------------------------------------------------- CLASS A (Inception 5/6/31) YTD 1 YEAR 3 YEARS 5 YEARS 10 Years - ------------------------- --- ------ ------- ------- -------- Net Asset Value(1) 3.88% 18.45% 13.75% 13.66% 10.76% With Max. Sales Charge(2) -2.11 11.62 11.52 12.32 10.11 Lipper Growth & Income Avg.(5) 9.24 22.13 14.48 14.36 SINCE CLASS B (Inception 9/13/93) YTD 1 YEAR INCEPTION - -------------------------- --- ------ --------- Net Asset Value(1) 3.45% 17.65% 12.94% With CDSC(3) -0.55 13.65 12.07 Standard & Poor's 500 Index(4) 10.08 25.93 17.32 Lipper Growth & Income Avg.(5) 9.24 22.13 n/a SINCE CLASS C (Inception 5/1/95) YTD 1 YEAR INCEPTION - ------------------------- --- ------ --------- Net Asset Value(1) 3.45% 17.57% 20.43% Standard & Poor's 500 Index(4) 10.08 25.93 28.55 Lipper Growth & Income Avg.(5) 9.24 22.13 n/a These returns represent past performance. Investment return and principal value will fluctuate so that shares, upon redemption, may be worth more or less than original cost. NOTES TO CHARTS AND PERFORMANCE UPDATE (1) Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. (2) With Maximum Sales Charge performance assumes reinvestment of all distributions and reflects the maximum sales charge of 5.75% at the time of purchase of Class A shares. (3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 4% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero five years after the purchase of shares. (4) Standard & Poor's 500(R) Index (S&P 500) is an unmanaged index representing the performance of 500 major companies, most of which are listed on the New York Stock Exchange. The S&P 500 performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. (5) Lipper Average is an average of the total return performance (calculated on the basis of net asset value) of funds with similar investment objectives as calculated by Lipper Analytical Services, an independent mutual fund ranking service. REWARDING SHAREHOLDERS FOR MORE THAN 60 YEARS Through good times and bad, investors have come to depend on New England Growth Opportunities Fund. This Fund is designed to pursue long-term growth from investments in common stocks similar to those in the S&P 500 Index(4). Its focus on large, well-established companies has produced a long history of solid performance. Please see pages 1 and 2 for the Fund's most recent results. [A chart in the form of a bar graph appears here, illustrating a $10,000 investment in Class A Shares New England Growth Opportunities Fund compared to a $10,000 investment in the Standard & Poor's 500 Index(4) from May, 1931 through June 30, 1996,the values of the Cumulative return are as follows:] -------------------------------------------- GROWTH OPPORTUNITIES FUND -- CLASS A SHARES* -------------------------------------------- A $10,000 INITIAL INVESTMENT COMPARED TO THE STANDARD & POOR'S 500 INDEX(4) MAY 1931 -- JUNE 30, 1996 CUMULATIVE RETURN YOUR FUND S&P 500 INDEX(4) --------- ---------------- $29,417,033 $7,962,709 * This information represents past performance only and cannot predict future returns. Investment return and principal value will vary and may result in a gain or loss on sale. Results assume sales charge of 7.25% in effect since 1931 and reinvestment of all dividend and capital gains distributions for period through 12/31/95. Generally, this was a period of rising stock prices. Effective 10/1/90, the maximum sales charge was reduced to 5.75%. Five advisers have managed the Fund, with changes occurring in 1968, 1983, 1988 and 1995. - ------------------- Phote of Gerald Scriver - ------------------ NEW ENGLAND GROWTH OPPORTUNITIES FUND Portfolio Manager: Gerald Scriver Westpeak Investment Advisors, L.P. The first six months of 1996 held few surprises for us in terms of the overall economic environment and its effects on your fund. We anticipated rising interest rates throughout 1996, as well as a rise in inflation; thus far, our expectations have been accurate. In the shadow of 1995's bull market (or rising market), both the stock market and the economy have remained strong. However, we do not expect the current growth rates to continue through the second half of this year. Therefore, we have positioned the portfolio for the weaker market environment ahead by placing a stronger emphasis on value stocks, which tend to outperform growth investments in uncertain market environments. How Your Fund Performed For the first half of 1996 -- through June 30 -- New England Growth Opportunities Fund's total return was 3.88% for Class A shares, at net asset value. While the Fund underperformed its benchmark, the Standard & Poor's 500 Index (S&P 500) in the first six months of the year, its long-term track record remains strong. As of June 30, 1996, a $10,000 investment in New England Growth Opportunities Fund at inception (see chart at left) would have grown to $29,417,033. We believe the Fund's relative underperformance for the first six months of this year was due, in part, to our own early anticipation of a changing market environment -- one we believe will ultimately favor value stocks over growth stocks -- and to investor reactions to rising interest rates. How We Managed Your Fund The momentum of the stock market this year has been driven by highly volatile, smaller companies. Consistent with our strategy, we've focused the Fund's investments on large, highly liquid companies with low price-to-earnings (P/E) ratios. Low P/E stocks, such as Exxon, Sears and General Motors, carry relatively low risk and have typically shown the potential to achieve consistent growth over time. While these large-capitalization stocks have been largely ignored during the last six to eight months, we believe that they are about to come back into favor, especially as interest rates rise and investors become more concerned with the effects of these economic changes on small-capitalization ("small-cap") investments. Recently, the NASDAQ* and Russell 2000** indexes, benchmarks for small company stock performance, have become more volatile. This trend seems to indicate that small-cap stocks may underperform in the second half of the year. With this prospect in mind, over the past few months we have been shifting the Fund's focus toward a value-based investment strategy, increasing our emphasis on defensive, low P/E stocks to help offset the volatility of smaller company stocks. Currently, the Fund's portfolio is overweighted in the energy sector. This allocation benefitted us in the first half of the year, as energy stocks responded well to rising interest rates. We'll maintain this position in anticipation of continued rising rates. A Long-Term Outlook While a changing economic landscape will most likely produce slower market growth in the second half of the year, we feel that a bear (or falling) market is unlikely. We have, however, positioned your Fund to take advantage of long-term growth opportunities in the environment ahead and will continue to pursue this objective while maintaining the conservative nature of the Fund. * National Association of Securities Dealers Automated Quotations system. NASDAQ is owned and operated by the National Association of Securities Dealers, an industry watchdog group. The NASDAQ index lists stocks of large, mid-sized and small-growth companies but specializes in small-cap issues. ** The Russell 2000 index represents the smallest two-thirds of the 3,000 largest U.S. companies, including a great many of the initial public offerings of the last few years. TOP FIVE PORTFOLIO HOLDINGS 6/30/96* PERCENTAGE COMPANY OF NET ASSETS ------------------------------------------------------------- 1. EXXON CORP. 4.30% World`s leading oil company ------------------------------------------------------------- 2. JOHNSON & JOHNSON 3.26% Healthcare products manufacturer ------------------------------------------------------------- 3. MOBIL CORP. 2.80% International oil/gas exploration/development ------------------------------------------------------------- 4. AMERITECH CORP. 2.79% Regional telephone company ------------------------------------------------------------- 5. AMOCO CORP. 2.74% Domestic oil company * Portfolio holdings are subject to change. - -------------------------------------------------------------------------------- [LOGO] NEW ENGLAND FUNDS Where The Best Minds Meet(TM) - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS - -------------------------------------------------------------------------------- NEW ENGLAND GROWTH OPPORTUNITIES FUND - ------------- JUNE 30, 1996 - ------------- - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Investments as of June 30, 1996 (unaudited) COMMON STOCKS -- 99.2% OF TOTAL NET ASSETS SHARES DESCRIPTION VALUE (a) - ------------------------------------------------------------------------------ AEROSPACE--0.6% 10,600 United Technologies Corp. ........................ $ 1,219,000 ------------ AIRLINES--0.9% 32,800 UAL Corp. (c) .................................... 1,763,000 ------------ ALUMINUM--0.1% 4,600 Aluminum Company of America ...................... 263,925 ------------ APPAREL & TEXTILES--1.6% 32,300 Nike, Inc., Class B .............................. 3,318,825 ------------ AUTOMOTIVE & RELATED--5.5% 78,100 Chrysler Corp. ................................... 4,842,200 105,400 General Motors Corp. ............................. 5,520,325 14,500 Paccar, Inc. ..................................... 710,500 ------------ 11,073,025 ------------ BANKS--5.1% 22,300 Bank of New York, Inc. ........................... 1,142,875 9,000 BankAmerica Corp. ................................ 681,750 21,900 BanPonce Corp. ................................... 985,500 27,500 Citicorp ......................................... 2,272,188 64,100 NationsBank Corp. ................................ 5,296,262 ------------ 10,378,575 ------------ BUSINESS SERVICES--4.7% 19,800 Automatic Data Processing, Inc. .................. 764,775 82,800 Comdisco, Inc. ................................... 2,204,550 41,700 Gtech Holdings Corp. ............................. 1,235,362 20,300 Omnicom Group .................................... 943,950 76,200 PHH Corp. ........................................ 4,343,400 ------------ 9,492,037 ------------ CHEMICALS--1.2% 42,700 Cabot Corp. ...................................... 1,046,150 109,500 Terra Industries, Inc. ........................... 1,355,063 ------------ 2,401,213 ------------ COMPUTER SOFTWARE & SERVICES--1.0% 13,300 Compuware Corp. .................................. 525,350 6,700 Primark Corp. .................................... 218,588 17,600 Sterling Software, Inc. .......................... 1,355,200 ------------ 2,099,138 ------------ COMPUTERS & BUSINESS EQUIPMENT--3.9% 25,900 Hewlett Packard Co. .............................. 2,580,287 12,600 International Business Machines Corp. ............ 1,247,400 43,800 Seagate Technology ............................... 1,971,000 2,600 Sun Microsystems, Inc. ........................... 153,075 74,600 Western Digital Corp. ............................ 1,948,925 ------------ 7,900,687 ------------ CONSTRUCTION--0.2% 10,300 Centex Corp. ..................................... 320,588 ------------ COSMETICS & TOILETRIES--3.3% 133,600 Johnson & Johnson ................................ 6,613,200 ------------ DOMESTIC OIL--3.6% 76,800 Amoco Corp. ...................................... 5,558,400 1,200 NGC Corp. ........................................ 18,000 39,600 Phillips Petroleum Co. ........................... 1,658,250 ------------ 7,234,650 ------------ DRUGS & HEALTH CARE--5.2% 12,000 Amgen, Inc. (c) .................................. 648,000 21,000 Bristol Myers Squibb Co. ......................... 1,890,000 40,200 Eli Lilly & Co. (c) .............................. 2,613,000 41,200 Merck & Co., Inc. ................................ 2,662,550 8,500 Rhone Poulenc Rorer, Inc. ........................ 570,562 33,700 Schering Plough Corp. ............................ 2,114,675 ------------ 10,498,787 ------------ ELECTRIC UTILITIES--3.1% 10,700 Duke Power Co. ................................... 548,375 27,700 Entergy Corp. .................................... 785,988 67,500 Pinnacle West Capital Corp. ...................... 2,050,312 107,500 Unicom Corp. ..................................... 2,996,562 ------------ 6,381,237 ------------ ELECTRONICS--5.4% 5,100 Harris Corp. Delaware ............................ 311,100 12,700 Honeywell, Inc. .................................. 692,150 25,700 Kemet Corp. ...................................... 514,000 94,000 KLA Instruments Corp. ............................ 2,185,500 66,700 Komag, Inc. ...................................... 1,759,213 57,600 Novellus Systems, Inc. ........................... 2,073,600 53,900 Raytheon Co. ..................................... 2,782,587 10,000 Tellabs, Inc. (c) ................................ 668,750 ------------ 10,986,900 ------------ ENTERTAINMENT--0.0% 1,700 King World Productions, Inc. ..................... 61,838 ------------ FINANCE--2.8% 63,525 Bear Stearns Co., Inc. ........................... 1,500,778 30,300 Green Tree Financial Corp. ....................... 946,875 127,100 Lehman Brothers Holdings, Inc. ................... 3,145,725 ------------ 5,593,378 ------------ FOOD & BEVERAGES--4.7% 11,600 Campbell Soup Co. ................................ 817,800 62,600 Coca Cola Co. .................................... 3,059,575 17,800 CPC International, Inc. .......................... 1,281,600 17,400 H. J. Heinz Co. .................................. 528,525 8,400 Hershey Foods Corp. .............................. 616,350 93,100 IBP, Inc. ........................................ 2,571,887 21,600 Sara Lee Corp. ................................... 699,300 ------------ 9,575,037 ------------ FOOD--RETAILERS/WHOLESALERS--0.3% 16,700 Kroger Co. (c) ................................... 659,650 ------------ GAS & PIPELINE UTILITIES--3.1% 33,200 MCN Corp. ........................................ 809,250 58,400 Oneok, Inc. ...................................... 1,460,000 83,200 Williams Companies, Inc. ......................... 4,118,400 ------------ 6,387,650 ------------ HEALTH CARE--1.4% 45,900 Abbott Labs ...................................... 1,996,650 10,500 Millipore Corp. .................................. 439,688 7,000 Pacificare Health Systems, Inc. .................. 474,250 ------------ 2,910,588 ------------ HOTELS & RESTAURANTS--1.1% 20,200 Marriott International, Inc. ..................... 1,085,750 23,500 McDonalds Corp. .................................. 1,098,625 ------------ 2,184,375 ------------ HOUSEHOLD PRODUCTS--2.6% 46,500 Clorox Co. ....................................... 4,121,063 18,000 Gillette Co. ..................................... 1,122,750 ------------ 5,243,813 ------------ INSURANCE--2.9% 53,200 Loews Corp. ...................................... 4,196,150 79,950 Old Republic International ....................... 1,718,925 ------------ 5,915,075 ------------ INTERNATIONAL OIL--7.2% 4,700 Chevron Corp. .................................... 277,300 100,500 Exxon Corp. ...................................... 8,730,937 50,700 Mobil Corp. ...................................... 5,684,738 ------------ 14,692,975 ------------ LEISURE TIME--0.1% 8,000 Grand Casinos, Inc. .............................. 206,000 ------------ METAL--1.4% 41,700 Asarco, Inc. ..................................... 1,151,963 25,800 Phelps Dodge Corp. ............................... 1,609,275 ------------ 2,761,238 ------------ MISCELLANEOUS--0.1% 6,700 American Water Works, Inc. ....................... 269,675 ------------ OIL--2.2% 25,600 Royal Dutch Petroleum Co. ........................ 3,936,000 15,800 Ultramar Corp. ................................... 458,200 ------------ 4,394,200 ------------ OIL SERVICES--1.6% 28,400 Halliburton Co. .................................. 1,576,200 31,700 Sonat Offshore Drilling, Inc. .................... 1,600,850 ------------ 3,177,050 ------------ PAPER--0.3% 16,100 Champion International Corp. ..................... 672,175 ------------ PHOTOGRAPHY--0.5% 11,800 Eastman Kodak Co. ................................ 917,450 ------------ PRODUCER OF GOODS--6.9% 30,000 Applied Materials, Inc. .......................... 915,000 18,100 Case Corp. ....................................... 868,800 28,000 Caterpillar, Inc. ................................ 1,897,000 45,600 Dover Corp. ...................................... 2,103,300 9,500 Harnischfeger Industries, Inc. ................... 315,875 49,500 Harsco Corp. ..................................... 3,328,875 40,300 Illinois Tool Works, Inc. ........................ 2,725,287 39,700 Lam Research Corp. ............................... 1,032,200 16,700 Varian Associates, Inc. .......................... 864,225 ------------ 14,050,562 ------------ RETAIL--6.0% 34,700 Gap, Inc. ........................................ 1,114,738 45,900 May Department Stores Co. ........................ 2,008,125 94,100 Sears Roebuck and Co. ............................ 4,575,612 99,300 Staples, Inc. .................................... 1,936,350 12,200 Tiffany & Co. .................................... 890,600 30,200 TJX Companies, Inc. .............................. 1,019,250 28,800 Waban, Inc. ...................................... 687,600 ------------ 12,232,275 ------------ SAVINGS & LOAN--0.2% 12,100 Standard Federal BanCorp. ........................ 465,850 ------------ TELECOMMUNICATION--7.7% 95,200 Ameritech Corp. .................................. 5,652,500 82,700 Bell Atlantic Corp. .............................. 5,272,125 16,500 Bellsouth Corp. .................................. 699,187 20,200 GTE Corp. ........................................ 903,950 29,900 SBC Communications, Inc. ......................... 1,472,575 25,400 Southern N E Telecommunications Corp. ............ 1,066,800 14,000 Sprint Corp. ..................................... 588,000 ------------ 15,655,137 ------------ TIRES & RUBBER--0.4% 14,800 Goodyear Tire and Rubber ......................... 714,100 ------------ TOBACCO--0.3% 14,900 American Brands, Inc. ............................ 676,088 ------------ Total Common Stock (Identified Cost $178,343,142) 201,360,966 ------------ SHORT TERM INVESTMENT -- 0.5% FACE AMOUNT DESCRIPTION VALUE (a) - ------------------------------------------------------------------------------ $ 969,000 Repurchase agreement with State Street Bank & Trust Co. dated 06/28/96 at 4.75% to be repurchased at $969,384 on 7/01/96. Collateralized by $1,015,000 U.S. Treasury Bill due 12/19/96, with a value of $989,440. ......................................... $ 969,000 ------------ Total Short Term Investment (Identified Cost $969,000) ....................................... 969,000 ------------ Total Investments--99.7% (Identified Cost $179,312,142) (b) ............................... 202,329,966 Other assets less liabilities .................... 561,822 ------------ Total Net Assets--100% ............................ $202,891,788 ============ (a) See Note 1a. (b) Federal Tax Information: At June 30, 1996 the net unrealized appreciation on investments based on cost of $179,312,142 for federal income tax purposes was as follows: Aggregate gross unrealized apppreciation for all investments in which there is an excess of value over tax cost ..................................... $ 28,758,510 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ........................................ (5,740,686) ------------ Net unrealized appreciation ....................... $ 23,017,824 ============ (c) Non-income producing security. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS & LIABILITIES - -------------------------------------------------------------------------------- June 30, 1996 (unaudited) ASSETS Investments at value .................................... $202,329,966 Cash .................................................... 436 Receivable for: Fund shares sold ...................................... 405,499 Securities sold ....................................... 151,203 Dividends and interest ................................ 278,589 Prepaid registration expense ............................ 14,000 ------------ 203,179,693 LIABILITIES Payable for: Fund shares redeemed .................................. $ 67,387 Withholding taxes ..................................... 787 Dividends declared .................................... 35,169 Accrued expenses: Management fees ....................................... 116,786 Deferred trustees' fees ............................... 4,999 Accounting and administrative ......................... 2,797 Other expenses ........................................ 59,980 --------- 287,905 ------------ NET ASSETS ................................................ $202,891,788 ============ Net Assets consist of: Capital paid in ....................................... $150,008,764 Undistributed net investment income ................... 29,644 Accumulated net realized gains ........................ 29,835,556 Unrealized appreciation on investments ................ 23,017,824 ------------ NET ASSETS ................................................ $202,891,788 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($158,849,925 divided by 10,674,692 shares of beneficial interest) ............................................... $14.88 ====== Offering price per share (100/94.25 of $14.88) ............ $15.79* ====== Net asset value and offering price of Class B shares ($39,306,317 divided by 2,640,101 shares of beneficial interest) ............................................... $14.89** ====== Net asset value and offering price of Class C shares ($4,735,546 divided by 318,443 shares of beneficial interest) ............................................... $14.87 ====== Identified cost of investments ............................ $179,312,142 ============ *Based upon single purchases of less than $50,000. Reduced sales charges apply for purchases in excess of this amount. **Redemption price per share is equal to net asset value less any applicable contingent deferred sales charges.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- Six Months Ended June 30, 1996 (unaudited) INVESTMENT INCOME Dividends $2,017,797(a) Interest ........................................ 145,424 ---------- 2,163,221 Expenses Management fees ............................... $694,103 Service fees--Class A ......................... 197,258 Service and distribution fees--Class B ........ 178,488 Service and distribution fees--Class C ........ 24,840 Trustees' fees and expenses ................... 10,589 Accounting and administrative ................. 21,668 Custodian ..................................... 46,665 Transfer agent ................................ 194,501 Audit and tax services ........................ 14,500 Legal ......................................... 9,410 Printing ...................................... 19,339 Registration .................................. 40,394 Miscellaneous ................................. 4,344 -------- Total expenses .................................. 1,456,099 ---------- Net investment income ........................... 707,122 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain on Investments--net ............... 27,763,529 Unrealized appreciation (depreciation) on Investments--net .............................. (21,355,308) ---------- Net gain on investment transactions ............. 6,408,221 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS ........ $7,115,343 ========== (a) Net of foreign taxes of: $15,407 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (unaudited) YEAR ENDED SIX MONTHS DECEMBER 31, ENDED 1995 JUNE 30, 1996 ------------ ------------- FROM OPERATIONS Net investment income ...................... $ 1,655,576 $ 707,122 Net realized gain on investments ........... 21,443,541 27,763,529 Unrealized appreciation (depreciation) on investments .............................. 16,043,612 (21,355,308) ------------ ------------ Increase in net assets from operations ..... 39,142,729 7,115,343 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A .................................. (1,549,436) (725,998) Class B .................................. (74,015) (42,256) Class C .................................. (4,516) (5,115) Net realized gain on investments Class A .................................. (17,435,536) 0 Class B .................................. (1,801,248) 0 Class C .................................. (120,627) 0 ------------ ------------ (20,985,378) (773,369) ------------ ------------ Increase in net assets derived from capital share transactions ....................... 57,002,658 12,124,087 ------------ ------------ Total increase in net assets ............... 75,160,009 18,466,061 NET ASSETS Beginning of the period .................... 109,265,718 184,425,727 ------------ ------------ End of the period $184,425,727 $202,891,788 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME Beginning of the period .................... $ 106,169 $ 95,891 ============ ============ End of the period .......................... $ 95,891 $ 29,644 ============ ============ See accompanying notes to financial statements. - ---------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ---------------------------------------------------------------------------------------------------------------------------------- (unaudited)
CLASS A ------------------------------------------------------------------------------ SIX MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------------ JUNE 30, 1991 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- -------- Net Asset Value, Beginning of Period ............. $ 9.54 $11.79 $12.20 $12.67 $12.41 $14.39 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income ............................ 0.26 0.23 0.21 0.22 0.18 0.07 Net Realized and Unrealized Gain (Loss) on Investments ................................. 2.63 0.86 0.75 (0.10) 4.01 0.49 ------ ------ ------ ------ ------ ------ Total From Investment Operations ................. 2.89 1.09 0.96 0.12 4.19 0.56 ------ ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ............. (0.26) (0.23) (0.21) (0.21) (0.18) (0.07) Distributions in Excess of Net Investment Income ......................................... 0.00 0.00 (0.01) 0.00 0.00 0.00 Distributions From Net Realized Capital Gains .......................................... (0.38) (0.45) (0.27) (0.17) (2.03) 0.00 ------ ------ ------ ------ ------ ------ Total Distributions .............................. (0.64) (0.68) (0.49) (0.38) (2.21) (0.07) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period ................... $11.79 $12.20 $12.67 $12.41 $14.39 $14.88 ====== ====== ====== ====== ====== ====== Total Return (%)(a) .............................. 30.6 9.3 8.0 1.0 35.1 3.9 Ratio of Operating Expenses to Average Net Assets (%) ......................... 1.23 1.94 1.21 1.28 1.38 1.31(b) Ratio of Net Investment Income to Average Net Assets (%) ......................... 2.28 1.18 1.70 1.75 1.31 0.86(b) Portfolio Turnover Rate (%) ...................... 12 10 4 6 69 136(b) Average Commission Rate (c) ...................... -- -- -- -- -- $ 0.0371 Net Assets, End of Period (000) .................. $70,263 $90,945 $109,168 $104,081 $150,693 $158,850 (a) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis. (c) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. As of January 1, 1993 the Fund discontinued the use of equalization accounting.
See accompanying notes to financial statements. - ---------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ---------------------------------------------------------------------------------------------------------------------------------- (unaudited)
CLASS B CLASS C ------------------------------------------------------- ------------------------ SEPTEMBER 13(a) SIX MONTHS MAY 1(a) SIX MONTHS THROUGH YEAR ENDED YEAR ENDED ENDED THROUGH ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, 1993 1994 1995 1996 1995 1996 --------------- ------------ ------------ ---------- ------------ ------------- Net Asset Value, Beginning of Period ........ $12.95 $12.66 $12.42 $14.40 $13.84 $14.39 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income ....................... 0.06 0.16 0.10 0.01 0.06 0.01 Net Realized and Unrealized Gain (Loss) on Investments ............................... 0.01 (0.09) 4.01 0.50 2.58 0.49 ------ ------ ------ ------ ------ ------ Total From Investment Operations ............ 0.07 0.07 4.11 0.51 2.64 0.50 ------ ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ........ (0.03) (0.14) (0.10) (0.02) (0.06) (0.02) Distributions in Excess of Investment Income (0.06) 0.00 0.00 0.00 0.00 0.00 Distributions From Net Realized Capital Gains (0.27) (0.17) (2.03) 0.00 (2.03) 0.00 ------ ------ ------ ------ ------ ------ Total Distributions ......................... (0.36) (0.31) (2.13) (0.02) (2.09) (0.02) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period .............. $12.66 $12.42 $14.40 $14.89 $14.39 $14.87 ====== ====== ====== ====== ====== ====== Total Return (%)(c) ......................... 0.6 0.6 34.3 3.5 20.2 3.5 Ratio of Operating Expenses to Average Net Assets (%) ................................ 2.08(b) 1.93 2.11 2.06(b) 2.11(b) 2.06(b) Ratio of Net Investment Income to Average Net Assets (%) ................................ 0.71(b) 1.10 0.56 0.11(b) 0.56(b) 0.11(b) Portfolio Turnover Rate (%) 4 6 69 136(b) 69 136(b) Average Commission Rate (d) ................. -- -- -- $0.0371 -- $0.0371 Net Assets, End of Year (000) ............... $1,498 $5,185 $29,026 $39,306 $4,707 $4,736 (a) Commencement of operations. (b) Computed on an annualized basis. (c) A contingent deferred sales charge in the case of Class B shares is not reflected in total return calculations. Periods less than one year are not annualized. (d) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- June 30, 1996 (unaudited) 1. The Fund is a series of New England Funds Trust II (the "Trust"), a Massachusetts business trust, registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (each such series of shares a "Fund"). The Fund offers Class A, Class B and Class C shares. The Fund commenced its public offering of Class B shares on September 13, 1993 and Class C Shares on May 1, 1995. Class A shares are sold with a maximum front end sales charge of 5.75%. Class B shares do not pay a front end sales charge, but pay a higher ongoing distribution fee than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge if those shares are redeemed within five years of purchase. Class C shares do not pay a front end or contingent deferred sales charge and do not convert to any other class of shares, but they do pay a higher ongoing distribution fee than Class A shares. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 plan. Shares of each class would receive their pro-rata share of the net assets of the Fund, if the Fund were liquidated. In addition, the Trustees approve separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles for investment companies. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION. Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees which service provides the last reported sale price for securities listed on an applicable securities exchange or on the NASDAQ national market system, or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income is increased by the accretion of discount. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the Internal Revenue Code applicable to regulated investment companies, and to distribute to its shareholders all of its income and any net realized capital gains, at least annually. Accordingly, no provision for federal income tax has been made. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on the ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from generally accepted accounting principles. These differences relate primarily to utilization of tax equalization. Permanent book and tax basis differences relating to shareholder distributions will result in reclassification to paid in capital. E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is the Fund's policy that the market value of the collateral be at least equal to 100% of the repurchase price. The Fund's subadviser is responsible for determining that the value of the collateral is at all times at least equal to the repurchase price. Repurchase agreements could involve certain risks in the event of default or insolvency of the other party including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. 2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the Fund for the six months ended June 30, 1996 were $151,736,770 and $132,106,643, respectively. 3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays management fees to its investment adviser, New England Funds Management L.P. ("NEFM") at the annual rate of 0.70% of the first $200 million of the Fund's average daily net assets, 0.65% of the next $300 million and 0.60% of such assets in excess of $500 million. NEFM pays the Fund's investment subadviser, Westpeak Investment Advisors, L.P. at the rate of 0.50% of the first $25 million of the Fund's average daily net assets, 0.40% of the next $75 million, 0.35% of the next $100 million and 0.30% of such assets in excess of $200 million. Certain officers and directors of NEFM and Westpeak Investment Advisors, L.P. are also officers or trustees of the Fund. NEFM and Westpeak Investment Advisors, L.P. are wholly owned subsidiaries of New England Investment Companies, L.P. ("NEIC"), which is a subsidiary of New England Mutual Life Insurance Company. Fees earned by NEFM and Westpeak Investment Advisors, L.P. under the management agreement in effect during the six months ended June 30, 1996 are as follows: FEES EARNED ----------- $310,032 New England Funds Management, L.P. $384,071 Westpeak Investment Advisors, L.P. B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of NEIC and performs certain accounting and administrative services for the Fund. The Fund reimburses New England Funds for all or part of New England Fund's expenses of providing these services which include the following: (i) expenses for personnel performing bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Fund, (ii) expenses for services required in connection with the preparation of registration statements and prospectuses, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance, and (iii) registration, filing and other fees in connection with requirements of regulatory authorities. For the six months ended June 30, 1996, these expenses amounted to $21,668 and are shown separately in the financial statements as accounting and administrative. C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder servicing agent for the Fund. For the six months ended June 30, 1996, the Fund paid New England Funds $144,668 as compensation for its services in that capacity. D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to the Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by the New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1996, the Fund paid New England Funds $197,258 in fees under the Class A Plan. Under the Class B and Class C Plans, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by New England Funds in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1996, the Fund paid New England Funds $44,622 and $6,210 in service fees under the Class B and Class C Plans, respectively. Also under the Class B and Class C Plan, the Fund pays New England Funds a monthly distribution fee at the annual rate of up to 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by New England Funds in connection with the marketing or sale of Class B and Class C shares. For the six months ended June 30, 1996, the Fund paid New England Funds $133,866 and $18,630 in distribution fees under the Class B and Class C Plans, respectively. Commissions (including contingent deferred sales charges) on Fund shares paid to New England Funds by investors in shares of the Fund during the six months ended June 30, 1996 amounted to $484,913. E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation directly to its officers or trustees who are directors, officers or employees of NEFM, New England Funds, NEIC or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $2,217 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting Committee Chairman Retainer $87/year A deferred compensation plan is available to the trustees on a voluntary basis. Each participating trustee will receive an amount equal to the value that such deferred compensation would have had, had it been invested in the Fund on the normal payment date. 4. CAPITAL SHARES. At June 30, 1996 there was an unlimited number of shares of beneficial interest authorized, divided into three classes, Class A, Class B and Class C capital stock. Transactions in capital shares were as follows:
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 --------------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT CLASS A ----------- ------------ ----------- ------------ Shares sold ........................................ 2,225,960 $ 31,708,352 1,089,636 $ 16,174,823 Shares issued in connection with the reinvestment of: Dividends from net investment income ............. 84,290 1,188,168 38,945 580,568 Distributions from net realized gain ............. 1,061,665 14,664,607 0 0 --------- ------------ --------- ------------ 3,371,915 47,561,127 1,128,581 16,755,391 Shares repurchased ................................. (1,286,544) (18,048,545) (922,830) (13,779,522) --------- ------------ --------- ------------ Net increase ....................................... 2,085,371 29,512,582 205,751 2,975,869 --------- ------------ --------- ------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 --------------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT CLASS B ----------- ------------ ----------- ------------ Shares sold ........................................ 1,584,901 $ 22,623,592 864,405 $ 12,873,298 Shares issued in connection with the reinvestment of: Dividends from net investment income ............. 5,067 71,601 2,590 38,696 Distributions from net realized gain ............. 121,353 1,687,756 0 0 --------- ------------ --------- ------------ 1,711,321 24,382,949 866,995 12,911,994 Shares repurchased ................................. (112,671) (1,588,699) (243,081) (3,633,849) --------- ------------ --------- ------------ Net increase ....................................... 1,598,650 22,794,250 623,914 9,278,145 --------- ------------ --------- ------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 --------------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT CLASS C ----------- ------------ ----------- ------------ Shares sold ........................................ 351,596 5,050,733 137,414 2,031,592 Shares issued in connection with the reinvestment of: Dividends from net investment income ............. 303 4,318 353 5,276 Distributions from net realized gain ............. 8,237 116,832 0 0 --------- ------------ --------- ------------ 360,136 5,171,883 137,767 2,036,868 Shares repurchased ................................. (33,071) (476,057) (146,389) (2,166,795) --------- ------------ --------- ------------ Net increase (decrease) ............................ 327,065 4,695,826 (8,622) (129,927) --------- ------------ --------- ------------ Increase derived from capital share transactions ... 4,011,086 $ 57,002,658 821,043 $ 12,124,087 ========= ============ ========= ============
- -------------------------------------------------------------------------------- REGULAR INVESTING PAYS - -------------------------------------------------------------------------------- FIVE GOOD REASONS TO INVEST REGULARLY 1. It's an easy way to build assets 2. It's convenient and effortless 3. It requires a low minimum to get started 4. It can help you reach important long-term goals like retirememt or college funding 5. It can help you benefit from the ups and downs of the market With Investment Builder, New England Funds' automatic investment program, you can invest as little as $50 a month in your New England Fund automatically -- without even writing a check. And, as you can see from the chart below, your monthly investments can really add up over time. THE POWER OF MONTHLY INVESTING [A line graph appears here, illustrating the hypothetical accumulation of monthly investments at an 8% annual rate of return. The data points of the graph are as follows:] Monthly investments of $50 Years Growth of Monthly Investments 0 $0 5 $3,661 10 $9,040 15 $16,943 20 $28,555 25 $45,618 Monthly investments of $100 Years Growth of Monthly Investments 0 $0 5 $7,322 10 $18,079 15 $33,886 20 $57,111 25 $91,236 Monthly investments of $200 Years Growth of Monthly Investments 0 $0 5 $14,643 10 $36,158 15 $67,772 20 $114,222 25 $182,472 Monthly investments of $500 Years Growth of Monthly Investments 0 $0 5 $36,608 10 $90,396 15 $169,429 20 $285,555 25 $456,181 For illustrative purposes only. These figures represent hypothetical accumulation at an 8% annual rate of return, and are not indicative of future performance of any New England Fund. The value of a New England Fund will fluctuate with changing market conditions. This program cannot assure a profit nor protect against a loss in a declining market. It does, however, ensure that you buy more shares when the price is low and fewer shares when the price is high. You can start an Investment Builder program with your current New England Fund account, or with any of our other funds. To open an Investment Builder account today, call your financial representative or New England Funds at 1-800-225-5478. - ------------------------------------------------------------------------------- SAVING FOR RETIREMENT - ------------------------------------------------------------------------------- AN EARLY START CAN MAKE A BIG DIFFERENCE With today's lengthening life spans, you may be retired for 20 years or more after you complete your working career. Living these retirement years the way you've dreamed of will require considerable financial resources. While it's never too late to start a retirement savings program, it's certainly never too early: The sooner you begin, the longer the time your money has to grow. The chart below illustrates this point dramatically. One investor starts at age 30, saves for just 10 years, then leaves the investment to grow. The second investor starts 10 years later but saves much longer -- for 25 years, in fact. Can you guess which investor accumulates the greater retirement nest egg? For the answer, look at the chart. [A chart in the form of a line graph appears here, comparing the growth of investments made for 10 years by an investor who begins investing at age 30 to the growth of investments made for twenty-five years by an investor who begins investing at age 40. A hypothetical appreciation of 10% is assumed. The data points from the graph are as follows:] Investor A - Begins at age 30 for 10 years: Age Growth of Investments 30 $2,000 35 $15,431 40 $35,062 45 $90,943 55 $146,464 60 $235,882 65 $379,890 Investor B - Begins investing at age 40 for 25 years: Age Growth of Investments 40 $2,000 45 $15,431 50 $37,062 55 $71,899 60 $128,005 65 $216,364 Assumes 10% hypothetical appreciation. For illustrative purposes only and not indicative of future performance of any New England Fund. Investor A invested $20,000, less than half of investor B's commitment -- and for less than half the time. Yet investor A wound up with a much greater retirement nest egg. The reason? It's all thanks to an early start. New England Funds has prepared a number of informative retirement planning guides. Call your financial representative or New England Funds today, and ask for the guide that best fits your personal needs. - ----------------------------------------------------------------------------- INFORMATION ON CALL - ----------------------------------------------------------------------------- YOU CAN CALL NEW ENGLAND FUNDS DAY OR NIGHT Do you like to keep on top of your New England Funds but can't always call us during regular business hours? With Tele#Facts, New England Funds' 24-hours a day automated telephone system, you can call us any time that's convenient for you -- day or night! By calling 1-800-346-5984 from any Touch-Tone(R) telephone, you can: o Check the current value of your New England Fund account o Find out the current yield and total return on any New England Fund o Buy, sell or exchange fund shares Just remember to have these four items with you before calling: 1. YOUR PERSONAL IDENTIFICATION NUMBER which is the last four digits of your Social Security number 2. THE FUND NUMBER -- two- or three-digit number listed on the Tele#Facts wallet card 3. FUNCTION NUMBER -- listed on the Tele#Facts wallet card 4. ACCOUNT NUMBER -- listed on all your statements You can get the information you need to use Tele#Facts from the back of your statement. If you need another Tele#Facts wallet card or have questions about getting started, please call us at 1-800-225-5478. So go ahead and give Tele#Facts a try. We think you'll enjoy this easy-to-use and convenient service from New England Funds! - ----------------------------------------------------------------------------- NEW ENGLAND FUNDS - ----------------------------------------------------------------------------- STOCK FUNDS Growth Fund Star Advisers Fund Capital Growth Fund Value Fund Growth Opportunities Fund Balanced Fund INTERNATIONAL STOCK FUNDS Growth Fund of Israel International Equity Fund Star Worldwide Fund BOND FUNDS High Income Fund Strategic Income Fund Government Securities Fund Bond Income Fund Limited Term U.S. Government Fund Adjustable Rate U.S. Government Fund TAX EXEMPT FUNDS Municipal Income Fund Massachusetts Tax Free Income Fund Intermediate Term Tax Free Fund of California Intermediate Term Tax Free Fund of New York MONEY MARKET FUNDS Cash Management Trust -- Money Market Series -- U.S. Government Series Tax Exempt Money Market Trust To learn more, and for a free prospectus, contact your financial representative. VISIT OUR WORLD WIDE WEB SITE AT HTTP://WWW.MUTUALFUNDS.COM New England Funds, L.P. 399 Boylston Street Boston, MA 02116 Toll Free 800-225-5478 This material is authorized for distribution to prospective investors when it is preceded or accompanied by the Fund's current prospectus, which contains information about distribution charges, management and other items of interest. Investors are advised to read the prospectus carefully before investing. [LOGO] -------------- NEW ENGLAND FUNDS BULK RATE Where The Best Minds Meet(TM) U.S. POSTAGE PAID BROCKTON, MA PERMIT NO. 770 -------------- - --------------------- 399 Boylston Street Boston, Massachusetts 02116 - --------------------- [LOGO: DALBAR SEAL] GP58-0896 [symbol] Printed on Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----