Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
After a substantial run in 1995 in which Northeast Investors Growth
Fund posted a near record 36.5% total return, results for the first six months
of 1996 essentially matched those of both the Dow Jones Industrial Average and
the S&P 500 Index. During this period, the fund posted a total return of 10.6%
while the Dow and the S&P 500 rose 11.7% and 10.1%, respectively. However, the
most startling market action has been after June 30 with the volatility
experienced in the first three weeks of July. While our investments have not
been immune to these movements, we are taking advantage of any price decline to
add to positions in investments we favor.
During the first six months, with cash raised from sales of existing
positions, particularly those which had grown to represent more than 5% of the
fund's assets, we increased our investment exposure in the technology area,
including new investment holdings in Cascade Communications, Cisco Systems,
Parametric Technology and Sun Microsystems, and additions to Hewlett-Packard,
Microsoft, Thermo Electron and Xerox. Given the accelerated pace of change in
this area, and because these new investments carry a higher level of risk due to
their growth expectations, we have limited the size of these positions to a
smaller level than those of our lower risk holdings.
The ten largest investment holdings reflect good diversification among
blue chip investments. In addition to the increased exposure given to tech-
nology, we continue to maintain an overweightedposition in the interest-
sensitive banking sector in which we see consolidation continuing. We also
continue to favor large, multi-national companies such as Gillette, Coca-Cola
and Procter and Gamble as ways to gain exposure to international
economies without taking the political and accounting risks attendant with
specific investments in foreign companies.
Going forward, our intention is to stay fully invested and hopefully to
use any downturn in the market to our advantage. There are reasons to be
optimistic about the future -- increased productivity via technology, a
worldwide trend toward freer markets and less government, as well as continued
indications that inflation in this country is not a major factor.
As always, I encourage shareholders to contact me with any questions
regarding the fund at any time.
Yours sincerely,
William A. Oates, Jr.
President
July 24, 1996
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
One year ended June 30, 1996 24.76%
Five years ended June 30, 1996 13.45%
Ten years ended June 30, 1996 11.09%
</TABLE>
<TABLE>
January 1, 1996 - June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Additions to Existing Holdings
<CAPTION>
Additions Now Own
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Home Products Corp. 9,300 11,800
Astra AB Spons ADR A 3,800 12,550
Cabot Corporation 12,500 25,000
Chubb Corporation 10,000 20,000
Coca-Cola Company 9,800 19,600
Eastman Kodak Company 3,900 20,000
Fifth Third Bancorp 5,500 16,500
First Security Corporation/Del 8,800 26,400
Hewlett-Packard Company 1,700 11,700
Home Depot, Inc. 9,200 18,300
Johnson & Johnson 18,000 36,000
McGraw-Hill, Inc. 8,400 12,400
Microsoft Corporation 3,800 8,800
Nike, Inc.-Class B 1,800 11,200
Pepsico, Inc. 15,000 30,000
Thermo Electron Corporation 9,300 27,900
Warner Lambert Company 12,200 14,800
Xerox Corporation 13,600 20,400
</TABLE>
<TABLE>
<CAPTION>
New Holdings
Now Own
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cascade Communications Corporation 12,200
Cisco Systems, Inc. 12,000
Isis Pharmaceuticals, Inc. 20,000
Micron Technology, Inc. 4,500
Parametric Technology Corporation 22,900
Pfizer, Inc. 8,000
Sun Microsystems, Inc. 14,200
</TABLE>
<TABLE>
<CAPTION>
Eliminations/Reductions of Holdings
Sold Now Own
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AT&T Corporation 3,700 0
Bank of Boston Corporation 32,000 20,000
Bankers Trust New York 5,000 0
Baybanks, Inc. 2,600 28,000
General Electric Company 2,500 21,500
General Mills, Inc. 6,600 0
Gillette Company 7,000 37,000
GTE Corporation 10,000 0
Maxxam, Inc. 5,000 5,000
Motorola, Inc. 8,000 28,000
SBC Communications, Inc. 10,000 0
St. Paul Companies, Inc. 24,000 0
Time Warner, Inc. 26,000 14,000
West Point Stevens, Inc. 20,000 0
</TABLE>
<TABLE>
<CAPTION>
January- April-
March June
------ -------
<S> <C> <C>
1996 High $34.10 $35.57
Low 30.57 32.56
- ---------------------------------------------------------------------------------------------------------------------------
January- April- July- October-
March June September December
------ ------- ------- -------
<S> <C> <C> <C> <C>
1995 High $26.81 $29.82 $32.16 $33.61
Low 24.33 26.51 29.64 31.32
</TABLE>
<TABLE>
June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ten Largest Investment Holdings
Percent
Market of Net
Value Assets
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BayBanks, Inc. $3,017,000 5.8%
Gillette Company 2,307,875 4.4%
Walt Disney Company 2,263,500 4.3%
General Electric Company 1,859,750 3.6%
Johnson & Johnson 1,782,000 3.4%
Motorola, Inc. 1,760,500 3.4%
General Re Corporation 1,689,975 3.2%
Eastman Kodak Company 1,555,000 3.0%
Royal Dutch Petroleum 1,537,500 2.9%
Procter & Gamble Company 1,495,312 2.9%
</TABLE>
- --------------------------------------------------------------------------------
Page 2
- --------------------------------------------------------------------------------
Northeast Investors Growth Fund
Common Stocks
<TABLE>
<CAPTION>
Percent of
Number of Market Net
Name of Issuer Shares Value Assets
- ---------------------------------------------------------------------------------------------------------------------------
Apparel
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nike, Inc.-Class B....................................... 11,200 $ 1,150,800 2.2%
Banks
- ---------------------------------------------------------------------------------------------------------------------------
Bank of Boston Corporation .............................. 20,000 990,000
BayBanks, Inc............................................ 28,000 3,017,000
Fifth Third Bancorp...................................... 16,500 891,000
First American Corporation, Tennessee.................... 13,200 556,050
First Security Corporation, Delaware..................... 26,400 633,600
Fleet Financial Group, Inc............................... 13,000 565,500
National Bancorp of Alaska, Inc.......................... 3,000 189,000
Zions Bancorporation..................................... 9,000 654,750
- ---------------------------------------------------------------------------------------------------------------------------
7,496,900 14.3%
Chemical
- ---------------------------------------------------------------------------------------------------------------------------
Cabot Corporation........................................ 25,000 612,500 1.2%
Computer & Data Processing
- ---------------------------------------------------------------------------------------------------------------------------
Cascade Communications Corporation^...................... 12,200 829,600
Cisco Systems Incorporated^.............................. 12,000 679,500
Hewlett-Packard Company.................................. 11,700 1,165,612
International Business Machines.......................... 10,000 990,000
Sun Microsystems, Inc.^.................................. 14,200 836,025
- ---------------------------------------------------------------------------------------------------------------------------
4,500,737 8.6%
Computer Software & Services
- ---------------------------------------------------------------------------------------------------------------------------
America Online, Inc.^.................................... 16,000 700,000
Microsoft Corporation^................................... 8,800 1,057,100
Parametric Technology Corporation^....................... 22,900 993,287
- ---------------------------------------------------------------------------------------------------------------------------
2,750,387 5.2%
Electrical Equipment
- ---------------------------------------------------------------------------------------------------------------------------
General Electric Company................................. 21,500 1,859,750 3.6%
Electronics
- ---------------------------------------------------------------------------------------------------------------------------
Intel Corporation........................................ 16,000 1,175,000
Micron Technology, Inc................................... 4,500 116,438
Motorola, Inc............................................ 28,000 1,760,500
- ---------------------------------------------------------------------------------------------------------------------------
3,051,938 5.8%
- ---------------------------------------------------------------------------------------------------------------------------
Page 3
Northeast Investors Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks--continued
Percent of
Number of Market Net
Name of Issuer Shares Value Assets
- ---------------------------------------------------------------------------------------------------------------------------
Energy & Natural Resources
- ---------------------------------------------------------------------------------------------------------------------------
Thermo Electron Corporation^............................. 27,900 $ 1,161,337 2.2%
Entertainment
- ---------------------------------------------------------------------------------------------------------------------------
Carnival Corporation..................................... 8,500 245,438
Walt Disney Company...................................... 36,000 2,263,500
Time Warner, Inc......................................... 14,000 549,500
- ---------------------------------------------------------------------------------------------------------------------------
3,058,438 5.8%
Fast Food Service
- ---------------------------------------------------------------------------------------------------------------------------
McDonald's Corporation................................... 12,000 561,000 1.1%
Financial Services
- ---------------------------------------------------------------------------------------------------------------------------
Beneficial Corporation................................... 12,400 695,950 1.3%
Food & Beverage
- ---------------------------------------------------------------------------------------------------------------------------
Coca-Cola Company........................................ 19,600 957,950
Pepsico, Inc............................................. 30,000 1,061,250
- ---------------------------------------------------------------------------------------------------------------------------
2,019,200 3.9%
Food Service
- ---------------------------------------------------------------------------------------------------------------------------
Sysco Corporation........................................ 15,000 513,750 1.0%
Health Care
- ---------------------------------------------------------------------------------------------------------------------------
American Home Products Corporation....................... 11,800 709,475
Johnson & Johnson........................................ 36,000 1,782,000
Warner Lambert Company................................... 14,800 814,000
- ---------------------------------------------------------------------------------------------------------------------------
3,305,475 6.3%
Household Products
- ---------------------------------------------------------------------------------------------------------------------------
Procter & Gamble Company................................. 16,500 1,495,312 2.9%
Industrial Services & Manufacturing
- ---------------------------------------------------------------------------------------------------------------------------
Caterpillar, Inc......................................... 7,200 487,800
Minnesota, Mining & Manufacturing Company................ 5,000 345,000
- ---------------------------------------------------------------------------------------------------------------------------
832,800 1.6%
- ---------------------------------------------------------------------------------------------------------------------------
Page 4 .
Northeast Investors Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks--continued
Percent of
Number of Market Net
Name of Issuer Shares Value Assets
- ---------------------------------------------------------------------------------------------------------------------------
Insurance
- ---------------------------------------------------------------------------------------------------------------------------
American International Group............................. 9,350 $ 922,144
Chubb Corporation........................................ 20,000 997,500
General Re Corporation................................... 11,100 1,689,975
- ---------------------------------------------------------------------------------------------------------------------------
3,609,619 6.9%
Office Equipment
- ---------------------------------------------------------------------------------------------------------------------------
Xerox Corporation........................................ 20,400 1,091,400 2.1%
Paper & Forest Products
- ---------------------------------------------------------------------------------------------------------------------------
James River Corporation, VA.............................. 17,500 461,563
Maxxam, Inc.^ 5,000 196,250
- ---------------------------------------------------------------------------------------------------------------------------
657,813 1.3%
Petroleum, Coal & Gas
- ---------------------------------------------------------------------------------------------------------------------------
Chevron Corporation...................................... 24,000 1,416,000
Royal Dutch Petroleum Company 10,000 1,537,500
- ---------------------------------------------------------------------------------------------------------------------------
2,953,500 5.6%
Pharmaceuticals
- ---------------------------------------------------------------------------------------------------------------------------
Abbott Laboratories...................................... 12,000 522,000
Astra AB Spons ADR A..................................... 12,550 549,063
Isis Pharmaceutical, Inc.^............................... 20,000 375,000
Merck & Company, Inc..................................... 9,600 620,400
Pfizer, Inc.............................................. 8,000 571,000
- ---------------------------------------------------------------------------------------------------------------------------
2,637,463 5.0%
Precision Instruments
- ---------------------------------------------------------------------------------------------------------------------------
Eastman Kodak Company.................................... 20,000 1,555,000 3.0%
Publishing & Printing
- ---------------------------------------------------------------------------------------------------------------------------
McGraw-Hill, Inc......................................... 12,400 567,300 1.1%
Retail
- ---------------------------------------------------------------------------------------------------------------------------
Home Depot, Inc.......................................... 18,300 988,200 1.9%
- ---------------------------------------------------------------------------------------------------------------------------
Page 5
Northeast Investors Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks--continued
Percent of
Number of Market Net
Name of Issuer Shares Value Assets
- ---------------------------------------------------------------------------------------------------------------------------
Toiletries & Cosmetics
- ---------------------------------------------------------------------------------------------------------------------------
Gillette Company......................................... 37,000 $ 2,307,875 4.4%
-------------- --------------
Total Common Stocks (Cost-$31,759,905).............. 51,434,444 98.3%
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement Face
- ---------------------------------------------------------------------------------------------------------------------------
Investors Bank & Trust Company Repurchase Agreement,
5.03% due July 1, 1996....................................... $888,368 888,368 1.7%
----------- --------------
Total Repurchase Agreement (Cost--$888,368)*......... 888,368
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$32,648,273) $ 52,322,812 100.00%
----------- --------------
----------- --------------
<FN>
*Acquired on June 28, 1996. Collateralized by $991,216 of various U.S. government mortgage-backed securities,
due through 6/01/2022 . The maturity value is $888,740. As an operating policy, the Fund, through the custodian
bank, secures receipt of adequate collateral supporting repurchase
agreements --(see Note F).
^ Non-income producing.
ADR stands for American Depository Receipt representing ownership of
foreign securities.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Page6 The accompanying notes are an integral part of the financial statements.
Northeast Investors Growth Fund
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
June 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investments-- at market value
(cost $32,648,273)--Notes B, D &F..... $52,322,812
Dividends and interest receivable........ 64,455
Receivable for shares of beneficial .....
interest sold......................... 86,509
- --------------------------------------------------------------------------------
Total Assets .......... 52,473,776
Liabilities
- --------------------------------------------------------------------------------
Payable for shares of beneficial interest
repurchased .......................... 615
Accrued expenses......................... 61,381
Accrued investment advisory fee--
Note C................................ 26,728
- --------------------------------------------------------------------------------
Total Liabilities...... 88,724
- --------------------------------------------------------------------------------
Net Assets............................... $52,385,052
================================================================================
- --------------------------------------------------------------------------------
Net Assets Consist of (Note B):
Capital paid-in.......................... $29,917,754
Accumulated net investment
income ............................... 105,672
Accumulated net realized gain
on investments........................ 2,687,087
Net unrealized appreciation of
investments........................... 19,674,539
- --------------------------------------------------------------------------------
Net Assets, for 1,490,801 shares
outstanding........................... $52,385,052
================================================================================
- --------------------------------------------------------------------------------
Net Asset Value, offering price
and redemption price per share
($52,385,052 / 1,490,801 shares) $35.14
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
<S> <C>
Dividends................................ $418,137
Interest................................. 6,893
- --------------------------------------------------------------------------------
Total Income........... 425,030
Expenses
- --------------------------------------------------------------------------------
Investment advisory fee--
Note C..................... $171,621
Administrative expenses
and salaries............... 49,450
Legal fees.................... 18,940
Auditing fees 17,025
Computer and
related expenses........... 16,270
Printing, postage.............
and stationery............. 13,740
Registration and..............
filing fees................ 12,460
Custodian fees................ 8,510
Trustee fees-Note C 3,000
Insurance..................... 2,730
Interest-Note G............... 2,432
Other expenses................ 4,946
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 321,124
- --------------------------------------------------------------------------------
Net Investment Income 103,906
Realized and Unrealized Gain
on Investments-Note B:
- --------------------------------------------------------------------------------
Net realized gain from investment
transactions........................... 2,677,528
Change in unrealized appreciation
of investments........................ 2,255,882
- --------------------------------------------------------------------------------
Net Gain on Investments.................. 4,933,410
- --------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations.............. $5,037,316
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Page 7
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
June 30, 1996 December 31, 1995
(unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Increase in Net Assets
From Operations:
Net investment income........................................................ $ 103,906 $ 303,099
Net realized gain from investment transactions............................... 2,677,528 2,025,092
Change in unrealized appreciation of investments............................. 2,255,882 10,108,493
---------- ----------
Net Increase in Net Assets Resulting from
Operations........................................................... 5,037,316 12,436,684
Distributions to Shareholders:
From net investment income.................................................. - (301,333)
From net realized gains on investments...................................... - (1,894,093)
---------- ----------
Total Distributions....................................................... - (2,195,426)
From Net Fund Share Transactions--Note E..................................... (989,561) 2,636,657
---------- ----------
Total Increase in Net Assets......................................... 4,047,755 12,877,915
Net Assets:
Beginning of Period.......................................................... 48,337,297 35,459,382
---------- ----------
End of Period (including undistributed net investment income
of $105,672 and $1,766, respectively)........................................ $52,385,052 $48,337,297
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 8 The accompanying notes are an integral part of the financial statements.
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Note A--Organization
Northeast Investors Growth Fund (the "Fund") is a diversified, no-load,
open-end, series-type management investment company registered under the
Investment Company Act of 1940, as amended. The Fund presently consists of one
portfolio.
The Fund is organized as a Massachusetts business trust.
Note B--Significant Accounting Policies
Significant accounting policies of the Fund are as follows:
Valuation of Investments: Investments in securities traded on national
securities exchanges are valued based upon closing prices on the exchanges.
Securities traded in the over-the-counter market and listed securities with no
sales on the date of valuation are valued at closing bid prices. Repurchase
agreements are valued at cost with earned interest included in interest
receivable. Other short-term investments, when held by the Fund, are valued at
cost plus earned discount or interest which approximates market value.
Security Transactions: Investment security transactions are recorded on the
date of purchase or sale. Net realized gain or loss on sales of investments is
determined on the basis of identified cost.
Federal Income Taxes: No provision for federal income taxes is necessary since
the Fund has elected to qualify under subchapter M of the Internal Revenue Code
and its policy is to distribute all of its taxable income, including net
realized capital gains, within the prescribed time periods.
State Income Taxes: Because the Fund has been organized by an Agreement and
Declaration of Trust executed under the laws of the Commonwealth of
Massachusetts, it is not subject to state or excise taxes.
Distributions and Income:
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for capital loss carryovers and losses deferred due to wash sales.
Permanent book and tax differences relating to shareholder distributions
will result in reclassifications to paid-in-capital. The Fund's distributions
and dividend income are recorded on the ex-dividend date. Interest income, which
consists of interest from repurchase agreements, is accrued as earned.
Net Asset Value: In determining the net asset value per share, rounding
adjustments are made for fractions of a cent to the next higher cent.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Note C--Investment Advisory and Service Contract
The Fund has its investment advisory and service contract with Northeast
Management & Research Company, Inc. (the "Advisor"). Under the contract the Fund
pays the Advisor an annual fee at a maximum rate of 1% of the first $10,000,000
of the Fund's average daily net assets, 3/4 of 1% of the next $20,000,000 and
1/2 of 1% of the average daily net assets in excess of $30,000,000, in monthly
installments on the basis of the average daily net assets during the month
preceding payment. In the event that the normal operating expenses of the Fund,
exclusive of taxes, interest and brokerage commissions or fees, but including
the investment advisory fee, shall exceed 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2% of the next $70,000,000 of the Fund's
average daily net asset value and 1.5% of the Fund's average daily net asset
value in excess of $100,000,000 for any fiscal year related thereto, the Advisor
will waive a portion of its fee to the extent of such excess.
All trustees except Messrs. John R. Furman and John C. Emery are officers
or directors of the Advisor. The compensation of all disinterested Trustees of
the Fund is borne by the Fund.
- --------------------------------------------------------------------------------
Page 9
- --------------------------------------------------------------------------------
Northeast Investors Growth Fund
Note D--Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments, other than
short-term securities, aggregated $6,939,575 and $7,634,048 respectively, for
the six months ended June 30, 1996.
Note E--Shares of Beneficial Interest
At June 30, 1996, there was an unlimited number of shares of beneficial
interest authorized with no par value. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold............................................. 105,670 $3,558,674 221,312 $6,723,415
Shares issued to shareholders in reinvestment of
distributions from net investment income and
realized gain from security transactions................ - - 63,002 2,021,120
------------ ------------- ------------ -------------
105,670 3,558,674 284,314 8,744,535
Shares repurchased (136,170) (4,548,235) (216,757) (6,107,878)
------------ ------------- ------------ -------------
Net Increase (Decrease)............................ (30,500) ($989,561) 67,557 $2,636,657
============ ============= ============ =============
</TABLE>
Note F--Repurchase Agreement
On a daily basis, the Fund invests uninvested cash balances into repurchase
agreements secured by U.S. Government obligations. Securities pledged as
collateral for repurchase agreements are held by the Fund's custodian bank until
maturity of the repurchase agreement. Provisions of the agreement ensure that
the market value of the collateral is sufficient in the event of default.
However, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings.
Note G--Short-term Borrowings
Short-term bank borrowings, which do not require maintenance of
compensating balances, are generally on a demand basis and are at rates equal to
adjusted money market interest rates in effect during the period in which such
loans are outstanding. At June 30, 1996, the Fund had an unused line of credit
amounting to $5,000,000.
The following information relates to aggregate short-term borrowings for
the six month period ended June 30, 1996:
Average amount outstanding (total of daily outstanding principal balances
divided by number of days during the period)........................$58,081
Weighted average interest rate (actual interest expense on short-term borrowings
divided by average short-term borrowings outstanding) (Annualized)......8.35%
Note H--Other Tax Information
For federal income tax purposes, the cost of investments owned at June 30,
1996 was $32,648,273. At June 30, 1996, gross unrealized appreciation of
investments was $19,802,169 and gross unrealized depreciation was $127,630,
resulting in net unrealized appreciation of $19,674,539.
- --------------------------------------------------------------------------------
Page 10
- --------------------------------------------------------------------------------
Northeast Investors Growth Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996
Per Share Data (unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value:
Beginning of Period........ $31.78 $24.40 $25.12 $29.11 $31.12 $23.45 $23.68 $18.28 $16.84 $18.23 $15.24
Income From Investment
Operations:
Net investment income...... .07 .21 .19 .20 .20 .26 .28 .23 .27 .14 .08
Net realized and
unrealized gain (loss)
on investments............. 3.29 8.70 (.22) .47 (.44) 8.32 .08 5.75 1.91 (.79) 3.56
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations................. 3.36 8.91 (.03) .67 (.24) 8.58 .36 5.98 2.18 (.65) 3.64
Less Distributions:
Net investment income...... - (.21) (.19) (.20) (.20) (.36) (.26) (.28) (.27) (.12) (.13)
Capital gains.............. - (1.32) (.50) (4.46) (1.57) (.55) (.33) (.30) (.47) (.62) (.52)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions........ - (1.53) (.69) (4.66) (1.77) (.91) (.59) (.58) (.74) (.74) (.65)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value:
End of Period.............. $35.14 $31.78 $24.40 $25.12 $29.11 $31.12 $23.45 $23.68 $18.28 $16.84 $18.23
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return............... 10.57% 36.46% (.07%) 2.44% (.73%) 36.91% 1.52% 32.73% 12.91% (3.54%) 24.36%
Ratios & Supplemental Data
Net assets end of
period (000's omitted)..... $52,385 $48,337 $35,459 $38,694 $42,609 $40,873 $27,189 $27,205 $19,248 $20,847 $20,537
Ratio of operating
expenses* to average
net assets................. 1.30%** 1.37% 1.53% 1.45% 1.42% 1.50% 1.74% 1.77%) 1.74%)+ 1.60% 1.87%
Ratio of net investment
income to average
net assets................. .42%** .74% .74% .62% .71% 1.02% 1.19% 1.11% 1.25%+ .60% .53%
Portfolio turnover rate.... 27.94%** 26.53% 25.55% 35.14% 28.91% 15.63% 37.18% 22.97% 15.83% 35.90% 12.61%
Average broker
commission................. $0.07
<FN>
* Includes state taxes incurred through June 30, 1987.
** Ratios are annualized.
+ During 1988 the investment advisor waived a portion of its fee. Had the
waiver not been made the ratios of operating expenses to average net assets
and net investment income to average net assets would have been 1.99% and
1.00%, respectively.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Page 11
- --------------------------------------------------------------------------------
William A. Oates, Jr. John R. Furman
Ernest E. Monrad John C. Emery
Robert B. Minturn, Jr.
- --------------------------------------------------------------------------------
William A. Oates, Jr., President
Ernest E. Monrad, Assistant Treasurer
Robert B. Minturn, Jr., Vice President & Clerk
Gordon C. Barrett, Vice President & Treasurer
- --------------------------------------------------------------------------------
Northeast Management & Research Company, Inc.
50 Congress Street
Boston, Massachusetts 02109
- --------- ----------------------------------------------------------------------
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
- --------------------------------------------------------------------------------
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
- -------------- -----------------------------------------------------------------
50 Congress Street
Boston, Massachusetts 02109
This report is prepared for the information of the shareholders of Northeast
Investors Growth Fund and must not be given to others unless preceded or
accompanied by a copy of the current Prospectus by which all offerings of the
Fund shares are made. It should be noted in reading this report and the letter
to shareholders that the record of past performance is not a representation as
to the Fund's future performance, and that the Fund's investments are subject to
market risk.
Shares of the Fund are sold to investors at net asset value by
Northeast Investors Growth Fund
50 Congress Street
Boston, Massachusetts 02109
800-225-6704
617-523-3588
The share price for Northeast Investors Growth Fund is quoted daily in the
Mutual Funds section of most major newspapers under the heading: NeInv GR or
Noeast Gr
- --------------------------------------------------------------------------------
