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SEMIANNUAL REPORT
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[logo]
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
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New England
Money Market Funds
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[graphic omitted]
Where
The Best Minds
Meet(R)
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December 31, 1998
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February 1999
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Photo of Bruce R. Speca]
"Research indicates that saving for retirement is the number one goal for
investors. Yet, surprisingly often, investors behave like short-term traders
looking for a quick score."
In September 1998, I became President of New England Funds. As an 18-year
veteran of the mutual fund industry, I was pleased and honored to accept this
important post. In my first message to you, I hope to present what I believe
you, our valued shareholders, really want to know and to offer it in a
straightforward manner.
How did my fund perform?
There's no question that long-term performance is the bottom line of your
investment program. With that in mind, please review the other sections of this
report. You'll see your fund's performance and commentary from your fund manager
that summarizes the fund's successes and shortcomings and the outlook for the
year ahead.
Our assessment of New England Funds' overall performance in 1998 is that we had
a solid, but not spectacular, year. While extremely pleased with both absolute
and relative returns in many of our stock and bond portfolios, we were
disappointed by the results of those equity funds that pursue a 'value' rather
than a `growth' strategy. Value stocks were largely ignored in 1998, as
investors focused on very large, high visibility growth stocks (indeed, 45% of
the gain in the Standard & Poor's Composite Index of 500 Stocks (the "S&P 500")
- - a market value-weighted, unmanaged index of common stock prices for 500
selected stocks - came from just 10 stocks!) and select technology companies.
Much of the underperformance in value-oriented funds can be attributed to market
cycles, but we continue to pursue strategies to increase returns in these funds.
Can the stock market keep going up?
Like any winning streak, sooner or later the market will experience setbacks.
Does that mean 1999 will see the last burst of energy from the bull market? It's
easy to argue both sides of this question. Employment is high, inflation is low
and economic growth is continuing. But corporate profits may start to lag and
commodity prices, notably oil, are depressed around the world. The conclusion?
Economists, like weathermen and other forecasters, can only hope to be right
more often than they are wrong.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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My Own Two Cents
All too often investors lament, "What I could have made if only . . ." instead
of "What I actually made." But experience has taught me that the more important
question is, "Did I stick with my investment program and make progress toward my
financial goals?"
Research indicates that saving for retirement is the number one goal for
investors. Yet, surprisingly often, investors behave like short-term traders
looking for a quick score.
The mutual fund industry has become extremely complex, with more funds, new
strategies and approaches to analyzing performance. What hasn't changed is your
financial representative's primary objective: to help you sort it all out and
increase your returns in line with your goals.
Your financial adviser can help you avoid being distracted by the daily noise
and avoid what I view as the most important risk that investors face. It's the
risk of not staying invested and possibly falling short of your long-term goals.
Your adviser will help you stick with your investment program during periods of
uncertainty.
One last thought: All of us at New England Funds appreciate the trust that you
and your representative have placed in us. We look forward to serving you in the
years ahead.
Sincerely,
/s/ Bruce R. Speca
Bruce R. Speca
President and CEO
PROGRESS ON THE Y2K FRONT
New England Funds has been and continues to engage in initiatives aimed at
having our computer systems tested and ready to function capably for the Year
2000. We are insisting on the same standard from vendors whose systems must
interact reliably with ours as well as from the subadvisers to our funds. We are
monitoring their progress and pursuing assurances of their readiness. Our
systems are being tested on a four-digit format (2000, not 00) and updated as
needed to perform competently. Additionally, we are developing contingency plans
to diminish the possibility of inconvenience related to Year 2000. Stay informed
on our Year 2000 readiness by visiting our Web site at www.mutualfunds.com.
This material represents Year 2000 Readiness disclosure pursuant to the Year
2000 Information and Readiness Act.
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NEW ENGLAND MONEY MARKET FUNDS
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ANNUALIZED SEVEN-DAY YIELDS - 12/31/98
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CLASS
A, B & C CLASS Y
New England Cash Management Trust - Money Market Series 4.4% 4.5%
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CLASS A & B
New England Tax Exempt Money Market Trust 3.2%
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Yields will fluctuate with changes in market conditions.
The seven-day money market yield reflects the Funds' current earnings more
closely than total return.
AVERAGE ANNUAL TOTAL RETURNS - 12/31/98
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES
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CLASS A 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 2.3% 4.9% 4.6% 5.2%
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SINCE
CLASS B (Inception 9/13/93) 6 MONTHS 1 YEAR 5 YEARS INCEPTION
Net Asset Value(1) 2.3% 4.9% 4.6% 4.5%
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SINCE
CLASS C (Inception 3/1/98) 6 MONTHS INCEPTION
Net Asset Value(1) 2.3% 3.9%
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SINCE
CLASS Y (Inception 2/27/98) 6 MONTHS INCEPTION
Net Asset Value(1) 2.3% 4.0%
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NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
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CLASS A 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 1.4% 3.1% 3.1% 3.5%
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SINCE
CLASS B (Inception 9/13/93) 6 MONTHS 1 YEAR 5 YEARS INCEPTION
Net Asset Value(1) 1.4% 3.1% 3.1% 3.0%
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(1) Investment results in this table represent annual returns including
reinvestment of distributions. Figures quoted above represent past
performance and are not a guarantee of future results.
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NEW ENGLAND MONEY MARKET FUNDS
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QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGERS
NEW ENGLAND CASH MANAGEMENT TRUST
[Photo of Scott Nicholson]
Scott Nicholson
Back Bay Advisors, L.P.
Q. HOW DID NEW ENGLAND CASH MANAGEMENT TRUST PERFORM OVER THE PAST SIX MONTHS?
New England Cash Management Trust maintained a constant $1.00(2) share price
throughout the period and was able to provide a positive total return of 2.3%
(calculated at NAV) for the six months ending December 31, 1998. The Fund's
return included the reinvestment of $0.02 per share in income distributions. As
of December 31, 1998, New England Cash Management Trust's seven-day yield was
4.4%.
Q. WHAT WAS THE FUND'S INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD?
The investment environment during the past six months was excellent. Investors
benefited from ideal economic conditions - low inflation, low unemployment,
moderate growth, a favorable interest rate environment and strong demand for
safe, liquid investments. During the period, investor concerns about global
economies and the stability of the world's financial markets caused a
"flight-to-quality" that drove U.S. interest rates to historic lows. Demand
escalated for those securities considered to have the highest degree of safety
and liquidity, namely U.S. Treasury securities. To forestall an economic
slowdown, the Federal Reserve Board cut the federal funds rate three times in
the fall of 1998 - from 5 1/2% to 4 3/4%. The federal funds rate is the rate
at which banks lend money to each other overnight and is the benchmark for other
short-term interest rates.
Against this backdrop, money market investments generated solid returns -
returns that were particularly attractive in light of the price stability of
money market securities. On average, money market funds delivered about 50% of
the average total return of all long-term bond funds and about 75% of the
average total return of all intermediate-term bond funds, as tracked by Lipper,
Inc., while offering competitive yields, safety and liquidity. Lipper is an
independent mutual fund ranking service.
(2) An investment in the Fund is not insured or guaranteed by the FDIC or any
other government agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Q. WHAT STRATEGIES DID YOU USE IN MANAGING THE FUND?
Shorter maturities are generally sought for their safety and liquidity - the
primary goals of New England Cash Management Trust. Yet, in a relatively stable
interest rate environment, we seek out longer maturities, which tend to offer
higher yields in exchange for slightly higher risk. In contrast, when we expect
rates to rise, we typically shorten the portfolio's average maturity, so that
issues coming due can be reinvested at higher rates. Throughout the entire
period, we invested in securities with longer maturities - maintaining a fairly
long average maturity of 60 to 75 days - to take advantage of their attractive
yield advantage. We did, however, pull back slightly on the Fund's average
maturity at year end. As of December 31, 1998, the Fund's average maturity stood
at 58 days.
Q. WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES OVER THE NEXT SIX MONTHS?
Looking ahead, we think short-term interest rates could move somewhat lower. We
anticipate slower U.S. economic growth in 1999, with a slowdown in manufacturing
and a reduction in consumer spending. However, any future interest rate
movements will depend on global developments and the direction of the U.S. stock
market.
PORTFOLIO COMPOSITION AS OF 12/31/98
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COMMERCIAL PAPER 66.3%
CERTIFICATES OF DEPOSIT 29.9%
EURODOLLAR CERTIFICATES OF DEPOSIT 1.3%
BANKERS ACCEPTANCES 2.5%
Portfolio allocation is subject to change, and is based on market value.
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The events of 1998 have underscored the value of money market holdings, which
seek capital preservation and reliable income. In our opinion, a well-rounded
investor portfolio is complemented by the safety and liquidity of a money market
investment.
The opinions expressed above are those of the portfolio manager and are subject
to change. The occurrence of forecasted events and predictions is not certain
and cannot be assured.
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NEW ENGLAND MONEY MARKET FUNDS
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NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
[Photo of John Maloney]
John Maloney
Back Bay Advisors, L.P.
Q. HOW DID NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST PERFORM OVER THE PAST SIX
MONTHS?
New England Tax Exempt Money Market Trust maintained its $1.00(2) share price
throughout the period and was able to provide a positive total return of 1.4%
(calculated at NAV) for the six months ending December 31, 1998. The Fund's
return included the reinvestment of $0.01 per share in income distributions. As
of December 31, 1998, the Fund's seven-day yield was 3.2% which translates into
a taxable equivalent yield of 5.3% for investors in the highest federal tax
bracket of 39.6%.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD?
The investment environment was extremely volatile over the past six months
generally, although it was very positive for short-term securities, the type of
securities in which the Fund invests. Early in the period, investors focused on
the strength of the U.S. economy and the belief by many that the Federal Reserve
Board would raise interest rates to curb inflation.
Expectations changed dramatically in August, however, when Russia placed a
moratorium on its debt repayment. With the Russian default, the financial
crisis, which had started in Asia, appeared to be spreading. These global
concerns, combined with moderating strength in the U.S. economy, gave the
Federal Reserve Board the ammunition it needed to cut the federal funds rate
three times between September 29, 1998 and November 17, 1998. The federal funds
rate - which stood at 5 1/2% at the beginning of the period and 4 3/4% at the
end of the period - is the rate at which banks lend money to each other
overnight and is the benchmark for short-term rates. The Federal Reserve Board
lowered interest rates to keep the U.S. economy on track and jump-start growth
in other economies.
(2) An investment in the Fund is not insured or guaranteed by the FDIC or any
other government agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Q. WHAT STRATEGIES DID YOU USE IN MANAGING THE FUND?
We took advantage of the seasonal factors that influence the short-term
municipal market. Supply tends to be heaviest in June, with June 30th being the
fiscal year-end of many municipalities. This bulge in supply typically pushes
short-term rates higher. We lengthened average maturity at that time, investing
in money market securities with the longest maturities to lock in higher yields
for the greatest period of time. As December 31, 1998 approached, we increased
our holdings in variable rate securities, which shortened the Fund's average
maturity. The interest rate of variable rate securities fluctuates with changes
in a designated base rate on a specified date. The yields of these securities
rise at the end of the calendar year. We increased the Fund's holdings in
variable rate securities to 72% of the portfolio to take advantage of the higher
yields these securities provide. As of December 31, 1998, the Fund's average
maturity was 47 days.
Q. WHAT IS YOUR OUTLOOK FOR TAX-EXEMPT MONEY MARKET SECURITIES?
While the future of the U.S. economy depends, in part, on developments in the
world's economies and financial markets, it appears that the recent
international situation has regained some stability. If the global situation
does not worsen and the domestic economy remains strong, we would expect the
general level of interest rates, including short-term rates, to remain
relatively stable. In that environment, we typically seek out longer maturities
which tend to offer higher yields in exchange for slightly higher risk.
The value of keeping a portion of your portfolio in safe, liquid investments was
reinforced by the instability that rocked 1998's financial markets. Over the
past year, tax-exempt money market investments continued to provide attractive
income, competitive yields and solid returns - returns that were especially
attractive considering their tax-advantaged(3) status and the low level of
inflation. In fact, as of the close of the fiscal period, tax-exempt money
market yields rivaled those provided by taxable money market funds. With their
competitive yields and tax-free3 income, tax-exempt money market funds have
historically offered, and in our opinion will continue to offer, an attractive
investment option for a wide range of investors.
(3) A portion of income may be subject to state, federal and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
The opinions expressed are those of the portfolio manager and are subject to
change. The occurrence of forecasted events and predictions is not certain and
cannot be assured.
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CASH MANAGEMENT TRUST MONEY MARKET SERIES
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Investments as of December 31, 1998
(unaudited)
INVESTMENTS--102.8% OF TOTAL NET ASSETS
FACE
AMOUNT DESCRIPTION VALUE (A)
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BANK NOTE--2.6%
$10,000,000 First Union National Bank, 4.700%, 1/01/1999 (b) ... $ 10,000,000
10,000,000 Travelers Insurance Co., 5.547%, 1/01/1999 (b) ..... 10,000,000
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Total Bank Note (Cost $20,000,000) ................. 20,000,000
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CERTIFICATES OF DEPOSIT--30.7%
10,000,000 Bankers Trust Co., 4.850%, 1/01/1999 (b) ........... 9,998,724
10,000,000 Barclays Bank plc, 5.486%, 1/02/1999 (b) ........... 9,996,727
3,000,000 Credit Suisse, 5.740%, 1/07/1999 ................... 2,999,945
11,500,000 Deutsche Bank AG New York, 5.670%, 1/08/1999 ....... 11,499,737
5,000,000 Canadian Imperial Bank Commerce, 5.570%, 1/11/1999 . 4,999,740
5,000,000 Canadian Imperial Bank Commerce, 5.650%, 1/11/1999 . 4,999,938
10,000,000 Dresdner Bank, 5.510%, 1/15/1999 ................... 9,999,532
5,000,000 Societe Generale, 5.560%, 1/19/1999 ................ 5,000,108
8,000,000 Canadian Imperial, 5.550%, 2/10/1999 ............... 7,999,260
3,000,000 Royal Bank of Canada, 5.630%, 2/26/1999 ............ 2,999,213
5,000,000 Societe Generale, 5.685%, 3/12/1999 ................ 4,999,862
10,000,000 ABN Amro Bank, 5.645%, 3/22/1999 ................... 9,998,769
2,000,000 Bank of Nova Scotia, 5.650%, 3/23/1999 ............. 1,999,318
5,000,000 Societe Generale New York, 5.665%, 3/23/1999 ....... 4,999,697
9,000,000 Bank of Nova Scotia, 5.650%, 3/29/1999 ............. 9,008,987
3,000,000 Barclays Bank plc, 5.700%, 3/30/1999 ............... 2,999,281
5,000,000 Bank of Nova Scotia, 5.705%, 3/31/1999 ............. 5,005,132
10,000,000 Canadian Imperial, 5.740%, 4/01/1999 ............... 10,011,735
3,000,000 Societe Generale, 5.800%, 4/01/1999 ................ 3,004,290
4,000,000 Societe Generale, 5.750%, 4/06/1999 ................ 4,006,143
5,000,000 Societe Generale New York, 5.750%, 4/06/1999 ....... 4,999,920
5,000,000 Societe Generale, 5.750%, 4/15/1999 ................ 4,999,002
5,000,000 Societe Generale, 5.760%, 4/16/1999 ................ 5,007,294
2,000,000 Canadian Imperial, 5.745%, 4/27/1999 ............... 1,999,711
3,300,000 Harris Trust & Savings Bank, 5.000%, 5/04/1999 ..... 3,300,679
14,300,000 Svenska Handelsbanken, 5.750%, 5/04/1999 ........... 14,307,517
5,000,000 Bank of Nova Scotia, 5.010%, 5/24/1999 ............. 4,999,806
5,000,000 Royal Bank of Canada, 5.650%, 7/12/1999 ............ 5,015,041
3,000,000 Bank of Nova Scotia, 5.680%, 8/03/1999 ............. 3,010,412
5,000,000 Rabobank Nederland, 5.710%, 1/06/1999 .............. 5,000,184
5,000,000 Toronto Dominion, 5.600%, 2/11/1999 ................ 5,002,291
5,000,000 Swiss Bank Corp. New York, 5.720%, 4/05/1999 ....... 5,004,648
5,500,000 Rabobank Nederland, 5.710%, 4/16/1999 .............. 5,504,315
3,000,000 Rabobank Nederland NV, 5.700%, 4/20/1999 ........... 3,004,727
3,000,000 Deutsche Bank AG New York, 5.750%, 4/27/1999 ....... 3,005,331
5,000,000 Rabobank Nederland, 5.750%, 4/27/1999 .............. 5,009,769
3,000,000 Rabobank Nederland, 5.740%, 4/28/1999 .............. 3,005,015
7,000,000 Banque Nationale de Paris, 5.830%, 4/29/1999 ....... 7,013,181
5,000,000 Rabobank Nederland, 5.740%, 5/19/1999 .............. 5,010,699
7,000,000 Toronto Dominion, 5.710%, 6/15/1999 ................ 7,015,741
5,000,000 Toronto Dominion, 5.640%, 7/08/1999 ................ 5,013,277
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Total Certificates of Deposit (Cost $232,754,698) .. 232,754,698
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CERTIFICATES OF DEPOSIT (EURODOLLARS)--1.3%
10,000,000 Barclays Bank plc, 5.640%, 1/07/1999 ............... 10,000,057
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Total Certificates of Deposit (Eurodollars) (Cost
$10,000,057) ..................................... 10,000,057
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COMMERCIAL PAPER--68.2%
AIRLINES--0.3%
2,000,000 International Lease Finance Corp., 4.930%, 3/11/1999 1,981,102
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ASSET BACKED--2.4%
5,000,000 Clipper Receivables Corp., 5.430%, 1/15/1999 ....... 4,989,441
3,500,000 Clipper Receivables Corp., 5.350%, 1/22/1999 ....... 3,489,077
5,000,000 Clipper Receivables Corp., 5.300%, 2/09/1999 ....... 4,971,292
5,000,000 Clipper Receivables Corp., 5.250%, 2/12/1999 ....... 4,969,375
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18,419,185
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AUTOMOTIVE--12.7%
2,400,000 Ford Motor Credit Co., 5.370%, 1/08/1999 ........... 2,397,494
7,355,000 Ford Motor Credit Co., 5.400%, 1/08/1999 ........... 7,347,277
7,000,000 Ford Motor Credit Co., 5.480%, 1/13/1999 ........... 6,987,213
5,000,000 Ford Motor Credit Co., 5.470%, 1/22/1999 ........... 4,984,046
7,000,000 General Motors Acceptance Corp., 5.050%, 1/29/1999 . 6,972,506
5,000,000 Ford Motor Credit Co., 5.080%, 2/04/1999 ........... 4,976,011
5,000,000 Ford Motor Credit Co., 5.080%, 2/05/1999 ........... 4,975,306
5,000,000 General Motors Acceptance Corp., 5.060%, 2/08/1999 . 4,973,294
5,000,000 American Honda Finance, 5.250%, 2/09/1999 .......... 4,971,563
5,000,000 American Honda Finance, 5.050%, 2/10/1999 .......... 4,971,944
4,000,000 General Motors Acceptance Corp., 5.060%, 2/10/1999 . 3,977,511
5,000,000 American Honda Finance, 5.050%, 2/11/1999 .......... 4,971,243
3,000,000 American Honda Finance, 5.170%, 2/11/1999 .......... 2,982,336
7,000,000 American Honda Finance, 5.050%, 2/12/1999 .......... 6,958,758
6,000,000 American Honda Finance, 5.070%, 2/12/1999 .......... 5,964,510
3,000,000 Ford Motor Credit Co., 5.080%, 2/23/1999 ........... 2,977,563
7,000,000 General Motors Acceptance Corp., 5.100%, 3/05/1999 . 6,937,525
5,000,000 General Motors Acceptance Corp., 5.140%, 3/19/1999 . 4,945,031
3,000,000 Ford Motor Credit Co., 4.740%, 9/27/1999 ........... 2,893,745
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96,164,876
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BANKS--10.8%
5,000,000 BNP Canada, 5.520%, 1/04/1999 ...................... 4,997,700
7,000,000 UBS Finance Delaware, Inc., 5.220%, 1/05/1999 ...... 6,995,940
8,000,000 BNP Canada, 5.490%, 1/06/1999 ...................... 7,993,900
7,000,000 Commerzbank AG New York, 5.470%, 1/06/1999 ......... 6,994,682
8,000,000 Svenska Handelsbanken, 5.510%, 1/08/1999 ........... 7,991,429
5,000,000 UBS Finance Delaware, Inc., 5.468%, 1/11/1999 ...... 4,992,406
5,000,000 UBS Finance Delaware, Inc., 5.470%, 1/11/1999 ...... 4,992,403
10,000,000 UBS Finance Delaware, Inc., 4.926%, 2/26/1999 ...... 9,923,373
6,400,000 Dresdner Bank, 5.130%, 3/15/1999 ................... 6,333,424
3,700,000 BNP Canada, 5.220%, 3/22/1999 ...................... 3,657,080
2,000,000 BNP Canada, 5.100%, 3/25/1999 ...................... 1,976,483
5,000,000 UBS Finance Delaware, Inc., 5.010%, 4/19/1999 ...... 4,924,850
1,400,000 BNP Canada, 4.980%, 5/12/1999 ...................... 1,374,630
1,800,000 BNP Canada, 4.880%, 6/04/1999 ...................... 1,762,424
2,700,000 BNP Canada, 4.880%, 6/07/1999 ...................... 2,642,538
4,620,000 BNP Canada, 4.880%, 6/21/1999 ...................... 4,512,908
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82,066,170
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ELECTRONICS--1.6%
7,000,000 Motorola Credit Corp., 5.200%, 2/19/1999 ........... 6,950,456
5,000,000 Motorola, Inc., 4.950%, 4/01/1999 .................. 4,938,125
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11,888,581
------------
FINANCE--16.8%
3,000,000 General Electric Capital Corp., 5.480%, 1/13/1999 .. 2,994,520
3,500,000 Commercial Credit Co., 5.160%, 1/22/1999 ........... 3,489,465
8,000,000 General Electric Capital Corp., 5.470%, 1/25/1999 .. 7,970,827
8,000,000 Household Finance Corp., 5.150%, 1/25/1999 ......... 7,972,533
5,000,000 Household Finance Corp., 5.120%, 1/26/1999 ......... 4,982,222
10,000,000 Commercial Credit Co., 5.170%, 2/03/1999 ........... 9,952,608
6,000,000 General Electric Capital Corp., 5.030%, 2/04/1999 .. 5,971,497
10,000,000 CIT Group Holdings, 5.360%, 2/05/1999 .............. 9,947,889
5,000,000 Transamerica Financial Group, 5.150%, 2/17/1999 .... 4,966,382
7,000,000 Avco Financial Services, Inc., 5.250%, 2/22/1999 ... 6,946,917
5,000,000 Avco Financial Services, Inc., 5.090%, 3/08/1999 ... 4,953,342
6,000,000 General Electric Capital Corp., 4.900%, 3/17/1999 .. 5,938,750
8,000,000 Associates Corp of N.A., 4.900%, 3/24/1999 ......... 7,910,711
5,000,000 General Electric Capital Corp., 5.000%, 3/25/1999 .. 4,942,361
5,000,000 CIT Group Holdings, 5.020%, 4/05/1999 .............. 4,934,461
7,000,000 CIT Group Holdings, 5.020%, 4/06/1999 .............. 6,907,269
7,000,000 Transamerica Finance Corp., 4.980%, 4/16/1999 ...... 6,898,325
2,200,000 Transamerica Financial Group, 4.980%, 4/16/1999 .... 2,168,045
2,500,000 General Electric Capital Corp., 4.990%, 4/21/1999 .. 2,461,882
2,150,000 American Express, 5.170%, 5/03/1999 ................ 2,112,331
6,000,000 Transamerica Financial Group, 4.980%, 5/06/1999 .... 5,896,250
7,000,000 General Electric Capital Corp., 4.940%, 5/26/1999 .. 6,860,719
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127,179,306
------------
INSURANCE--6.3%
14,000,000 AIG Funding, 4.900%, 1/04/1999 ..................... 13,994,283
5,000,000 Prudential Funding Corp., 5.490%, 1/14/1999 ........ 4,990,087
5,000,000 Prudential Funding Corp., 5.290%, 1/21/1999 ........ 4,985,306
5,000,000 Prudential Funding Corp., 5.310%, 1/21/1999 ........ 4,985,250
3,000,000 Prudential Funding Corp., 5.320%, 1/22/1999 ........ 2,990,690
6,000,000 Prudential Funding Corp., 5.040%, 1/26/1999 ........ 5,979,000
5,000,000 Prudential Funding Corp., 5.240%, 2/18/1999 ........ 4,965,067
5,000,000 Prudential Funding Corp., 5.180%, 2/19/1999 ........ 4,964,747
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47,854,430
------------
PHARMACEUTICAL--1.8%
5,700,000 American Home Products Corp., 5.000%, 1/04/1999 .... 5,697,625
8,000,000 American Home Products Corp., 5.150%, 3/04/1999 .... 7,929,045
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13,626,670
------------
RETAIL--4.1%
6,000,000 Sears Roebuck Acceptance Corp., 5.070%, 1/28/1999 .. 5,977,185
4,000,000 Sears Roebuck Acceptance Corp., 5.280%, 2/09/1999 .. 3,977,120
5,000,000 Sears Roebuck Acceptance Corp., 5.100%, 2/18/1999 .. 4,966,000
3,000,000 Sears Roebuck Acceptance Corp., 5.270%, 2/19/1999 .. 2,978,481
6,000,000 Sears Roebuck Acceptance Corp., 5.160%, 3/15/1999 .. 5,937,220
7,000,000 Sears Roebuck Acceptance Corp., 5.070%, 4/15/1999 .. 6,897,473
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30,733,479
------------
SECURITIES--11.4%
5,000,000 Merrill Lynch & Co., 5.340%, 1/15/1999 ............. 4,989,617
4,000,000 Goldman Sachs Group, 5.100%, 1/22/1999 ............. 3,988,100
7,000,000 Goldman Sachs Group, 5.500%, 1/25/1999 ............. 6,974,333
5,000,000 Goldman Sachs Group, 5.480%, 1/29/1999 ............. 4,978,689
5,000,000 Merrill Lynch & Co., 5.330%, 1/29/1999 ............. 4,979,272
4,000,000 Goldman Sachs Group, 5.230%, 2/11/1999 ............. 3,976,174
3,000,000 Merrill Lynch & Co., 5.520%, 2/12/1999 ............. 2,980,680
6,000,000 Merrill Lynch & Co., 5.450%, 2/22/1999 ............. 5,952,767
5,000,000 Merrill Lynch & Co., 5.500%, 2/22/1999 ............. 4,960,278
6,000,000 Goldman Sachs Group, 5.450%, 2/23/1999 ............. 5,951,858
5,000,000 Goldman Sachs Group, 5.450%, 2/25/1999 ............. 4,958,368
5,000,000 Merrill Lynch & Co., 4.930%, 3/05/1999 ............. 4,956,863
3,000,000 Merrill Lynch & Co., 5.020%, 3/22/1999 ............. 2,966,533
15,000,000 J.P. Morgan, 5.020%, 3/25/1999 ..................... 14,826,392
4,000,000 Goldman Sachs Group, 5.030%, 4/14/1999 ............. 3,942,434
2,000,000 Goldman Sachs Group, 4.900%, 4/23/1999 ............. 1,969,511
3,000,000 Merrill Lynch & Co., 4.980%, 5/21/1999 ............. 2,941,900
------------
86,293,769
------------
Total Commercial Paper (Cost $516,207,568) ......... 516,207,568
------------
Total Investments--102.8%
(Identified Cost $778,962,323)(c) ................. 778,962,323
Other assets less liabilities ...................... (21,445,511)
------------
Total Net Assets--100% ............................. $757,516,812
============
(a) See Note 1a of Notes to Financial Statements.
(b) Variable rate interest certificates are instruments whose interest rates
vary with changes in a designated base rate on a specific date. This
certificate resets interest daily based on the prime interest rate. The
maturity date shown is the next interest reset date.
(c) The aggregate cost for federal income tax purposes was $778,962,323.
Percentage of Net Assets invested in obligations of foreign banks or foreign
branches of U.S. Banks at December 31, 1998:
Canada 10.44% Netherlands 4.82%
England 3.04% Sweden 2.94%
France 9.63% Switzerland 5.26%
Germany 5.00%
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT MONEY MARKET TRUST
- -------------------------------------------------------------------------------
Investments as of December 31, 1998
(unaudited)
TAX EXEMPT OBLIGATIONS--103.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT ISSUER VALUE (A)
- ------------------------------------------------------------------------------------------
<C> <S> <C>
ALABAMA--6.5%
$1,500,000 Alabama State Docks Department Facilities Revenue, 5.250%,
10/01/1999 ............................................... $ 1,519,650
3,300,000 Athens Industrial Development Board Revenue, 5.200%, (b) ... 3,300,000
-----------
4,819,650
-----------
COLORADO--1.4%
1,000,000 Colorado River Texas Municipal Water District, 8.500%,
1/01/1999 ................................................ 1,000,000
-----------
DELAWARE--0.7%
500,000 Delaware State, 5.800%, 8/15/1999 .......................... 507,250
-----------
DISTRICT OF COLUMBIA--4.9%
3,600,000 District of Columbia, 5.000%, (b) .......................... 3,600,000
-----------
FLORIDA--2.4%
500,000 Sarasota County Public Hospital 85B, 3.250%, 2/19/1999 ..... 500,000
1,300,000 Dade County Special Obligation, 5.200%, (b) ................ 1,300,000
-----------
1,800,000
-----------
IDAHO--2.7%
2,000,000 Idaho State, 4.500%, 6/30/1999 ............................. 2,008,565
-----------
ILLINOIS--16.0%
1,000,000 Chicago, 6.100%, 1/01/1999 ................................. 1,000,000
1,000,000 Chicago, 3.550%, 2/04/1999 ................................. 1,000,000
3,500,000 Illinois Educational Facilities Authority Revenues,
4.050%, (b) .............................................. 3,500,000
3,000,000 Jackson/Union Counties, 4.050%, (b) ........................ 3,000,000
3,300,000 McCook Revenue, 4.050%, (b) ................................ 3,300,000
-----------
11,800,000
-----------
IOWA--8.2%
3,000,000 Iowa Finance Authority Revenue, 4.050%, (b) ................ 3,000,000
3,100,000 West Des Moines Commercial Development, 4.000%, (b) ........ 3,100,000
-----------
6,100,000
-----------
KENTUCKY--4.7%
3,440,000 Mayfield Multi City Lease, 4.100%, (b) ..................... 3,440,000
-----------
LOUISIANA--11.1%
1,735,000 Louisiana Public Facilities Authority Hospital, 4.250%,
7/01/1999 ................................................ 1,739,999
3,400,000 Jefferson Parish Hospital District 1, 4.000%, (b) .......... 3,400,000
3,100,000 Louisiana Public Facilities Hospital Authority, 4.050%, (b) 3,100,000
-----------
8,239,999
-----------
MICHIGAN--2.7%
1,000,000 Detroit City School District, 4.500%, 7/01/1999 ............ 1,004,063
1,000,000 Detroit Sewage Disposal Revenue, 7.125%, 7/01/1999 ......... 1,023,187
-----------
2,027,250
-----------
MONTANA--0.5%
400,000 Forsyth Pollution Control Revenue, 5.250%, (b) ............. 400,000
-----------
NEVADA--0.7%
500,000 Clark County School District, 6.250%, 6/01/1999 ............ 505,122
-----------
NEW YORK--6.0%
900,000 New York State Dormitory Authority Revenues, 4.250%,
7/01/1999 ................................................ 902,166
3,150,000 New York City, 5.000%, (b) ................................. 3,150,000
400,000 New York State Energy Research & Development, 5.200%, (b) .. 400,000
-----------
4,452,166
-----------
NORTH CAROLINA--8.1%
725,000 North Carolina Medical Care Commission, 4.000%, 10/01/1999 . 727,906
1,795,000 University of North Carolina at Chapel Hill, 4.050%, (b) ... 1,795,000
3,500,000 North Carolina Educational Facilities Finance, 3.950%, (b) . 3,500,000
-----------
6,022,906
-----------
OHIO--3.8%
1,500,000 Ohio State Public Facilities Commission, 4.500%, 11/01/1999 1,513,322
1,300,000 Hamilton County Health Systems Revenue, 6.000%, (b) ........ 1,300,000
-----------
2,813,322
-----------
PENNSYLVANIA--8.7%
3,000,000 Philadelphia Tax & Revenue Anticipation Notes, 4.250%,
6/30/1999 ................................................. 3,008,768
3,430,000 Washington County Authority Lease, 4.050%, (b) ............. 3,430,000
-----------
6,438,768
-----------
SOUTH CAROLINA--4.7%
3,500,000 Florence County Hospital Revenue, 4.000%, (b) .............. 3,500,000
-----------
TEXAS--8.3%
1,000,000 Lower Company River Authority Texas Revenue, 5.000%,
1/01/1999 ................................................. 1,000,000
335,000 Dallas County Texas Community College, 4.500%, 2/15/1999 ... 335,299
1,325,000 Nueces County Health Facilities, 4.050%, (b) ............... 1,325,000
3,500,000 Port Corpus Christi Authority Texas, 3.850%, (b) ........... 3,500,000
-----------
6,160,299
-----------
WASHINGTON--1.4%
1,000,000 Washington State Public Power Supply, 7.400%, 7/01/1999 .... 1,018,123
-----------
Total Investments--103.5% (Identified Cost $76,653,420) (c) 76,653,420
Other assets less liabilities .............................. (2,627,514)
-----------
Total Net Assets--100% ..................................... $74,025,906
===========
(a) See Note 1a of Notes to Financial Statements.
(b) Floating rate notes are instruments whose interest rates vary with changes in a designated
base rate (such as the prime interest rate) on a specified date (such as coupon date or
interest payment date). These instruments are payable on demand and are secured by letters
of credit or other credit support agreements from major banks.
(c) Aggregate cost for federal income tax purposes was $76,653,420.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST TAX EXEMPT
MONEY MARKET MONEY MARKET
SERIES TRUST
--------------------- ------------
<S> <C> <C>
ASSETS
Investments at value ............................ $778,962,323 $76,653,420
Cash ............................................ 3,196,298 81,531
. Receivable for:
Shares of the Trust sold ...................... 6,611,596 98,817
Interest ...................................... 9,429,660 638,738
------------ -----------
798,199,877 77,472,506
LIABILITIES
Payable for:
Securities purchased .......................... -- 3,009,374
Shares of the Trust redeemed .................. 39,455,309 272,421
Dividends declared ............................ 626,526 44,967
Accrued expenses:
Management fees ............................... 273,294 53,989
Deferred trustees' fees ....................... 70,850 32,970
Accounting and administrative ................. 13,463 2,651
Other expenses ................................ 243,623 30,228
------------ -----------
40,683,065 3,446,600
------------ -----------
NET ASSETS ........................................ $757,516,812 $74,025,906
============ ===========
Net Assets consist of:
Capital paid in Class A shares ................ $605,211,444 $73,735,144
Capital paid in Class B shares ................ 17,375,230 290,762
Capital paid in Class C shares ................ 1,889,261 --
Capital paid in Class Y shares ................ 132,925,577 --
Undistributed net investment income ........... 118,853 --
Accumulated net realized gains (losses) ....... (3,553) --
------------ -----------
NET ASSETS ........................................ $757,516,812 $74,025,906
============ ===========
Shares of beneficial interest outstanding,
no par value
Class A shares ................................ 605,211,444 73,735,144
Class B shares ................................ 17,375,230 290,762
Class C shares ................................ 1,889,261 --
Class Y shares ................................ 132,925,577 --
----------- ---------
Shares of beneficial interest outstanding ......... 757,401,512 74,025,906
============ ===========
Net asset value per share Class A, Class B,
Class C and
Class Y shares* ............................. $1.00 $1.00
===== =====
COST OF INVESTMENTS ............................... $778,962,323 $76,653,420
============ ===========
* Shares of the series are sold and redeemed at net asset value (net assets/shares of beneficial interest outstanding).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
Six Months Ended December 31, 1998
(unaudited)
<TABLE>
CAPTION>
CASH MANAGEMENT TRUST TAX EXEMPT
MONEY MARKET MONEY MARKET
SERIES TRUST
--------------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................ $21,065,644 $1,329,785
----------- ----------
Expenses
Management fees ............................... 1,586,354 149,745
Trustees' fees ................................ 21,207 4,166
Accounting and administrative ................. 84,469 12,687
Custodian ..................................... 65,274 26,801
Transfer agent ................................ 1,083,306 65,415
Service fees -- Class Y ....................... 154,731 --
Audit and tax services ........................ 12,600 12,600
Legal ......................................... 24,971 2,632
Printing ...................................... 58,139 4,095
Registration .................................. 52,237 21,806
Insurance ..................................... 1,300 80
Miscellaneous ................................. 5,038 2,018
----------- ----------
Total expenses .................................. 3,149,626 302,045
Less - waiver of fees by investment
adviser and distributor ........................ -- (58,697)
----------- ----------
Net investment income ........................... 17,916,018 1,086,437
REALIZED GAIN (LOSS) ON INVESTMENTS - NET ......... 1,980 --
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $17,917,998 $1,086,437
=========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
-------------------------------------------- ----------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1998 1998 1998
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ... $ 34,021,407 $ 17,916,018 $ 2,215,871 $ 1,086,437
Net realized gain (loss)
on investments ........ (651) 1,980 0 0
-------------- -------------- ------------- -------------
Increase (decrease) in
net assets from
operations ............ 34,020,756 17,917,998 2,215,871 1,086,437
-------------- -------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A ............... (32,279,427) (14,613,311) (2,215,871) (1,086,437)
Class B ............... 0 (350,807) 0 0
Class C ............... 0 (29,557) 0 0
Class Y ............... (1,741,329) (2,924,109) 0 0
-------------- -------------- ------------- -------------
(34,020,756)(a) (17,917,784)(a) (2,215,871) (1,086,437)
-------------- -------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of
shares ................ 1,671,676,546 1,114,059,044 104,256,210 51,123,274
Net asset value of shares
issued in connection
with the reinvestment
of dividends from net
investment income and
distributions from net
realized gains ........ 32,781,591 16,720,361 2,177,898 1,026,063
Cost of shares redeemed . (1,691,851,054) (1,084,528,815) (100,372,725) (51,920,956)
-------------- -------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS DERIVED
FROM CAPITAL SHARE
TRANSACTIONS ............ 12,607,083 46,250,590 6,061,383 228,381
-------------- -------------- ------------- -------------
Total increase (decrease)
in net assets 12,607,083 46,250,804 6,061,383 228,381
NET ASSETS
Beginning of the period . 698,658,925 711,266,008 67,736,142 73,797,525
-------------- -------------- ------------- -------------
End of the period ....... $ 711,266,008(b) $ 757,516,812(b) $ 73,797,525 $ 74,025,906
============== ============== ============= =============
(a) Amounts distributed included a net realized gain (loss) of ($651) for the year ended June 30, 1998 and $1,980 for the period
ended December 31, 1998.
(b) Including undistributed net investment income of $118,640 for the year ended June 30, 1998 and $118,854 for the period ended
December 31, 1998.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
-----------------------------------------------------------------------------------------------
CLASSES A, B, C SIX MONTHS
YEAR ENDED JUNE 30, ENDED
---------------------------------------------------------------------------- DECEMBER 31.
1994 1995 1996 1997 1998(A) 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income ..... 0.0264 0.0469 0.0482 0.0467 0.0488 0.0269
Net Realized and Unrealized
Gain (Loss) on
Investments ............. 0.0000 0.0000 0.0002 0.0000 0.0000 0.0000
-------- -------- -------- -------- -------- --------
Total From Investment
Operations 0.0264 0.0469 0.0484 0.0467 0.0488 0.0269
-------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income ....... (0.0264) (0.0469) (0.0484)(b) (0.0465) (0.0488) (0.0269)
Distributions From Net
Realized Capital Gains .. 0.0000 0.0000 0.0000 (0.0002) 0.0000 0.0000
-------- -------- -------- -------- -------- --------
Total Distributions ....... (0.0264) (0.0469) (0.0484) (0.0467) (0.0488) (0.0269)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return (%) .......... 2.7 4.8 5.0 4.8 5.0 2.3
Ratio of Operating Expenses
to Average Net Assets (%) 0.84 0.88 0.90 0.88 0.84 0.83(b)
Ratio of Net Investment
Income to Average Net
Assets (%) .............. 2.65 4.67 4.85 4.66 4.88 5.56(b)
Net Assets, End of Period
(000) ................... $699,369 $649,808 $663,621 $698,659 $607,406 $605,211
(a) Class C shares commenced operations March 1, 1998.
(b) Computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
MONEY MARKET SERIES -- CLASS Y
------------------------------------
FEBRUARY 27 (a) SIX MONTHS
THROUGH ENDED
JUNE 30, DECEMBER 31,
1998 1998
----- ------
<S> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 1.00 $ 1.00
-------- --------
Income From Investment Operations
Net Investment Income .................................... 0.0169 0.0271
-------- --------
Total From Investment Operations ......................... 0.0169 0.0271
-------- --------
Less Distributions
Distributions From Net Investment Income ................. (0.0169) (0.0271)
-------- --------
Total Distributions ...................................... (0.0169) (0.0271)
-------- --------
Net Asset Value, End of Period ........................... $ 1.00 $ 1.00
======== ========
Total Return (%) ......................................... 1.7 2.3
Ratio of Operating Expenses to Average Net Assets (%) (b) 0.74 0.83
Ratio of Net Investment Income to Average Net
Assets (%)(b) .......................................... 4.98 5.71
Net Assets, End of Period (000) .......................... $103,860 $132,925
(a) Commencement of operations.
(b) Computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
TAX EXEMPT MONEY MARKET TRUST
-----------------------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
---------------------------------------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income ..... 0.0208 0.0314 0.0327 0.0314 0.0323 0.0166
Net Realized and Unrealized
Gain (Loss) on
Investments ............. 0.0000 0.0000 0.0000 0.0001 0.0000 0.0000
------- ------- ------- ------- ------- -------
Total From Investment
Operations ................ 0.0208 0.0314 0.0327 0.0315 0.0323 0.0166
------- ------- ------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income ....... (0.0208) (0.0314) (0.0327) (0.0315)(a) (0.0323) (0.0166)
------- ------- ------- ------- ------- -------
Total Distributions ....... (0.0208) (0.0314) (0.0327) (0.0315) (0.0323) (0.0166)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return (%) .......... 2.1 3.2 3.3 3.2 3.3 1.4
Ratio of Operating Expenses
to Average Net Assets (%)
(b) ..................... 0.56 0.56 0.56 0.56 0.60 0.65(c)
Ratio of Net Investment
Income to Average Net
Assets (%) .............. 2.08 3.15 3.29 3.17 3.23 3.55(c)
Net Assets, End of Period
(000) $66,620 $67,797 $64,897 $67,736 $73,798 $74,026
(a) Including net realized gain on investments.
(b) The ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense limitation and
voluntary fee waiver
described in Note 3 to
the financial
statements would have
been .................. 0.89 0.85 0.90 0.85 0.85 0.81(c)
(c) Computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
December 31, 1998
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES. New England Cash Management Trust Money
Market Series and New England Tax Exempt Money Market Trust (the "Trusts") are
registered under the Investment Company Act of 1940, as amended, as diversified,
open-end investment companies. The Cash Management Trust Money Market Series
seeks maximum current income consistent with the preservation of capital and
liquidity. The Tax Exempt Money Market Trust seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity.
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES -- The Trust's Agreement
and Declaration of Trust permits the issuance of an unlimited number of shares
of beneficial interest, no par value. The Trust commenced its public offering of
Class B shares on September 13, 1993, Class C shares on March 1, 1998 and Class
Y shares on February 27, 1998. Class A, B and C shares were offered to enable
investors in each class of the New England Stock or Bond Funds to invest in
money market shares. Class A, B and C shares are identical except that Class B
and C shares may be subject to a contingent deferred sales charge upon
redemption if the shares were acquired by exchange of Class B or C shares of a
stock or bond fund. Class Y shares are intended for institutional investors with
a minimum of $1 million to invest.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- The Trust's Agreement and
Declaration of Trust permits the issuance of an unlimited number of shares of
beneficial interest, no par value. Effective September 13, 1993, the Trust began
offering two classes of shares, Class A and Class B, in order to enable
investors in either class of the New England Stock or Bond Funds to invest in
money market shares. Class A and B shares are identical except that Class B
shares may be subject to a contingent deferred sales charge upon redemption if
the shares were acquired by exchange of Class B shares of a stock or bond fund.
The following is a summary of significant accounting policies followed by the
Trusts in the preparation of the 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 Trusts employ the amortized cost method of security
valuation as set forth in Rule 2a-7 under the Investment Company Act of 1940
which, in the opinion of the trustees of each Trust, represents the fair value
of the particular security. The amortized cost of a security is determined by
valuing it at original cost and there-after accreting any discount or amortizing
any premium on a straight-line basis.
B. REPURCHASE AGREEMENTS. The Trusts, through their custodian, receive delivery
of the underlying securities collateralizing repurchase agreements. It is the
Trusts' policy that the market value of the collateral be at least equal to 100%
of the repurchase price. The 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 portfolio's ability to dispose of the underlying security.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (date the order to buy or sell is executed)
and interest income is recorded on the accrual basis. In determining the net
gain or loss on securities sold, the cost of securities is determined on the
identified cost basis.
D. DELAYED DELIVERY SECURITIES. Delivery and payment for securities purchased on
a when-issued or delayed delivery basis can take place one month or more after
the date of the transaction. The securities so purchased are subject to market
fluctuation during this period.
E. FEDERAL INCOME TAXES. The Cash Management Trust Money Market Series and the
Tax Exempt Money Market Trust intend to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies, and to distribute to
their shareholders all of their taxable and tax exempt income. Accordingly, no
provision for federal income tax has been made.
The Tax Exempt Money Market Trust has designated 100% of dividends paid from net
investment income during the fiscal year as tax exempt for federal income tax
purposes.
F. DIVIDENDS TO SHAREHOLDERS. Dividends are declared daily to shareholders of
record at the time and are paid monthly. Long term gain distributions, if any,
will be made annually.
G. OTHER. Each of the Trusts invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within the two
highest ratings categories of a nationally recognized rating agency or, if not
rated, are believed to be of comparable quality. The ability of the issuers of
the securities held by the Trusts to meet their obligations may be affected by
foreign economic, political and legal developments in the case of foreign banks
or foreign branches or subsidiaries of U.S. banks, or domestic economic
developments in a specific industry, state or region.
2. INVESTMENT TRANSACTIONS. For the six months ended December 31, 1998:
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES -- Purchases and sales or
maturities of short-term obligations, including securities purchased subject to
repurchase agreements, aggregated $2,318,825,535 and $2,253,687,533,
respectively.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- Purchases and sales or maturities
of short-term obligations aggregated $98,274,191 and $102,195,000, respectively.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. During the six months
ended December 31, 1998, the Trusts incurred management fees payable to the
Trusts' investment adviser, New England Funds Management L.P. ("NEFM") and
subadviser, Back Bay Advisors L.P. ("BBA"). Certain officers and directors of
NEFM are also officers and trustees of the Trusts. NEFM and BBA are wholly-
owned subsidiaries of Nvest Companies, L.P. ("Nvest"), formerly known as New
England Investment Companies, L.P., which is a subsidiary of Metropolitan Life
Insurance Company ("MetLife").
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES. Under the management
agreement, the Trust pays to its investment adviser, NEFM, a monthly fee based
on the annual percentage rates of its corresponding average daily net asset
values set forth below.
Under the same management agreement, the Trust pays to its investment
subadviser, BBA, a monthly fee based on the annual percentage rates of its
corresponding average daily net asset values set forth below:
ANNUAL PERCENTAGE RATE ANNUAL PERCENTAGE RATE OF
OF ADVISORY FEES ADVISORY FEES PAID TO THE
PAID TO NEFM SUBADVISER, BBA
---------------------- -------------------------
the first $500 million 0.4250% 0.2050%
the next $500 million 0.4000% 0.1800%
the next $500 million 0.3500% 0.1600%
the next $500 million 0.3000% 0.1400%
amounts in excess of $2 billion 0.2500% 0.1200%
FEES EARNED
- -----------
$837,838 NEFM
$748,516 BBA
The effective annualized management fee for the six months ended December 31,
1998 was 0.42%.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
The Trust pays management fees to its investment adviser, NEFM, at the annual
rate of 0.40% of the first $100 million of the Trust's average daily net assets
and 0.30% of such assets in excess of $100 million. The Trust pays management
fees to its investment subadviser, BBA, at the rate of 0.20% of the first $100
million of the Trust's average daily net assets and 0.15% of such assets in
excess of $100 million. Fees earned by NEFM and BBA under the management
agreements in effect during the six months ended December 31, 1998 are as
follows:
FEES EARNED(a)
- --------------
$74,872 NEFM
$74,873 BBA
(a) Before reduction pursuant to voluntary expense limitations.
The effective annualized management fee for the six months ended December 31,
1998 was 0.40%.
Effective January 1, 1998 NEFM and BBA voluntarily agreed, until further notice,
to reduce the management fee and, if necessary, to assume Trust expenses in
order to limit the expenses to 0.65 of 1% of average daily net assets. Prior to
January 1, 1998 expenses were limited to 0.5625 of 1% of average net assets per
year. As a result of fund expenses exceeding the expense limitation, for the six
months ended December 31, 1998 NEFM and BBA reduced their fees by $29,348 and
$29,349, respectively.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England
Funds"), the Trusts' distributor, is a wholly owned subsidiary of Nvest and
performs certain accounting and administrative services for the Trusts. Each
Trust 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 clerical functions relating to the Trusts, 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 Trusts
or regulatory authorities and reports and questionnaires for SEC compliance. For
the six months ended December 31, 1998, these expenses amounted to $84,469 for
the Cash Management Trust Money Market Series and $12,687 for the Tax Exempt
Money Market Trust.
C. TRANSFER AGENT FEES. New England Funds Service Corporation ("NEFSCO") is the
transfer and shareholder servicing agent for the Trusts and Boston Financial
Data Services serves as the sub-transfer agent for the Trusts. For the six
months ended December 31, 1998, the New England Cash Management Trust Money
Market Series and Tax Exempt Money Market Trust paid $806,568 and $33,781,
respectively, to NEFSCO as compensation for its services in that capacity. For
the six months ended December 31, 1998, the Cash Management Trust Money Market
Series and Tax Exempt Money Market Trust received $6,825 and $710, respectively,
in transfer agent credits. The transfer agent expense in the Statement of
Operations is net of these credits.
D. SERVICE FEE. The Cash Management Trust Money Market Series Class Y shares
that are purchased through an omnibus account may bear a service charge of 0.25%
annually of the Class Y average daily net assets which will be paid by the Fund
to such investment advisers, financial planners and broker-dealers, including
New England Securities Corporation, for services provided by them to service
accounts on behalf of Class Y shares of the Fund under a service agreement. For
the six months ended December 31, 1998 the Fund paid $154,731 in service fees.
4. TRUSTEES FEES AND EXPENSES. The Trusts do not pay any compensation to
officers or trustees who are directors, officers, or employees of NEFM, NEFSCO,
Nvest, New England Funds or their affiliates, other than registered investment
companies. Each disinterested trustee is compensated by the Cash Management
Trust Money Market Series and by the Tax Exempt Money Market Trust as follows:
CASH MANAGEMENT TAX EXEMPT
TRUST MONEY MARKET
MONEY MARKET SERIES TRUST
------------------- ------------
Annual Retainer $4,614 $433
Meeting Fee 152/meeting 152/meeting
Annual Committee Member Retainer 692 65
Annual Committee Chairman Retainer 461 43
A deferred compensation plan is available to members of the boards of trustees.
A trustee's participation in the plan is voluntary. Each participating trustee
will receive an amount equal to the value that such deferred compensation would
have been, had it been invested in the Trust on the normal payment date.
5. CONCENTRATION OF CREDIT. The Tax Exempt Money Market Trust had the following
industry concentrations in excess of 10% on December 31, 1998 as a percentage of
the Trust's total net assets: Education (16.9%) Government (18.6%) and Hospitals
(33.0%). The Trust also had more than 10% of its total net assets invested in
Illinois (16.0%) and Louisiana (11.1%) and had more than 10% of its net assets
backed by letters of credit with MBIA (11.5%) and First Union National Bank of
North Carolina (13.3%).
<PAGE>
- -------------------------------------------------------------------------------
NEW ENGLAND FUNDS
- -------------------------------------------------------------------------------
LARGE-CAP EQUITY FUNDS
Capital Growth Fund
Growth Fund
Growth Opportunities Fund
Balanced Fund
Value Fund
ALL-CAP EQUITY FUNDS
Star Advisers Fund
Star Worldwide Fund
International Equity Fund
Bullseye Fund
Equity Income Fund
SMALL-CAP EQUITY FUNDS
Star Small Cap Fund
CORPORATE INCOME FUNDS
Short Term Corporate Income Fund
(formerly Adjustable Rate U.S. Government Fund)
Bond Income Fund
High Income Fund
Strategic Income Fund
GOVERNMENT INCOME FUNDS
Limited Term U.S. Government Fund
Government Securities Fund
TAX-FREE INCOME FUNDS
Municipal Income Fund
Intermediate Term Tax Free Fund of California
Tax Free Income Fund of New York
(formerly Intermediate Term Tax Free Fund of NY)
Massachusetts Tax Free Income Fund
MONEY MARKET FUNDS
Cash Management Trust
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 800-289-9999 or by visiting their Web
site at www.NASDR.com.
<PAGE>
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