-----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, DK3CI2CM7VUird5nRbVhrbPJ4U5fB6OhfOgWy1RwK61YFlseWPGcy4sUjp7DYBrX N4YTOsztWWr1G1G/sUjfLQ== 0000950156-97-000314.txt : 19970310 0000950156-97-000314.hdr.sgml : 19970310 ACCESSION NUMBER: 0000950156-97-000314 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970307 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: 97552226 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 - INTERMEDIATE TAX FREE OF CA - -------------------------------------------------------------------------------- ANNUAL REPORT AND PERFORMANCE UPDATE - -------------------------------------------------------------------------------- (Logo) NEW ENGLAND FUNDS Where The Best Minds Meet(TM) - -------------------------------------------------------------------------------- New England Intermediate Term Tax Free Fund of California [graphic omitted] December 31, 1996 FEBRUARY 1997 - -------------------------------------------------------------------------------- [Photo of Henry L.P. Schmelzer] Dear New England Funds Shareholder, Taken together, 1995 and 1996 constituted the sixth strongest back-to-back years for the U.S. stock market since 1915, as measured by percentage gain in the Dow Jones Industrial Average (according to Bloomberg Business News). Most New England Funds portfolio managers believe that the forces behind this rally -- low inflation, relatively stable interest rates and strong corporate profits -- will persist, at least for a time. Nevertheless, bull markets can suddenly turn quiet; they can decline modestly; or they can reverse course sharply. No one can predict what is ahead, nor can anyone guarantee whether the market's strength will extend even further in 1997 and beyond. Maintain a Long-Term Perspective Whatever the market's direction, you should be prepared to consider any short-term trends in the broader context of your long-term personal goals, including the accumulation of financial assets. One way to manage this important process is by diversifying your investments. While U.S. stocks have historically been the strongest performers, you may, depending on your financial goals and needs, also benefit from investing in various types of bond funds, and by participating in growing overseas markets. Remember that each investment has its own unique risks. What's more, no strategy can assure a profit or protect against a loss. However, one time-tested approach is to invest regularly and stay invested -- in good times and bad -- to avoid the pitfall of guessing what the market might do in the short run. Our Multiple-Adviser Approach Sets Us Apart Many financial representatives recommend New England Funds to their clients because of our distinctive multiple-adviser approach. For each fund, we hand-pick a specific subadviser or subadvisers with significant experience and demonstrated skill in selecting investments that are in tune with that fund's stated objective. We call it matching the talent to the task. Finally, it may interest you to learn that you are part of a major national trend. In 1996, nearly 37 million U.S. households owned mutual funds, according to the Investment Company Institute, an industry trade organization. Mutual funds are now a cornerstone of retirement, college and other investment plans for millions of Americans. New England Funds has grown with the industry and is now over $6 billion in size. We thank you for helping us reach this important milestone, and look forward to serving your investment needs well into the future. Sincerely, /s/ Henry L.P. Schmelzer Henry L.P. Schmelzer, President For more information, including a prospectus for any New England Fund, please contact your financial representative or call the Investor Services and Marketing Group at 800-225-5478. Please read the prospectus carefully, including the information on charges and expenses, before you invest. - -------------------------------------------------------------------------------- NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA - -------------------------------------------------------------------------------- AWARD WINNING SERVICE -- TWO YEARS RUNNING - -------------------------------------------------------------------------------- - --------------------- For two years running we're proud to announce that [Logo] DALBAR, an independent evaluator of mutual fund QUALITY service, has awarded New England Funds its Quality TESTED SERVICE Tested Service Seal for "providing the highest 1996 tier of service excellence in the mutual fund - --------------------- industry." New England Funds is one of just three DALBAR mutual fund companies to earn this distinction in HONORS COMMITMENT TO: each of the last two years -- another reason why INVESTORS we are becoming known as the mutual fund company - --------------------- Where The Best Minds Meet(TM). INVESTMENT RESULTS THROUGH DECEMBER 31, 1996 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in the New England Intermediate Term Tax Free Fund of California's Class A Shares compared to the Lehman Municipal Index and the Cost of Living. The data points to this chart are as follows:] COMPARED TO LEHMAN MUNICIPAL INDEX(4) AND THE COST OF LIVING INDEX(5) Net With Lehman Asset Maximum Municipal Cost of Date Value(1) Sales Charge(2) Index(4) Living(5) - -------- ------- ------------ --------- ------- 4/23/93 $10,000 $9,750 $10,000 $10,000 12/31/93 $10,864 $10,592 $10,718 $10,125 12/31/94 $10,322 $10,064 $10,164 $10,396 12/31/95 $11,756 $11,462 $11,938 $10,668 12/31/96 $12,381 $12,071 $12,469 $11,022 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 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. - -------------------------------------------------------------------------------- NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96* - -------------------------------------------------------------------------------- CLASS A (Inception 4/23/93) 1 YEAR 3 YEARS SINCE INCEPTION Net Asset Value(1) 5.32% 4.45% 5.96% With Max. Sales Charge(2) 2.64 3.58 5.24 Lipper CA Municipal Average(6) 4.05 4.23 5.20 - -------------------------------------------------------------------------------- CLASS B (Inception 9/13/93) 1 YEAR 3 YEARS SINCE INCEPTION Net Asset Value(1) 4.55% 3.59% 3.50% With CDSC(3) 0.55 2.68 2.96 Lehman Municipal(4) 4.44 5.18 5.22 Lipper CA Municipal Average(6) 4.05 4.23 n/a YIELDS AS OF 12/31/96(7) - -------------------------------------------------------------------------------- CLASS A CLASS B SEC 30-day Yield 4.81% 4.21% Taxable Equivalent Yield 8.78 7.69 *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 2.5% at the time of purchase of Class A shares. (3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 4% sales charge 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) Lehman Municipal Index is an unmanaged index of bonds issued by states, municipalities and other governmental entities having maturities of more than one year. The Index performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. (5) Cost of Living is based on the Consumer Price Index, a widely recognized measure of the cost of goods and services in the United States, as calculated by the U.S. Bureau of Labor Statistics. (6) 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. (7) SEC Yield is based on the Fund's net investment income over a 30-day period and is calculated in accordance with Securities and Exchange Commission guidelines. Taxable equivalent yield is based on the maximum combined federal and California state income tax bracket of 45.22%. The alternative minimum tax and some federal and state taxes may apply. - -------------------------------------------------------------------------------- NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGER - -------------------------------------------------------------------------------- Q. How did New England Intermediate Term Tax Free Fund of California perform in 1996? [Photo of James Welch Back Bay Advisors, L.P.] The Fund's performance was very strong despite widely fluctuating interest rates during the year. For the 12-month period, the Fund had a total return of 5.32% for Class A shares, based on net asset value, well ahead of the average return of 4.05% for the Lipper California Municipal Average.(6) The Fund also generated attractive levels of tax-exempt income: As of December 31, 1996, the Fund's 30-day SEC yields(7) were 4.81% and 4.21% for Class A and Class B shares, respectively, which translate into taxable equivalent yields of 8.78% and 7.69% for a taxable investment for investors in the maximum combined federal and California state income tax bracket of 45.22%.* We're also pleased to report that Lipper Analytical Services, an independent mutual fund ranking service, ranked your Fund #2 out of 28 intermediate California tax free funds for the year ending December 31, 1996. Longer term, the Fund was ranked #8 out of 20 peers for 3-year performance and #2 out of 12 peers from inception (4/23/93) through December 31, 1996.(6) In addition, independent fund-rating service Morningstar awarded your Fund a four-star rating for three-year performance and a five-star rating -- its highest rating -- for one-year performance through December 31, 1996. These ratings reflect the Fund's attractive blend of share price appreciation, income and managed risk.** Although past performance is not predictive of future return, performance to date as recognized by Lipper and Morningstar lends credibility to the strategies and techniques used to manage your Fund. Q. How did you manage the Fund during the year? When unexpectedly strong economic activity early in the year caused interest rates to move sharply higher, we reduced the Fund's sensitivity to interest rate changes by decreasing its duration to 5.5 years. Duration measures a portfolio's sensitivity to changes in interest rates; a lower duration results in smaller price declines when interest rates rise. Because bond prices and interest rates move in opposite directions, this move helped to protect shareholders' asset value as interest rates were rising. During the second half of the year, a moderating economy made the environment for fixed income securities more appealing. We took advantage of this improved investment environment by extending duration and adding to our position in lower coupon discount bonds (bonds priced below par), which tend to have stronger price gains when interest rates decline. We substantially increased our holdings of California general obligation bonds early in the year based on our improving outlook for the state. The economy continued to post gains over the course of the year as the state's job growth led the nation, its exports increased dramatically and its tax revenue collections strengthened. This strategic move was rewarded in July with an upgrade for these bonds by both Moody's Investors Service and Standard & Poor's (independent bond rating services). The Fund also emphasized revenue bonds issued for essential purposes, such as utilities, transportation, education and public works, which we expected to benefit from improving local and national economies. An important event that will affect certain California municipal bonds took place when the state's voters passed Proposition 218. This initiative mandates that all tax-raising bills require a two-thirds majority voter approval for enactment into law, retroactive to January 1, 1995. This means that there will no longer be special assessment and tax allocation bond issues in the state, creating uncertainty in the tax-supported sector of the market as authorities determine which existing issues may be negatively influenced by the Proposition. The Fund's focus on revenue bonds, which are backed by a dedicated revenue stream and/or voter-approved state sales tax allocations, is intended to insulate the portfolio from much of this uncertainty. Q. What is your investment outlook for the months ahead? We believe that we will see continued moderate economic growth and low levels of inflation, both positive factors for fixed income investments. Our long-term outlook for the California municipal bond market is also positive as supply and demand dynamics remain favorable. We expect low new issue supply and strong demand for California tax-exempt bonds resulting from an improved economy and heavy reinvestment cash flow as a large dollar volume of securities matures early in 1997. These factors should influence a favorable environment for California municipal bonds and for your Fund. ** Morningstar proprietary ratings reflect risk-adjusted performance through 12/31/96. The ratings are subject to change every month. Past performance is no guarantee of future results. Morningstar ratings are calculated from the fund's three- and one-year returns (with fee adjustments) in excess of 90-day T-bill returns. The one-year rating is calculated using the same methodology, but is not a component of the overall rating. The Fund received four stars for three years and five stars for one year. It was rated among 1129 and 1739 funds, respectively. Ten percent of the funds in a rating category receive five stars, and the next 22.5% receive four stars. - -------------------------------------------------------------------------------- NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CREDIT QUALITY COMPOSITION -- DECEMBER 31, 1996 - -------------------------------------------------------------------------------- AAA 30.95% AA 4.79% A 28.05% BBB 31.48 NR 4.73 Average Portfolio Quality = A+ Average Portfolio Maturity = 10.5 Years Quality rating provided by Standard & Poor's. * Alternative minimum tax and some federal or state taxes may apply. - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Investments as of December 31, 1996 TAX EXEMPT OBLIGATIONS--101.1% OF TOTAL NET ASSETS
RATINGS (c) (UNAUDITED) ------------------------- FACE STANDARD AMOUNT ISSUER MOODY'S & POOR'S VALUE (a) - ---------------------------------------------------------------------------------------------------------- CALIFORNIA--92.1% $ 1,500,000 Berkeley California Health Facility, 6.500%, 12/01/11 ................................ Baa BBB+ $ 1,540,845 925,000 California Educational Facilities Authority, 5.000%, 9/01/15, (MBIA) ................. Aaa AAA 870,379 1,000,000 California Educational Facilities Authority, 6.125%, 6/01/09 ......................... Baa -- 1,019,970 1,000,000 California Educational Facilities Authority (Stanford Univ.), 5.250%, 12/01/01 ...... Aaa AAA 1,043,790 1,000,000 California Educational Facilities Authority (Stanford Univ.), 7.000%, 1/01/04 ....... Aaa AAA 1,073,210 1,000,000 California Health Facilities Financing, 5.000%, 7/01/14, (MBIA) ................. Aaa AAA 937,870 1,120,000 California Housing Finance Agency, 6.250%, 8/01/16 ................................. Aa AA- 1,138,379 1,000,000 California Pollution Control Financing Authority, 5.900%, 6/01/14 .............. A2 A-1 1,050,110 1,000,000 California Pollution Control Financing Authority, 6.900%, 9/01/06 .............. -- A+ 1,072,380 1,000,000 California Pollution Control Financing Authority, 8.750%, 1/01/07 .............. A2 A 1,057,150 1,500,000 California Pollution Control Solid Waste, 5.800%, 12/01/16 ........................ A2 A 1,491,150 1,000,000 California State, 7.000%, 6/01/02 (FGIC) .. Aaa AAA 1,120,700 1,000,000 California State Department Water Resources Valley, 5.125%, 12/01/13 ................ Aa AA 969,710 1,000,000 California State Public Works, 5.500%, 6/01/10 .................................. A1 A 1,012,250 1,000,000 California State Public Works, 6.400%, 9/01/08 .................................. A A 1,057,460 1,000,000 California State Public Works Lease, 5.375%, 11/01/13, (MBIA) ................ Aaa AAA 979,870 1,500,000 Duarte, CA Certificates of Participation, 6.125%, 4/01/13 ......................... Baa1 -- 1,510,905 1,295,000 Fresno United School District, 6.600%, 3/01/99 ................................. A -- 1,352,265 2,030,000 Fresno United School District, 7.250%, 3/01/07 ................................. A -- 2,201,169 1,000,000 Orange County, CA, 6.000%, 7/01/08 (MBIA) . Aaa AAA 1,081,110 975,000 Pleasanton Financing Authority, 5.600%, 9/02/00 ................................. Baa -- 1,006,405 1,000,000 Sacramento Utility District, 3.625%, 11/15/06 (d) (FSA) ...................... Aaa AAA 1,000,000 1,000,000 Sacramento Utility District, 6.895%, 11/15/06 (d) (FSA) ...................... Aaa AAA 1,060,200 1,000,000 Sacramento, CA Power Authority Project, 5.875%, 7/01/15 ......................... -- BBB- 990,540 1,155,000 San Bernardino, CA Joint Powers Financing, 5.500%, 10/01/10, (FSA) ................. Aaa AAA 1,163,270 2,000,000 San Diego Port Facilities, 6.600%, 12/01/02 -- -- 2,083,920 1,000,000 Southern California Rapid Transit District, 7.500%, 7/01/05, (MBIA) ................. Aaa AAA 1,124,970 1,000,000 Stanislaus Solid Waste Authority, 7.500%, 1/01/05 ................................. -- BBB+ 1,065,680 1,945,000 Stanislaus Solid Waste Authority, 7.625%, 1/01/10 ................................. -- BBB+ 2,077,688 775,000 Valley Health Systems, 6.250%, 5/15/99 .... -- BBB- 785,230 1,000,000 Valley Health Systems, 6.500%, 5/15/15 .... -- BBB- 1,012,710 2,000,000 West & Central Basin Financing Authority, 6.020%, 8/01/06, (AMBAC) ................ Aaa AAA 2,059,760 1,000,000 Whittier Health Facilities, 6.250%, 6/01/09. Aaa AAA 1,094,070 ----------- 40,105,115 ----------- OTHER OBLIGATIONS--9.0% 1,000,000 Puerto Rico Commonwealth Aqueduct Sewer, 6.000%, 7/01/09 ......................... Baa1 A 1,074,690 1,750,000 Virgin Islands Public Finance Authority, 7.700%, 10/01/04 ........................ -- BBB 1,894,182 885,000 Virgin Islands Territory, Public Finance Authority, 7.750%, 10/01/06 ............. -- -- 958,995 ----------- 3,927,867 ----------- Total Tax Exempt Obligations (Identified Cost $42,987,537) ............ 44,032,982 ----------- Total Investments--101.1% (Identified Cost $42,987,537) (b) ........ 44,032,982 Other assets less liabilities ............ (470,695) ----------- Total Net Assets--100% ..................... $43,562,287 =========== (a) See Note 1a. (b) Federal Tax Information: At December 31, 1996 the net unrealized appreciation on investments based on cost of $42,987,537 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost. ........................................... $ 1,115,296 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value. ........................................... (69,851) ----------- Net unrealized appreciation. ................................................ $ 1,045,445 =========== As of December 31, 1996, the Fund had a net tax basis capital loss carryforward as follows: Expiring December 31, 2002 .................................................. $ 1,325,032 (c) The ratings shown are believed to be the most recent ratings available at December 31, 1996. Securities are generally rated at the time of issuance. The rating agencies may revise their ratings from time to time. As a result there can be no assurance that the same ratings would be assigned if the securities were rated at December 31, 1996. The Fund's adviser independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) Floating rate demand notes are instruments whose interest rates change on a specific date (such as coupon date or interest payment date). These instruments are payable on demand and are secured by a letter of credit or other support agreements from banks. The rates shown were those in effect at December 31, 1996. Legend of Portfolio abbreviations: AMBAC - American Municipal Bond Assurance Corp. FGIC - Financial Guarantee Insurance Company FSA - Financial Security Assurance MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES - ---------------------------------------------------------------------------------------------- December 31, 1996 ASSETS Investments at value ...................................... $44,032,982 Cash ...................................................... 43,366 Receivable for: Fund shares sold ........................................ 127,903 Securities sold ......................................... 977,462 Accrued interest ........................................ 715,439 Unamortized organization expense ........................ 12,433 Prepaid registration expense .............................. 5,000 ----------- 45,914,585 LIABILITIES Payable for: Securities purchased .................................... $2,210,341 Fund shares redeemed .................................... 18,511 Dividends declared ...................................... 58,310 Due to investment adviser ............................... 20,357 Accrued expenses: Deferred trustees' fees ................................. 3,453 Accounting and administrative ........................... 1,675 Other expenses .......................................... 39,651 ---------- 2,352,298 ----------- NET ASSETS .................................................. $43,562,287 =========== Net Assets consist of: Capital paid in ......................................... $43,821,161 Undistributed net investment income ..................... 64,024 Accumulated net realized losses ......................... (1,368,343) Unrealized appreciation on investments .................. 1,045,445 ----------- NET ASSETS .................................................. $43,562,287 =========== Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($35,971,916 divided by 4,693,431 shares of beneficial interest) ................................................. $7.66 Offering price per share (100/97.50 of $7.66) ............... $7.86* ===== Net asset value and offering price of Class B shares ($7,590,371 divided by 993,289 shares of beneficial interest) ................................................. $7.64** ===== Identified cost of investments .............................. $42,987,537 =========== * Based upon single purchases of less than $100,000. 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 - ---------------------------------------------------------------------------------------------- Year Ended December 31, 1996 INVESTMENT INCOME Interest ................................................... $2,385,876 Expenses Management fees .......................................... $210,469 Service fees - Class A ................................... 84,706 Service and distribution fees - Class B .................. 63,402 Trustees' fees and expenses .............................. 12,136 Accounting and administrative ............................ 19,945 Custodian ................................................ 59,703 Transfer agent ........................................... 38,160 Audit and tax services ................................... 18,000 Legal .................................................... 24,372 Printing ................................................. 20,066 Registration ............................................. 23,338 Amortization of organization expenses .................... 8,066 Miscellaneous ............................................ 4,811 -------- Total Expenses ............................................. 587,174 Less expenses waived by the investment adviser and subadviser ............................................... (236,628) 350,546 -------- ---------- Net investment income ...................................... 2,035,330 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS AND FUTURES CONTRACTS Realized gain (loss) on: Investments - net ........................................ 126,853 Futures contracts - net .................................. 166,891 Options contracts - net .................................. (171,260) -------- Net realized gain on investments ......................... 122,484 -------- Unrealized appreciation on: Investments - net ........................................ 7,573 -------- Net gain on investment transactions ........................ 130,057 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $2,165,387 ==========
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------ STATEMENT OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------------------------------ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1995 1996 ----------- ----------- FROM OPERATIONS Net investment income ...................................... $ 1,926,651 $ 2,035,330 Net realized gain on investments, options and futures transactions ..................................... 80,972 122,484 Unrealized appreciation on investments, options and futures transactions ..................................... 2,839,989 7,573 ----------- ----------- Increase in net assets from operations ..................... 4,847,612 2,165,387 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A .................................................. (1,665,974) (1,717,606) Class B .................................................. (260,677) (274,603) In excess of net investment income Class A .................................................. (9,744) 0 Class B .................................................. (1,589) 0 ----------- ----------- (1,937,984) (1,992,209) ----------- ----------- Increase (decrease) in net assets derived from capital share transactions ....................................... (591,705) 5,065,241 ----------- ----------- Total increase in net assets ............................... 2,317,923 5,238,419 NET ASSETS Beginning of the year ...................................... 36,005,945 38,323,868 ----------- ----------- End of the year ............................................ $38,323,868 $43,562,287 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME Beginning of the year ...................................... $ 29,558 $ 20,903 =========== =========== End of the year ............................................ $ 20,903 $ 64,024 =========== ===========
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------- CLASS A --------------------------------------------------------------- APRIL 23,(a) YEAR YEAR YEAR THROUGH ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1993 1994 1995 1996 ------------ ------------ ------------ ------------ Net Asset Value, Beginning of Period ... $7.50 $7.84 $7.08 $7.65 ----- ----- ----- ----- Income From Investment Operations Net Investment Income .................. 0.26 0.38 0.39 0.39 Net Realized and Unrealized Gain (Loss) on Investments 0.38 (0.76) 0.57 0.00 ----- ----- ----- ----- Total From Investment Operations ....... 0.64 (0.38) 0.96 0.39 ----- ----- ----- ----- Less Distributions Dividends From Net Investment Income ... (0.26) (0.38) (0.39) (0.38) Distributions in Excess of Net Investment Income .................... (0.04) 0.00 0.00 0.00 ----- ----- ----- ----- Total Distributions .................... (0.30) (0.38) (0.39) (0.38) ----- ----- ----- ----- Net Asset Value, End of Period ......... $7.84 $7.08 $7.65 $7.66 ===== ===== ===== ===== Total Return (%) (d) ................... 8.6 (4.9) 13.9 5.3 Ratio of Operating Expenses to Average Net Assets (%)(b) 0.70(c) 0.70 0.70 0.75 Ratio of Net Investment Income to Average Net Assets (%) ............... 4.88(c) 5.07 5.24 5.18 Portfolio Turnover Rate (%) ............ 121(c) 212 167 161 Net Assets, End of Period (000) ........ $28,938 $30,293 $32,707 $35,972 (a) Commencement of operations. (b) Effective September 1, 1996 expenses were voluntarily limited to 0.85% of Class A average net assets. Prior to September 1, 1996 expenses were voluntarily limited to 0.70% of Class A average net assets. See Note 4. The ratio of operating expenses to average net assets without giving effect to this expense limitation would have been 1.49% (annualized) for the period ended December 31, 1993, 1.33%, 1.31% and 1.34% for the years ended December 31, 1994, 1995, and 1996, respectively. (c) Computed on an annualized basis. (d) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized.
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- continued - ---------------------------------------------------------------------------------------------------------- CLASS B ------------------------------------------------------------------ SEPTEMBER 13,(a) YEAR YEAR YEAR THROUGH ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1993 1994 1995 1996 ------------ ------------ ------------ ------------ Net Asset Value, Beginning of Period $7.92 $7.84 $7.07 $7.63 ----- ----- ----- ----- Income From Investment Operations Net Investment Income ............... 0.10 0.32 0.33 0.33 Net Realized and Unrealized Gain (Loss) on Investments ............. (0.04) (0.77) 0.56 0.01 ----- ----- ----- ----- Total From Investment Operations .... 0.06 (0.45) 0.89 0.34 ----- ----- ----- ----- Less Distributions Dividends From Net Investment Income (0.10) (0.32) (0.33) (0.33) Distributions in Excess of Net Investment Income ................. (0.04) 0.00 0.00 0.00 ----- ----- ----- ----- Total Distributions ................. (0.14) (0.32) (0.33) (0.33) ----- ----- ----- ----- Net Asset Value, End of Period ...... $7.84 $7.07 $7.63 $7.64 ===== ===== ===== ===== Total Return (%)(d) ................. 0.8 (5.8) 12.9 4.6 Ratio of Operating Expenses to Average Net Assets (%)(b) ......... 1.45(c) 1.45 1.45 1.50 Ratio of Net Investment Income to Average Net Assets (%) ............ 3.68(c) 4.32 4.49 4.43 Portfolio Turnover Rate (%) ......... 121(c) 212 167 161 Net Assets, End of Period (000) ..... $1,849 $5,713 $5,617 $7,590 (a) Commencement of operations. (b) Effective September 1, 1996 expenses were voluntarily limited to 1.60% of Class B average net assets. Prior to September 1, 1996 expenses were voluntarily limited to 1.45% of Class B average net assets. See Note 4. The ratio of operating expenses to average net assets without giving effect to this expense limitation would have been 2.24% (annualized) for the period ended December 31, 1993, 2.08%, 2.06% and 2.09% for the years ended December 31, 1994, 1995, and 1996, respectively. (c) Computed on an annualized basis. (d) A contingent deferred sales charge is not reflected in total return calculations. Periods less than one year are not annualized.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- December 31, 1996 1. The Fund is a series of The New England Funds Trust II, a Massachusetts business trust (the "Trust"), and is 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 series of shares a "Fund"). The Fund offers both Class A and Class B shares. The Fund commenced its public offering of Class B shares on September 13, 1993. Class A shares are sold with a maximum front end sales charge of 2.50%. 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. Expenses of the Fund are borne pro-rata by the holders of both classes 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. The Fund's investment subadviser, Back Bay Advisors, L.P. ("Back Bay Advisors"), under the supervision of the Fund's trustees, determines the value of the Fund's portfolio of securities, using valuations provided by a pricing service selected by Back Bay Advisors and other information with respect to transactions in securities, including quotations from securities dealers. Valuations of securities and other assets owned by the Fund for which market quotations are readily available are based on those quotations. Short-term obligations that will mature in 60 days or less are stated at amortized cost, which, when combined with accrued interest or discount earned, approximates market value. All other securities and assets are valued at their fair value as determined in good faith by Back Bay Advisors under the supervision of the Fund's trustees. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Interest income is recorded on the accrual basis. Interest income is increased by the accretion of original issue discount. Interest income is reduced by the amortization of premium. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. C. OPTIONS AND FUTURES. CALLS AND PUTS. The Fund may write (sell) call and put options on securities to manage its exposure to interest rates and the bond market. Buying futures, writing puts, and buying calls tend to increase the Fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. When a Fund writes a call or put option, an amount equal to the premium received by the Fund is included in the Fund's statement of assets and liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. The current value of a written option is the closing price on the principal exchange on which such option is traded. If an option which the Fund has written either expires on its stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the underlying security and the proceeds from such sale are increased by the premium originally received. If a put option which the Fund has written is exercised, the amount of the premium originally received will reduce the cost of the security which the Fund purchases upon exercise of the option. The premium paid by a Fund for the purchase of a call or a put option is included in the asset section of the Fund's statement of assets and liabilities as an investment and subsequently adjusted to the current market value of the option. The current value of a purchased option is the closing price on the principal exchange on which such option is traded. If an option which the Fund has purchased expires on the stipulated expiration date, the Fund will realize a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund will realize a gain or loss, depending on whether the sales proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a purchased put option, it will realize a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. If the Fund exercises a purchased call option, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid. The risk in writing a call option is that the Fund relinquishes the opportunity to profit if the market price of the underlying security increases and the option is exercised. In writing a put option, the Fund assumes the risk of incurring a loss if the market price decreases and the option is exercised. In addition, there is the risk the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. INTEREST RATE FUTURES CONTRACTS. The Fund may purchase and sell interest rate futures contracts to hedge against changes in the values of tax exempt municipal securities the Fund owns or expects to purchase. An interest rate futures contract is an agreement between two parties to buy and sell a security for a set price (or to deliver an amount of cash) on a future date. Upon entering into such a contract, the purchasing Fund is required to pledge to the broker an amount of cash, U.S. Government securities or other high quality debt securities equal to the minimum "initial margin" requirements of the exchange, currently up to $3,000 per contract. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as "variation margin", and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The potential risk to the Fund is that the change in value of futures contracts primarily corresponds with the value of underlying instruments which may not correspond to the change in the value of the hedged instruments. In addition, there is a risk that the Fund may not be able to close out its futures positions due to an illiquid secondary market. D. 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. E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily to shareholders of record at the time and are paid monthly. 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. Permanent book and tax basis differences relating to shareholder distributions will result in reclassification to paid in capital. F. 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. Back Bay Advisors 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. G. ORGANIZATION EXPENSE. Costs incurred in 1993 in connection with the Fund's organization and initial registration amounted to $26,500 and were paid by the Fund. These costs are being amortized over 60 months beginning April 23, 1993. 2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the Fund for the year ended December 31, 1996 were $ 71,046,134 and $63,660,950 respectively. Investments in written options and futures contracts for the Fund for the year ended December 31, 1996 are summarized as follows: FUTURES CONTRACTS ----------------------- AGGREGATE NUMBER OF FACE VALUE CONTRACTS OF CONTRACTS --------- ------------ Open at December 31, 1995 ........................... 0 $ 0 Contracts opened .................................... 525 58,958,150 Contracts closed .................................... (525) (58,958,150) ---- ----------- Open at December 31, 1996 ........................... 0 $ 0 ==== =========== WRITTEN OPTIONS ----------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- -------- Open at December 31, 1995 ........................... 0 $ 0 Contracts opened .................................... 625 220,400 Contracts closed .................................... (625) (220,400) ---- ----------- Open at December 31, 1996 ........................... 0 $ 0 ==== =========== 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 0.525% of the first $200 million of the Fund's average daily net assets, 0.50% of the next $300 million and 0.475% of such assets in excess of $500 million. NEFM pays the Fund's investment subadviser, Back Bay Advisors at the rate of 0.2625% of the first $200 million of the Fund's average daily net assets, 0.25% of the next $300 million and 0.2375% of such assets in excess of $500 million. Certain officers and directors of NEFM are also officers or trustees of the Fund. NEFM and Back Bay Advisors are wholly owned subsidiaries of New England Investment Companies, L.P. ("NEIC"), which is a subsidiary of Metropolitan Life Insurance Company ("MetLife"). Fees earned by NEFM and Back Bay Advisors under the management agreement in effect during the year ended December 31, 1996 are as follows: FEES EARNED ----------- $105,235 New England Funds Management, L.P. $105,234 Back Bay Advisors, L.P. (a) Before reduction pursuant to voluntary expense limitation. See note 4 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 Funds' expenses of providing these services which include the following: (i) expenses for personnel performing bookkeeping, accounting, internal auditing and financial reporting functions and related 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 year ended December 31, 1996 these expenses amounted to $19,945 and are shown separately in the financial statements as accounting and administrative. C. 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 a Service and Distribution Plan relating to the Fund's Class B shares (the "Class B Plan"). Under the Class A Plan, the Fund pays New England Funds, L.P. ("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 New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the year ended December 31, 1996, the Fund paid New England Funds $84,706 in fees under the Class A Plan. If the expenses of New England Funds that are otherwise reimbursable under the Class A Plan incurred in any year exceed the amounts payable by the Fund under the Class A Plan, the unreimbursed amount (together with unreimbursed amounts from prior years) may be carried forward for reimbursement in future years in which the Class A Plan remains in effect. The amount of unreimbursed expenses carried forward into 1997 is $179,456. Under the Class B 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 B 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 shares and/or the maintenance of shareholder accounts. For the year ended December 31, 1996, the Fund paid New England Funds $15,850 in service fees under the Class B Plan. Also under the Class B 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 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 shares. For the year ended December 31, 1996, the Fund paid New England Funds $47,552 in distribution fees under the Class B Plan. Commissions (including contingent deferred sales charges) on Fund shares paid to New England Funds by investors of shares of the Fund during the year ended December 31, 1996 amounted to $118,453. D. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder servicing agent to the Fund. For the year ended December 31, 1996, the Fund paid New England Funds $30,870 as compensation for its services in that capacity. 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 $730 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting Committee Chairman Retainer $18/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. EXPENSE LIMITATIONS. Effective September 1, 1996 until further notice to the Fund, Back Bay Advisors and NEFM have voluntarily agreed to reduce management fees in order to limit the Fund's expenses to an annual rate of 0.85% of the Fund's Class A average daily net assets and 1.60% of Class B average daily net assets. Prior to September 1, 1996 Back Bay Advisors and NEFM had voluntarily agreed to reduce management fees in order to limit the Fund's expenses to an annual rate of 0.70% of the Fund's Class A average daily net assets and, effective September 13, 1993, 1.45% of Class B average daily net assets. As a result of the Fund's expenses exceeding the foregoing expense limitations during the year ended December 31, 1996, Back Bay Advisors waived its entire subadvisory fee of $105,234 and NEFM waived its entire advisory fee of $105,235. 5. CONCENTRATION OF CREDIT. The Fund primarily invests in debt obligations issued by the State of California and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to factors adversely affecting issuers of California municipal securities than is a comparable municipal bond fund that is not so concentrated. Uncertain economic and fiscal conditions may affect the ability of issuers of California municipal securities to meet their financial obligations. 6. CAPITAL SHARES. At December 31, 1996 there was an unlimited number of shares of beneficial interest authorized, divided into two classes, Class A and Class B capital stock. Transactions in capital shares were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1996 -------------------------- ---------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT - ------- -------- ------------ --------- ----------- Shares sold ........................... 788,727 $ 5,839,073 2,067,648 $15,581,682 Shares issued in connection with the reinvestment of: Distributions from net investment income ............................ 125,283 929,591 122,617 929,169 ------- ------------ --------- ----------- 914,010 6,768,664 2,190,265 16,510,851 Shares repurchased .................... (922,790) (6,815,110) (1,769,674) (13,385,231) ------- ------------ --------- ----------- Net increase (decrease) ............... (8,780) $ (46,446) 420,591 $ 3,125,620 ------- ------------ --------- ----------- YEAR ENDED YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1996 -------------------------- ---------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT - ------- -------- ------------ --------- ----------- Shares sold ........................... 93,955 $ 683,998 443,797 $ 3,344,406 Shares issued in connection with the reinvestment of: Distributions from net investment income ............................ 14,354 106,386 17,906 135,371 ------- ------------ --------- ----------- 108,309 790,384 461,703 3,479,777 Shares repurchased .................... (180,341) (1,335,643) (204,258) (1,540,156) ------- ------------ --------- ----------- Net increase (decrease) ............... (72,032) $ (545,259) 257,445 $ 1,939,621 ------- ------------ --------- ----------- Increase (decrease) derived from capital shares transactions ......... (80,812) $ (591,705) 678,036 $ 5,065,241 ======= ============ ========= ===========
- -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Trustees of New England Funds Trust II and the Shareholders of the NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of New England Intermediate Term Tax Free Fund of California as of December 31, 1996, and the related statement of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated herein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1996, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the New England Intermediate Term Tax Free Fund of California as of December 31, 1996 the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated herein, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts February 10, 1997 -------------- (Logo) BULK RATE NEW ENGLAND FUNDS U.S. POSTAGE Where The Best Minds Meet(TM) PAID BROCKTON, MA PERMIT NO. 770 -------------- --------------------- 399 Boylston Street Boston, Massachusetts 02116 --------------------- - --------------------- --------------------- [Logo] [Logo] QUALITY QUALITY TESTED SERVICE TESTED SERVICE 1995 1996 - --------------------- --------------------- DALBAR DALBAR HONORS COMMITMENT TO: HONORS COMMITMENT TO: INVESTORS INVESTORS - --------------------- --------------------- CA56-1296 [recycle symbol] Printed On Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----