-----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, AERgYP8GEPXYDzm7XDwax1kZfs4pQfWM0X+1zu9L5eZAQoQsr+t7StayeW/xQ/Hy 7PDJUWJMvPg22XQI2W6UPQ== 0000950156-98-000524.txt : 19980825 0000950156-98-000524.hdr.sgml : 19980825 ACCESSION NUMBER: 0000950156-98-000524 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980824 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: SEC FILE NUMBER: 811-00242 FILM NUMBER: 98696417 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 - HIGH INCOME FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT - -------------------------------------------------------------------------------- [Logo](R) NEW ENGLAND FUNDS(R) Where the Best Minds Meet(R) - -------------------------------------------------------------------------------- New England High Income Fund [Graphic Omitted] - --------------------- June 30, 1998 - --------------------- August 1998 - -------------------------------------------------------------------------------- [Photo of Henry L.P. Schmelzer] Dear Shareholder: Investors had reason for comfort during the first half of 1998. After stunning gains in each of the last three years, the stock market behaved more like its customary self: Major market indicators moved up for a time, slid back and were once again in recovery mode at the end of the period. This pattern largely reflected investors' responses to fast-changing events in Asia. Unpredictable markets call to mind the long-term experience of millions of mutual fund investors; those of us who held firm to our plans as markets entered difficult periods were often rewarded as markets recovered. The longer you stay invested the less interim ups and downs -- here or overseas -- should concern you. News from the Far East drove bond market sentiment as well. In the United States, faltering Asian economies meant lower prices on many imported goods, putting pressure on prices and corporate earnings. With slower growth now a real possibility and with little immediate evidence of inflation, the Federal Reserve Board left short-term interest rates unchanged, while long-term rates fell to record lows in mid-June. In the pages that follow, you can read about how your Fund's management dealt with the disruptions in the Pacific region and their impact on our domestic economy. But beyond Asia's present problems, and notwithstanding the inevitable ebb and flow of our own business cycle, there are reasons to be optimistic about investment prospects over the next several years. For example, vast, under-served populations in China and elsewhere represent huge potential demand for consumer goods. Here in the United States, there is the prospect of a demography-driven spending wave, as millions of baby-boomers enter their peak consumption years. Events may turn out differently -- volatility will always be part of investing -- but as much as the markets may waver, the watchwords for many long-term investors are constant: diversify and persist. While you are thinking about your investments, take a few minutes to review your portfolio. It's possible that three years of strong market gains have tilted your holdings disproportionately toward aggressive stock funds. If so, you and your financial representative can adjust the balance easily using some of New England Funds' more conservative equity or bond funds to reallocate your assets in line with your long-term goals and comfort level. Once you are satisfied with your portfolio's balance, be sure to stay in touch with your financial professional, invest regularly and don't try to guess what the market will do next. Thank you for your continued support of New England Funds. Sincerely, /s/ Henry L.P. Schmelzer Henry L.P. Schmelzer President PREPARING FOR THE YEAR 2000 - -------------------------------------------------------------------------------- New England Funds continues to work to provide high quality service as we move into the new century. Since last year we have devoted significant resources to identifying, analyzing and resolving computer issues related to Year 2000. As a further measure, we have focused on year-end 1998 as a target for preparedness by vendor and service agency systems that we rely on for support. We expect major systems to be ready before the end of the year, with a year of quality assurance to follow. NEW ENGLAND HIGH INCOME FUND INVESTMENT RESULTS THROUGH JUNE 30, 1998 - -------------------------------------------------------------------------------- Putting Performance in Perspective The charts comparing your Fund's performance to a benchmark index provide 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. GROWTH OF 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 Class A Shares of New England High Income Fund compared to the First Boston High Yield Index and the Cost of Living from 6/30/88. The data points to this chart are as follows:] JUNE 1988 THROUGH JUNE 1998 COMPARED TO FIRST BOSTON HIGH YIELD INDEX(4) AND THE COST OF LIVING(5) With First Cost Maximum Boston of NAV(1) Sales Charge(2) High Yield(4) Living(5) - ------------------------------------------------------------------------------ 6/30/88 $10,000 $ 9,550 $10,000 $10,000 6/89 $10,561 $10,086 $10,968 $10,517 6/90 $10,584 $10,108 $10,760 $11,008 6/91 $10,771 $10,286 $12,448 $11,525 6/92 $13,472 $12,866 $15,581 $11,881 6/93 $15,614 $14,911 $18,224 $12,237 6/94 $16,268 $15,536 $19,015 $12,542 6/95 $17,146 $16,375 $21,392 $12,923 6/96 $18,712 $17,870 $23,525 $13,279 6/97 $21,811 $20,829 $26,976 $13,584 6/98 $24,260 $23,168 $29,938 $13,796 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 differ from that shown based on differences in inception date, fees and sales charges. All index and Fund performance assumes reinvested distributions. - -------------------------------------------------------------------------------- NEW ENGLAND HIGH INCOME FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -- 6/30/98 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CLASS A (Inception 2/22/84) 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Net Asset Value(1) 3.25% 11.34% 9.24% 9.28% With Max. Sales Charge(2) -1.41 6.37 8.24 8.78 First Boston High Yield Index(4) 4.31 10.98 10.43 11.59 Lipper High Current Yield Average(6) 4.42 11.45 9.90 10.23 - -------------------------------------------------------------------------------- CLASS B (Inception 9/20/93) 6 MONTHS 1 YEAR SINCE INCEPTION Net Asset Value(1) 2.86% 10.41% 8.78% With CDSC(3) -2.08 5.41 8.48 First Boston High Yield Index(4) 4.31 10.98 10.44 (calculated from 9/30/93) Lipper High Current Yield Average(6) 4.42 11.45 9.99 (calculated from 9/30/93) - -------------------------------------------------------------------------------- CLASS C (Inception 3/2/98) SINCE INCEPTION Net Asset Value(1) 1.21% With CDSC(3) 0.22 First Boston High Yield Index(4) 1.77 Lipper High Current Yield Average(6) 1.66 - -------------------------------------------------------------------------------- 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. The Fund's current subadviser began managing the Fund on July 1, 1996. Results for earlier periods reflect performance under previous subadvisers. NOTES TO CHARTS (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 assumes reinvestment of all distributions and reflects the maximum sales charge of 4.5% at the time of purchase of Class A shares. (3) With Contingent Deferred Sales Charge (CDSC) performance assumes reinvestment of all distributions and a maximum 5% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero six years after the purchase of shares. CDSC for Class C shares assumes a maximum 1% sales charge on redemptions within the first year of purchase. (4) First Boston High Yield Index is an unmanaged index of bonds issued by U.S. corporations rated below investment-grade by Standard & Poor's or Moody's Investors Service. 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, calculated by the U.S. Bureau of Labor Statistics. (6) Lipper High Current Yield 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. - -------------------------------------------------------------------------------- NEW ENGLAND HIGH INCOME FUND - -------------------------------------------------------------------------------- [Photo of Gary L. Goodenough] Gary L. Goodenough Loomis Sayles & Company, L.P. QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGER - -------------------------------------------------------------------------------- Q. How did New England High Income Fund perform? For the six-month period that ended June 30, 1998, the Fund continued to provide investors a generous level of monthly income. In fact, immediately after the semiannual reporting period on July 1, the Fund raised its monthly dividend distribution to $0.075 per share -- the fifth such increase in the past two years. Total return for the Fund's Class A shares was 3.25% for the six months, reflecting a $0.12 per share drop in net asset value to $9.82 per share and the reinvestment of $0.44 per share in dividend distributions. Q. What was the investment environment during the period? It was very challenging. At the beginning of 1998, the high-yield bond market was strong. Interest rates declined, economic growth was solid and U.S. equity markets made significant gains. During the second quarter of 1998, however, concerns that Asia's economic problems could eventually dampen corporate profits, and thereby U.S. economic growth, created uncertainty in the high-yield marketplace. In addition, investors had to cope with an overabundance of supply. High-yield investors absorbed $120 billion worth of new bonds in 1997. In 1998, new issuance is running at a rate that is double 1997's rate of issuance. High-yield bond prices weakened as the surge in supply outstripped the growth in demand. Q. What affected the Fund's performance? Most investments in the portfolio performed in line with our expectations, contributing positively to the Fund's performance. The impact of each individual holding on the total portfolio can be considerable, given our concentrated investment approach. In other words, each holding will tend to have greater influence on overall performance -- whether good or bad -- than a more diversified portfolio stretched across a greater number of holdings. That said, two sizable holdings worked against the Fund during the period -- Petroleum Heat & Power Company, the largest oil distributor in the northeast, and Penn-Traffic, a northeastern supermarket chain. Because of an unusually warm winter, Petroleum Heat & Power felt the negative effects of the reduced demand for home heating oil. We eliminated the company from the portfolio because of disappointing results. In contrast, we retained the Fund's investment in Penn-Traffic, which has been struggling amidst intense competition in the supermarket industry. Viewing Penn-Traffic's problems as manageable, we decided to keep it in the portfolio. We feel the company's new management team, in now for about a year, has the potential to turn the company around. Q. What strategies did you use in managing the Fund? We continued to invest in higher-yielding bonds that had relatively stable prices. Specifically, we selected bonds of companies that we believe to have strong balance sheets. In addition, we invested in shorter-term bonds, whose prices tend to be less volatile than those of longer-term bonds. We also upgraded the quality of the portfolio by cutting exposure to emerging markets from 10% to 6% of assets, as the Asian fallout clouded these markets. We continued to invest selectively in global bond markets but, as usual, eliminated the risks associated with currency fluctuations by investing only in U.S.-denominated securities. At the end of the period, the only emerging market securities in the Fund were U.S. dollar-denominated Mexican bonds. Mexico has been the strongest of the emerging market countries. Because the Asian crisis relieved inflationary pressures and slowed economic growth around the world, we avoided most commodity-based companies, which tend to do well in an inflationary environment. These included energy, metals, steel and chemical companies. Because of the flood in supply, we built up the portfolio's cash position to about 10% of assets. We plan to use this cash in the coming weeks to take advantage of investment opportunities that may arise. At the end of the period, the average quality of the portfolio was B. Q. In what market sectors did you invest? We invested in several sectors, including cable television, manufacturing, food-related companies, autos, and telecommunications. At 15% of assets, cable companies accounted for the largest portion of Fund's portfolio. We favored these companies for their stable growth characteristics and tendency to be cash-flow generators. Cable company bonds, especially, performed well and we believe their long-term outlook is good. Q. What is your outlook? We are cautious yet optimistic about the high-yield bond market. We believe the economy will continue to grow at a moderate rate -- around 2%, which is the historical norm. We also think that inflation and interest rates will remain relatively low. In other words, conditions that would be favorable for high-yield bonds. Meanwhile, given the abundant supply of high-yield bonds, prices are relatively cheap and yields are high -- especially when compared to yields of higher-grade corporate bonds and Treasury securities. We believe these factors contribute to supporting the investment value of high-yield bonds. Portfolio commentary reflects the conditions and actions taken during the reporting period, which are subject to change. A shift in opinion may result in strategic and other portfolio changes. - ---------------------------------------------------------- CREDIT QUALITY COMPOSITION -- 6/30/98 AAA 10.5% BB 6.4% B 76.3% CCC 4.8% Other 1.9% Quality is based on ratings provided by Standard & Poor's. Portfolio holdings and asset allocations may change. Average Credit Quality = B - ----------------------------------------------------------- - ------------------------------------------------------------------------------------------------------ PORTFOLIO COMPOSITION - ------------------------------------------------------------------------------------------------------ Investments as of June 30, 1998 (unaudited) BONDS AND NOTES--78.9% OF TOTAL NET ASSETS
FACE AMOUNT DESCRIPTION VALUE (a) - ------------------------------------------------------------------------------------------------------ AUTO PARTS--4.0% $ 3,580,000 CSK Auto, Inc., 11.000%, 11/01/06 ...................... $ 3,946,950 1,500,000 Delco Remy International, Inc., 10.625%, 8/01/06 ....... 1,620,000 ------------ 5,566,950 ------------ BROADCASTING--10.2% 7,000,000 Century Communications Corp., Zero Coupon, 1/15/08 ..... 3,220,000 8,390,000 Fox Family Worldwide, Inc., 0/10.25% 11/01/07 (c) ...... 5,495,450 3,000,000 FrontierVision Holding, L.P., 0/11.875% 9/15/07 (c) .... 2,385,000 1,250,000 FrontierVision Oper. Partners, L.P., 11.000%, 10/15/06 . 1,392,187 1,500,000 Lenfest Communications, Inc., 10.500%, 6/15/06 ......... 1,755,000 ------------ 14,247,637 ------------ COAL--1.1% 1,500,000 P&L Coal Holdings Corp., 144A, 9.625%, 5/15/08 ......... 1,548,750 ------------ ELECTRICAL EQUIPMENT--2.1% 2,750,000 Motors & Gears, Inc., 10.750%, 11/15/06 ................ 2,915,000 ------------ ENTERTAINMENT--3.5% 6,000,000 AMF Bowling Worldwide, Inc., 0/12.250% 3/15/06 (c) ..... 4,852,500 ------------ ENVIRONMENTAL CONTROL--3.3% 4,600,000 Envirotest Systems Corp., 9.625%, 4/01/03 .............. 4,600,000 ------------ FOOD -- RETAILERS/WHOLESALERS--5.9% 2,706,000 Big V Supermarkets, Inc., 11.000%, 2/15/04 ............. 2,841,300 3,300,000 Fleming Companies, Inc., 10.500%, 12/01/04 ............. 3,448,500 5,500,000 Penn Traffic Co., 9.625%, 4/15/05 ...................... 1,952,500 ------------ 8,242,300 ------------ FOREIGN ISSUES--7.0% 1,500,000 Algoma Steel, Inc., 12.375%, 7/15/05 ................... 1,687,500 3,250,000 Altos Hornos de Mexico S.A., 11.875%, 4/30/04 .......... 3,266,250 3,000,000 Grupo Televisa S.A., 0/13.250%, 5/15/08 (c) ............ 2,430,000 3,000,000 Kablemedia Holding GMBL, 0/13.625%, 8/01/06 (c) ........ 2,325,000 ------------ 9,708,750 ------------ INDUSTRIALS--15.0% 3,800,000 Advance Holding Corp., 144A, 0/12.875% 4/15/09 (c) ..... 2,242,000 4,000,000 Allied Waste Industries, Inc., 0/11.300% 6/01/07 (c) ... 2,940,000 3,750,000 Chesapeake Energy Corp., 144A, 9.625%, 5/01/05 ......... 3,778,125 1,190,000 Continental Global Group, Inc., 11.000%, 4/01/07 ....... 1,273,300 5,000,000 Falcon Building Products, Inc., 0/10.500%, 6/15/07 (c) . 3,375,000 4,000,000 RBX Corp., 144A, 12.000%, 1/15/03 ...................... 3,800,000 3,300,000 Stone Container Corp., 12.250%, 4/01/02 ................ 3,382,500 ------------ 20,790,925 ------------ METAL--4.7% 3,000,000 Earle M. Jorgensen, 144A, 9.500%, 4/01/05 .............. 2,910,000 3,400,000 Euramax International PLC, 11.250%, 10/01/06 ........... 3,689,000 ------------ 6,599,000 ------------ MISCELLANEOUS--2.8% 4,000,000 Liberty Group Publishing, Inc., 0/11.625% 2/01/09 (c) .. 2,420,000 1,400,000 Tekni Plex, Inc., 9.250%, 3/01/08 ...................... 1,407,000 ------------ 3,827,000 ------------ RESTAURANTS--3.1% 4,034,342 Advantica Restaurant Group, Inc., 11.250%, 1/15/08 ..... 4,306,660 ------------ RETAIL--3.3% 4,250,000 Mothers Work, Inc., 12.625%, 8/01/05 ................... 4,579,375 ------------ TELECOMMUNICATION--5.8% 4,000,000 Level 3 Communications, Inc., 144A, 9.125%, 5/01/08 .... 3,915,000 6,350,000 Nextel Communications, Inc., 144A, 0/9.950% 2/15/08 (c). 4,087,813 ------------ 8,002,813 ------------ TRANSPORTATION--4.7% 3,350,000 Greyhound Lines, Inc., 11.500%, 4/15/07 ................ 3,735,250 4,500,000 TFM S.A., 0/11.750% 6/15/09 (c) ........................ 2,790,000 ------------ 6,525,250 ------------ UTILITIES--2.4% 2,993,865 Panda Funding Corp., 11.625%, 8/20/12 .................. 3,278,282 ------------ Total Bonds and Notes (Identified Cost $107,347,320) ... 109,591,192 ------------ COMMON STOCK--0.1% SHARES - ------------------------------------------------------------------------------------------------------ 1,237 Mothers Work, Inc. ..................................... $ 8,659 1,750 Ameriking, Inc. (d) .................................... 87,500 ------------ Total Common Stock (Identified Cost $81,073) ........... 96,159 ------------ PREFERRED STOCK--9.4% - ------------------------------------------------------------------------------------------------------ 25,398 Nebco Evans Holding Co., 14.250, 3/01/08 (pay-in-kind) . 2,596,946 123,938 Anvil Holdings, Inc., 13.000%, 3/15/09(pay-in-kind) .... 3,005,496 28,428 CSC Holdings, Inc., 11.825%, 4/01/01 (pay-in-kind) ..... 3,262,113 15,000 Superior National Capital Trust, 10.750%, 12/01/17 ..... 1,605,000 41,526 Liberty Group Publishing, Inc., 14.750%, 2/01/10 (pay- in-kind) ............................................... 1,090,058 57,382 Ameriking, Inc. 13.000%, 12/01/08 (pay-in-kind) ........ 1,549,314 ------------ Total Preferred Stock (Identified Cost $12,630,826) .... 13,108,927 ------------ SHORT TERM INVESTMENT--10.5% FACE AMOUNT - ------------------------------------------------------------------------------------------------------ $14,609,000 Repurchase Agreement with State Street Corp. dated 6/30/98 at 5.000% to be repurchased at $14,610,029 on 7/01/98 collateralized by $11,345,000 U.S. Treasury Bond due 8/15/19 valued at $14,902,588 ...... $ 14,609,000 ------------ Total Short Term Investment (Identified Cost $14,609,000) ......................................... 14,609,000 ------------ Total Investments--98.9% (Identified Cost $134,668,219)(b) ..................................... 137,405,278 Other assets less liabilities .......................... 1,564,755 ------------ Total Net Assets--100% ................................. $138,970,033 ============ (a) See Note 1a of Notes to the Financial Statements. (b) Federal Tax Information: At June 30, 1998 the net unrealized appreciation on investments based on cost for federal income tax purposes of $134,668,219 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess value over tax cost ................................. $ 4,758,721 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value .............................. (2,021,662) ------------ Net unrealized appreciation ............................................ $ 2,737,059 ============ At December 31, 1997 the Fund had a capital loss carryforward of $2,847,461 of which $527,465 expires on December 31, 1998, $1,300,610 expires on December 31, 1999 and $1,019,386 expires on December 31, 2004. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (d) Non-income producing security. 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $22,281,688 or 16.0% of net assets. See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES - --------------------------------------------------------------------------------------------------- ASSETS Investments at value Securities ................................................. $122,796,278 Repurchase agreements ...................................... 14,609,000 ------------ Total Investments at value (Identified cost $134,668,219). 137,405,278 Cash ......................................................... 387 Receivable for: Fund shares sold ........................................... 521,436 Dividends and interest ..................................... 2,204,039 Miscellaneous .............................................. 1,227 Prepaid registration expense ................................. 4,000 ------------ 140,136,367 LIABILITIES Payable for: Securities purchased ....................................... $201,664 Fund shares redeemed ....................................... 268,555 Dividends declared ......................................... 418,493 Accrued expenses: Management fees ............................................ 225,418 Deferred trustees' fees .................................... 7,129 Accounting and administrative .............................. 3,037 Other ...................................................... 42,038 -------- 1,166,334 ------------ NET ASSETS ..................................................... $138,970,033 ============ Net Assets consist of: Capital paid in ............................................ $139,718,120 Undistributed net investment income ........................ 652,795 Accumulated net realized losses ............................ (4,137,941) Unrealized appreciation on investments ..................... 2,737,059 ------------ NET ASSETS ..................................................... $138,970,033 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($79,383,128 divided by 8,087,530 shares of beneficial interest) .................................................. $9.82 ===== Offering price per share (100/95.50 of $9.82) .................. $10.28* ====== Net asset value and offering price of Class B shares ($56,356,992 divided by 5,743,099 shares of beneficial interest) .................................................... $9.81** ===== Net asset value and offering price of Class C shares ($3,229,913 divided by 329,189 shares of beneficial interest) .................................................... $9.81** ===== *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 - ------------------------------------------------------------------------------------------------- Six Months Ended June 30, 1998 (unaudited) INVESTMENT INCOME Dividends .................................................... $ 713,592 Interest ..................................................... 5,894,610 ---------- 6,608,202 Expenses Management fees .............................................. $420,894 Service fees - Class A ....................................... 87,401 Service and distribution fees - Class B ...................... 245,940 Service and distribution fees - Class C ...................... 5,067 Trustees' fees and expenses .................................. 5,627 Accounting and administrative ................................ 15,868 Custodian .................................................... 38,869 Transfer agent ............................................... 90,472 Audit and tax services ....................................... 16,265 Legal ........................................................ 1,877 Printing ..................................................... 15,156 Registration ................................................. 17,609 Miscellaneous ................................................ 21,731 -------- Total expenses ............................................... 982,776 ---------- Net investment income ........................................ 5,625,426 REALIZED AND UNREALIZED LOSS ON INVESTMENTS, Realized loss on: Investments - net .......................................... (1,133,393) Unrealized depreciation on: Investments - net .......................................... (1,127,831) ---------- Net loss on investment transactions ........................ (2,261,224) ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $3,364,202 ========== See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1997 1998 ---------------- ---------------- FROM OPERATIONS Net investment income ................................... $ 7,024,314 $ 5,625,426 Net realized gain (loss) on investments ................. 1,698,066 (1,133,393) Unrealized appreciation (depreciation) on investments, .. 2,358,716 (1,127,831) ------------ ------------ Increase in net assets from operations .................. 11,081,096 3,364,202 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A ............................................... (4,574,797) (3,052,211) Class B ............................................... (2,387,966) (1,964,448) Class C ............................................... 0 (44,886) ------------ ------------ (6,962,763) (5,061,545) ------------ ------------ INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS .......................................... 40,263,008 35,527,081 ------------ ------------ Total increase in net assets .............................. 44,381,341 33,829,738 NET ASSETS Beginning of the period ................................. 60,758,954 105,140,295 ------------ ------------ End of the period ....................................... $105,140,295 $138,970,033 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ....................................... $ 88,914 $ 652,795 ============ ============
- -------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------- SIX MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------------------------------- JUNE 30, 1993 1994 1995 1996 1997 1998 ----- ----- ----- ----- ----- ----- Net Asset Value, Beginning of the Period $ 9.46 $10.06 $ 8.89 $ 8.98 $ 9.42 $ 9.94 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income ........... 0.90 0.88 0.88 0.84 0.87 0.48 Net Realized and Unrealized Gain (Loss) on Investments ......... 0.61 (1.19) 0.13 0.44 0.52 (0.16) ------ ------ ------ ------ ------ ------ Total From Investment Operations 1.51 (0.31) 1.01 1.28 1.39 0.32 ------ ------ ------ ------ ------ ------ Less Distributions Distributions From Net Investment Income ........................ (0.90) (0.86) (0.88) (0.83) (0.87) (0.44) Distributions in Excess of Net Investment Income ............. (0.01) 0.00 (0.04) (0.01) 0.00 0.00 ------ ------ ------ ------ ------ ------ Total Distributions ............. (0.91) (0.86) (0.92) (0.84) (0.87) (0.44) ------ ------ ------ ------ ------ ------ Net Asset Value, End of the Period ........................ $10.06 $ 8.89 $ 8.98 $ 9.42 $ 9.94 $ 9.82 ====== ====== ====== ====== ====== ====== Total Return (%)(b) ............. 16.5 (3.3) 11.8 14.9 15.4 3.3 Ratio of Operating Expenses to Average Net Assets (%) (a) .... 1.54 1.60 1.60 1.53 1.36 1.32(c) Ratio of Net Investment Income to Average Net Assets (%) ........ 9.17 9.18 9.71 9.32 9.03 9.67(c) Portfolio Turnover Rate (%) ..... 43 33 30 134 99 93(c) Net Assets, End of the Period (000) ......................... $31,176 $33,673 $39,148 $42,992 $62,739 $79,383 The Subadviser to the Fund prior to July 1, 1996 was Back Bay Advisors, L.P. Effective July 1, 1996 Loomis, Sayles & Company, L.P. became the subadviser to the Fund. (a) The ratio of operating expenses to average net assets without giving effect to voluntary expense limitations described in Note 4 to the Financial Statements would have been (%) ......... 2.00 1.83 1.72 1.69 -- -- (b) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (c) Computed on an annualized basis.
- ---------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS continued - ----------------------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C --------------------------------------------------------------------------------------------------- ------------ SEPTEMBER 20,(a) SIX MONTHS MARCH 2(a) THROUGH YEAR ENDED DECEMBER 31, ENDED THROUGH DECEMBER 31, ----------------------------------------------------------- JUNE 30, JUNE 30, 1993 1994 1995 1996 1997 1998 1998 ---------------- --------- -------- -------- -------- ------------- ---------- Net Asset Value, Beginning of the Period .......... $ 9.87 $10.06 $ 8.88 $ 8.98 $ 9.42 $ 9.93 $ 9.96 ------ ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income .... 0.23 0.79 0.83 0.79 0.80 0.44 0.28 Net Realized and Unrealized Gain (Loss) on Investments ............ 0.20 (1.18) 0.13 0.42 0.51 (0.16) (0.16) ------ ------ ------ ------ ------ ------ ------ Total From Investment Operations ... 0.43 (0.39) 0.96 1.21 1.31 0.28 0.12 ------ ------ ------ ------ ------ ------ ------ Less Distributions Distributions From Net Investment Income ...... (0.23) (0.78) (0.81) (0.76) (0.80) (0.40) (0.27) Distributions in Excess of Net Investment Income .. (0.01) (0.01) (0.05) (0.01) 0.00 0.00 0.00 ------ ------ ------ ------ ------ ------ ------ Total Distributions ...... (0.24) (0.79) (0.86) (0.77) (0.80) (0.40) (0.27) ------ ------ ------ ------ ------ ------ ------ Net Asset Value, End of the Period ....... $10.06 $ 8.88 $ 8.98 $ 9.42 $ 9.93 $ 9.81 $ 9.81 ====== ====== ====== ====== ====== ====== ====== Total Return (%) (c) ..... 4.4 (4.0) 11.2 14.1 14.4 2.9 1.2 Ratio of Operating Expenses to Average Net Assets (%) (b).......... 2.25(d) 2.25 2.25 2.19 2.11 2.07(d) 2.33(d) Ratio of Net Investment Income to Average Net Assets (%) ............. 7.66(d) 8.53 8.96 8.33 8.28 8.92(d) 9.50(d) Portfolio Turnover Rate (%) 43(d) 33 30 134 99 93(d) 93(d) Net Assets, End of the Period (000) ........... $1,232 $5,233 $10,625 $17,767 $42,401 $56,357 $3,230 The Subadviser to the Fund prior to July 1, 1996 was Back Bay Advisors, L.P. Effective July 1, 1996 Loomis, Sayles & Company, L.P. became the subadviser to the Fund. (a) Commencement of operations. (b) The ratio of operating expenses to average net assets without giving effect to voluntary expense limitations described in Note 4 to the Financial Statements would have been ....... 2.53 2.48 2.37 2.35 -- -- -- (c) A contingent deferred sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (d) Computed on an annualized basis.
- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- June 30, 1998 (unaudited) 1. The Fund is a series of 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 Class A, Class B and Class C shares. The Fund commenced its public offering of Class C shares on March 2, 1998. Class A shares are sold with a maximum front end sales charge of 4.50%. 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 six years of purchase (or five years if purchased before May 1, 1997). Class C shares do not pay a front end 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 and may be subject to a contingent deferred sales charge if those shares are redeemed within one year. 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. Debt securities (other than short-term obligations with a remaining maturity of less than sixty days) are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees, which service determines valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates value. All other securities and assets are valued at their fair value as determined in good faith by the Fund's adviser, and subadviser, 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). 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 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. These differences primarily relate to the expiration of capital loss carryforwards. 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 For the six months ended June 30, 1998 purchases and sales of securities (excluding short-term investments) were $77,592,736 and $53,792,390 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 and 0.65% of such assets in excess of $200 million. NEFM pays the Fund's investment subadviser, Loomis, Sayles & Company L.P. ("Loomis Sayles") at the rate of 0.35% of the first $200 million of the Fund's average daily net assets and 0.30% of such assets in excess of $200 million of the Fund's average daily net assets. Certain officers and directors of NEFM are also officers or trustees of the Fund. NEFM and Loomis Sayles are wholly owned subsidiaries of Nvest Companies, L.P. ("Nvest"), which is a subsidiary of Metropolitan Life Insurance Company ("MetLife"). Fees earned by NEFM and Loomis Sayles under the management agreements in effect during the six months ended June 30, 1998 are as follows: FEES EARNED ----------- $210,447 NEFM $210,447 Loomis Sayles B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of Nvest 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, and financial reporting functions and related clerical functions relating to the Fund, and (ii) expenses for services required in connection with the preparation of registration statements and prospectuses, registration of shares in various states, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance. For the six months ended June 30, 1998 these expenses amounted to $15,868 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 Service and Distribution Plan 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 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, 1998, the Fund paid New England Funds $87,401 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, 1998, the Fund paid New England Funds $61,485 and $1,266 in service fees under the Class B and Class C Plans, respectively. Also under the Class B and Class C Plans, 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, 1998, the Fund paid New England Funds $184,455 and $3,801 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, 1998 amounted to $411,549. D. TRANSFER AGENT FEES. New England Funds Services Corporation ("NEFSCO") is the transfer and shareholder servicing agent to the Fund. For the six months ended June 30, 1998, the Fund paid NEFSCO $60,011 as compensation for its services in that capacity. For the six months ended June 30, 1998, the Fund received $1,285 in transfer agent credits. The transfer agent expense in the Statement of Operations is net of these credits. 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, Nvest, NEFSCO or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $652 Meeting Fee 159/meeting Annual Committee Member Retainer 98 Annual Committee Chairman Retainer 65 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 July 1, 1996 NEFM and Loomis Sayles voluntarily agreed to reduce management fees to limit expenses to 1.40% of the Fund's Class A average daily net assets and 2.15% of the Funds Class B and Class C average daily net assets. Fund expenses did not exceed the voluntary limit for the six months ended June 30, 1998. 5. CONCENTRATION OF CREDIT; LOWER RATED SECURITIES. The Fund invests in securities offering high current income which generally will be rated below investment grade by recognized rating agencies. Certain of these lower rated securities are regarded as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligations and generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for lower rated securities may be less liquid than the market for higher-rated securities. 6. CAPITAL SHARES. At June 30, 1998 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, 1997 JUNE 30, 1998 ---------------------------- --------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 2,709,896 $26,327,240 2,568,185 $25,460,847 Shares issued in connection with the reinvestment of: Distributions from net investment income ............................. 319,480 3,105,107 207,565 2,059,132 --------- ----------- --------- ----------- 3,029,376 29,432,347 2,775,750 27,519,979 Shares repurchased ................... (1,278,693) (12,385,135) (1,002,739) (9,917,136) --------- ----------- --------- ----------- Net increase ......................... 1,750,683 $17,047,212 1,773,011 $17,602,843 ========= =========== ========= =========== YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1997 JUNE 30, 1998 ---------------------------- --------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 2,686,351 $26,155,636 1,850,208 $18,385,617 Shares issued in connection with the reinvestment of: Distributions from net investment income ............................. 99,615 971,640 87,248 865,309 --------- ----------- --------- ----------- 2,785,966 27,127,276 1,937,456 19,250,926 Shares repurchased ................... (403,524) (3,911,480) (463,173) (4,589,462) --------- ----------- --------- ----------- Net increase ......................... 2,382,442 $23,215,796 1,474,283 $14,661,464 ========= =========== ========= =========== YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1997 JUNE 30, 1998 ---------------------------- --------------------------- CLASS C SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 0 $ 0 337,319 $ 3,344,232 Shares issued in connection with the reinvestment of: Distributions from net investment income ............................. 0 0 2,833 27,941 --------- ----------- --------- ----------- 0 0 340,152 3,372,173 Shares repurchased ................... 0 0 (10,963) (109,399) --------- ----------- --------- ----------- Net increase ......................... 0 0 329,189 3,262,774 --------- ----------- --------- ----------- Increase derived from capital shares transactions ....................... 4,133,125 $40,263,008 3,576,483 $35,527,081 ========= =========== ========= =========== (a) Commencement of operations.
GLOSSARY FOR MUTUAL FUND INVESTORS - ------------------------------------------------------------------------------- TOTAL RETURN - The change in value of a mutual fund investment over a specific time period, assuming all earnings are reinvested in additional shares of the fund. Expressed as a percentage. INCOME DISTRIBUTIONS - Payments to shareholders resulting from the net interest or dividend income earned by a fund's portfolio. CAPITAL GAINS DISTRIBUTIONS - Payments to shareholders of profits earned from selling securities in a fund's portfolio. Capital gains distributions are usually paid once a year. YIELD - The rate at which a fund pays income. Yield calculations for 30-day periods are standardized among mutual funds, based on a formula developed by the Securities and Exchange Commission. MATURITY - Refers to the period of time before principal repayment on a bond is due. A bond fund's "average maturity" refers to the weighted average of the maturities of all the individual bonds in the potfolio. DURATION - A measure, stated in years, of a bond's sensitivity to interest rates. Duration is a means to directly compare the volatility of different instruments. As a general rule, for every 1% move in interest rates, a bond is expected to fluctuate in value as indicated by its duration. For example, if interest rates fall by 1%, a bond with a duration of 4 years should rise in value 4%. Conversely, the bond should decline 4% if interest rates rise 1%. TREASURIES - Negotiable debt obligations of the U.S. government, secured by its full faith and credit. The income from Treasury securities is exempt from state and local income taxes but not from federal income taxes. There are three types of Treasuries: Bills (maturity of 3-12 months), Notes (maturity of 1-10 years) and Bonds (maturity of 10-30 years). MUNICIPAL BOND - A debt security issued by a state or municipality to finance public expenditures. Interest payments are exempt from federal taxes and, in most cases, from state and local income taxes. The two main types are general obligation (GO) bonds, which are backed by the full faith and credit and taxing powers of the municipality; and revenue bonds, supported by the revenues from a municipal enterprise, such as airports and toll bridges. - -------------------------------------------------------------------------------- NEW ENGLAND FUNDS - -------------------------------------------------------------------------------- STOCK FUNDS Bullseye Fund Star Small Cap Fund Growth Fund Star Advisers Fund Capital Growth Fund Growth Opportunities Fund Value Fund Equity Income Fund Balanced Fund INTERNATIONAL STOCK FUNDS International Equity Fund Star Worldwide Fund BOND FUNDS High Income Fund Strategic Income Fund Bond Income Fund Government Securities Fund Limited Term U.S. Government Fund Adjustable Rate U.S. Government Fund TAX EXEMPT FUNDS Municipal Income Fund Massachusetts Tax Free Income Fund Tax Free Income Fund of New York Intermediate Term Tax Free Fund of California MONEY MARKET FUNDS Cash Management Trust, Money Market 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 WWW.MUTUALFUNDS.COM New England Funds, L.P., Distributor 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. New England Funds, L.P., and other firms selling shares of New England Funds are members of the National Association of Securities Dealers, Inc. (NASD). As a service to investors, the NASD has asked that we inform you of the availability of a brochure on its Public Disclosure Program. The program provides access to information about securities firms and their representatives. Investors may obtain a copy by contacting the NASD at 1-800-289-9999 or by visiting their web site at www.NASDR.com. ------------------ [LOGO](R) Bulk Rate NEW ENGLAND FUNDS(R) U.S. Postage Where The Best Minds Meet(R) Paid Brockton, MA Permit No. 770 ------------------ --------------------- 399 Boylston Street Boston, Massachusetts 02116 --------------------- [Dalbar Logo] - ----------------------- 1995 o 1996 o 1997 HP58-0698 [Recycle Logo] Printed on Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----