Northeast Investors Growth Fund
Dear Fellow Shareholders:
1996 was a strong year in the stock market and a fine year for
Northeast Investors Growth Fund, which recorded a substantial total return of
+24.6%. This total return was 1.9 points above the 22.7% recorded by the S&P 500
and 4 points below the 28.6% recorded by the more narrowly defined Dow Jones
Industrial Average.
The prior year, 1995, was also an equally strong period for our fund
with a +34.5% total return. With the results of the year just ended, the fund
has posted a two-year cumulative return of +61.06% -- our best two year period
since inception in 1980.
As you know, on December 18, 1996, we made a capital gain distribution
of $2.95 per share and a $0.16 per share distribution of dividend income. While
we cannot anticipate what the 1997 per share gain might be, the dividend income
distribution will more than likely be in the same range given the relatively low
current yield resulting from our emphasis on growth stock investing.
During 1996, net assets grew to $60,274,753, an increase of 25% from
$48,337,297 recorded at year end 1995. We have been careful with the expenses of
the fund, and this care, plus the larger asset base, has brought the expense
ratio to its lowest level, 1.21%, since inception. We anticipate a further
lowering of this rate as the fundOs assets continue to grow.
In measuring the emphasis of our current investment mix, technology,
financial services, insurance, health care and energy represent the largest
sectors. During the year, the technology holdings were substantially increased
and the merger of Baybank and Bank of Boston resulted in our single largest
position at year end -- BankBoston at 8.7% of total assets. While we sold some
of this position, we are comfortable with its pre-eminent size in the portfolio
as we enter 1997.
As the fund has grown, we have added more new positions both within the
five largest categories mentioned above, but also in other areas as well. We
continue to emphasize what we hope is a common sense approach to investing in
areas of above-average growth. Further, we anticipate being fully invested as we
have been in the past. Market timing with precision is difficult, if not
impossible, and we have found our best results have come from being in, not out
of, the market.
During the early days of 1997, the market has continued upward, much to
the surprise and consternation of congenital pessimists and many well-known
market commentators. No doubt about it, corrections will occur, just as was the
case in July last year when, in a very brief period, the market declined about
8%. And currently the case is being made for both a growing, and a slowing,
economy in 1997. Until events unfold more clearly, at this juncture, our course
will be to continue to watch those investments we now have and to be alert to
new opportunities as they come along.
As always, I encourage shareholders to contact me about any questions
regarding the fund at any time. Again, we are delighted with the results of the
past two years, and with the momentum we have as we enter the new year.
Ever sincerely,
William A. Oates, Jr. President
January 23, 1997
Northeast Investors Growth Fund
<TABLE>
Portfolio Transactions (unaudited)
January 1, 1996-December 31, 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
BankBoston Corporation 29,600 81,600
Beneficial Corporation 1,000 13,400
Carnival Corporation 6,400 14,900
Chubb Corporation 5,000 15,000
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 12,500 30,100
Fleet Financial Group, Inc. 6,000 19,000
Hewlett-Packard Company 4,900 14,900
Home Depot, Inc. 5,400 14,500
International Business Machines 600 10,600
Johnson & Johnson 14,200 32,200
Microsoft Corporation 16,500 21,500
Nike, Inc.-Class B 13,000 22,400
Pepsico, Inc. 15,000 30,000
Warner Lambert Company 12,200 14,800
Xerox Corporation 13,600 20,400
Zions Bancorporation 1,000 10,000
</TABLE>
<TABLE>
<CAPTION>
New Holdings
Now Own
<S> <C>
Cascade Communications Corporation 12,200
Cisco Systems, Inc. 18,800
Corning, Inc. 11,500
Eaton Vance Corporation 12,000
Eli Lilly & Company 6,300
First Data Corporation 18,700
H & R Block, Inc. 10,200
Ionics, Inc. 9,800
Isis Pharmaceuticals, Inc. 20,000
Lucent Technologies, Inc. 7,800
Mellon Bank Corporation 7,600
Mirage Resorts 16,500
Monsanto Company 5,000
Morgan Stanley Group, Inc. 7,400
Parametric Technology Corporation 22,900
Pfizer, Inc. 15,100
Schlumberger Ltd 5,900
Sun Microsystems, Inc. 28,400
</TABLE>
<TABLE>
<CAPTION>
Portfolio Transactions (unaudited)
January 1, 1996-December 31, 1996
Eliminations/Reductions of Holdings
Sold Now Own
<S> <C> <C>
America Online, Inc. 16,000 0
AT&T Corporation 3,700 0
Bankers Trust New York 5,000 0
Baybanks, Inc. 30,600 0
Cabot Corporation 12,500 0
General Electric Company 2,500 21,500
General Mills, Inc. 6,600 0
Gillette Company 15,500 28,500
GTE Corporation 10,000 0
Maxxam, Inc. 10,000 0
McGraw-Hill, Inc. 4,000 0
Motorola, Inc. 20,000 16,000
SBC Communications, Inc. 10,000 0
St. Paul Companies, Inc. 24,000 0
Sysco Corporation 15,000 0
Thermo Electron Corporation 5,100 13,500
Time Warner, Inc. 40,000 0
WestPoint Stevens, Inc. 20,000 0
</TABLE>
<TABLE>
Ten Largest Investment
Holdings (unaudited)
<CAPTION>
December 31, 1996
Ten Largest Investment Holdings
Market
Cost Value
<S> <C> <C>
BankBoston Corporation $1,426,985 $5,242,800
Walt Disney Company 867,591 2,506,500
Gillette Company 631,361 2,215,875
General Electric Company 973,599 2,125,812
Intel Corporation 458,640 2,095,000
Microsoft Corporation 1,215,727 1,776,438
Procter & Gamble Company 821,518 1,773,750
General Re Corporation 734,337 1,751,025
Royal Dutch Petroleum Company 572,200 1,707,500
Eastman Kodak Company 1,129,565 1,605,000
</TABLE>
<TABLE>
Tax Information
For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund during its calendar year ended December
31, 1996.
December 18, 1997
<S> <C>
Net Investment Income*.............................................$0.16
Short-Term Capital Gains*....................................... .$0.00
Long-Term Capital Gains............................................$2.95
<FN>
*Under the Internal Revenue Code, 100% of the income distributions and
short-term capital gains paid to shareholders may be taken into account as a
dividend for purposes of the deduction for dividends received by corporations
(section 243, as amended).
</FN>
</TABLE>
Average Annual Total Return (unaudited)
<TABLE>
<S> <C>
One year ended December 31, 1996..................................24.60%
Five years ended December 31, 1996................................11.56%
Ten years ended December 31, 1996.................................13.27%
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value Per Share
(unaudited)
<C> <C> <C> <C>
January- April- July- October-
March June September December
------- ---- --------- ---------
1996 High $34.10 $35.57 $37.03 $40.65
Low $30.57 $32.56 $32.68 $36.00
January- April- July- October-
March June September December
------- ---- --------- ---------
1995 High $26.81 $29.82 $32.16 $33.61
Low $24.33 $26.51 $29.64 $31.32
</TABLE>
Page 3
Northeast Investors Growth Fund
Performance Graph -- Ten Years (1986 - 1996)
The following graph compares the cumulative total shareholder return on the
Northeast Investors Growth Fund shares over the ten preceding fiscal years to
the cumulative total share return on the Standard & PoorOs 500 Index, assuming
an investment of $10,000 in both at their closing prices on December 31, 1986
and reinvestment of dividends and capital gains. For managementOs discussion of
the Growth FundOs fiscal year 1996 performance, including strategies and market
conditions which influenced such performance, see the PresidentOs letter to
shareholders.
(EDGAR REFERENCE -- GRAPH)
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
Northeast Investors Growth Fund $10,000 $9,646 $10,891 $14,456 $14,676
Standard & PoorOs 500 Index $10,000 $10,520 $12,259 $16,145 $15,638
1991 1992 1993 1994 1995 1996
Northeast Investors Growth Fund $20,093 $19,946 $20,433 $20,418 $27,863 $34,717
Standard & PoorOs 500 Index $20,392 $21,942 $24,140 $24,454 $33,654 $41,381
</TABLE>
Northeast Investors Growth Fund
Schedule of Investments--
December 31, 1996
<TABLE>
Common Stocks-- Market Percent of
<CAPTION>
Number of Value Net
Name of Issuer Shares (Note B) Assets
Apparel
<S> <C> <C> <C>
Nike, Inc.- Class B...................................... 22,400 $ 1,338,400 2.2%
Banks
BankBoston Corporation .................................. 81,600 5,242,800
Fifth Third Bancorp...................................... 16,500 1,036,406
First American Corporation, Tennessee.................... 13,200 760,650
First Security Corporation, Delaware.................... 30,100 1,015,875
Fleet Financial Group, Inc............................... 19,000 947,625
Mellon Bank Corporation.................................. 7,600 539,600
National Bancorp of Alaska, Inc.......................... 3,000 205,500
Zions Bancorporation..................................... 10,000 1,040,000
10,788,456 17.9%
Chemical
Monsanto Company......................................... 5,000 194,375 .3%
Computer & Data Processing
Cascade Communications Corporation^...................... 12,200 672,525
Cisco Systems, Inc.^..................................... 18,800 1,196,150
Hewlett-Packard Company.................................. 14,900 748,725
International Business Machines.......................... 10,600 1,600,600
Sun Microsystems, Inc.^.................................. 28,400 729,525
4,947,525 8.2%
Computer Software & Services
Microsoft Corporation^................................... 21,500 1,776,438
Parametric Technology Corporation^....................... 22,900 1,176,487
2,952,925 4.9%
Data Processing/Management
First Data Corporation................................... 18,700 682,550 1.1%
Electrical Equipment
General Electric Company................................. 21,500 2,125,812 3.5%
Electronics
Intel Corporation........................................ 16,000 $ 2,095,000
Lucent Technologies, Inc................................. 7,800 360,750
Motorola, Inc............................................ 16,000 982,000
3,437,750 5.7%
Northeast Investors Growth Fund
Common Stocks -- continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
Energy & Natural Resources
Thermo Electron Corporation^ 13,500 556,875 .9%
Entertainment
Carnival Corporation 14,900 491,700
Mirage Resorts^.......................................... 16,500 356,812
Walt Disney Company...................................... 36,000 2,506,500
3,355,012 5.6%
Environmental Industry
Ionics, Inc.^ 9,800 470,400 .8%
Fast Food Service
McDonaldOs Corporation 12,000 543,000 .9%
Financial Services
Beneficial Corporation 13,400 849,225
Eaton Vance Corporation.................................. 12,000 571,500
H & R Block, Inc......................................... 10,200 295,800
1,716,525 2.8%
Food & Beverage
Coca-Cola Company........................................ 19,600 1,031,450
Pepsico, Inc............................................. 30,000 877,500
1,908,950 3.2%
Health Care
American Home Products Corporation....................... 11,800 691,775
Johnson & Johnson........................................ 32,200 1,601,950
Warner Lambert Company................................... 14,800 1,110,000
3,403,725 5.6%
Household Products
Corning, Inc............................................. 11,500 531,875
Procter & Gamble Company................................. 16,500 1,773,750
2,305,625 3.8%
Industrial Services & Manufacturing
Caterpillar, Inc......................................... 7,200 $ 541,800
Minnesota, Mining & Manufacturing Company................ 5,000 414,375
956,175 1.6%
Northeast Investors Growth Fund
Common Stocks--continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
Insurance
American International Group, Inc........................ 9,350 1,012,137
Chubb Corporation........................................ 15,000 806,250
General Re Corporation.................................. 11,100 1,751,025
3,569,412 5.9%
Investment Company
Morgan Stanley Group, Inc................................ 7,400 422,725 .7%
Office Equipment
Xerox Corporation........................................ 20,400 1,073,550 1.8%
Oilfield Services
Schlumberger Ltd......................................... 5,900 589,263 1.0%
Paper & Forest Products
James River Corporation, VA ............................. 17,500 579,688 1.0%
Petroleum, Coal & Gas
Chevron Corporation...................................... 24,000 1,560,000
Royal Dutch Petroleum Company........................... 10,000 1,707,500
3,267,500 5.4%
Pharmaceuticals
Abbott Laboratories...................................... 12,000 609,000
Astra AB Spons ADR A.................................... 12,550 614,950
Elis Lilly & Company 6,300 459,900
Isis Pharmaceuticals, Inc.^.............................. 20,000 360,000
Merck & Company, Inc..................................... 9,600 760,800
Pfizer, Inc.............................................. 15,100 1,251,412
4,056,062 6.0%
Precision Instruments
Eastman Kodak Company................................... 20,000 1,605,000 2.7%
Retail
Home Depot, Inc.......................................... 14,500 726,813 1.2%
Northeast Investors Growth Fund
Common Stocks--continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
Toiletries & Cosmetics
Gillette Company 28,500 $ 2,215,875 3.7%
Total Common Stocks (Cost--$35,427,118) 59,789,968 99.2%
Repurchase Agreement Face
Investors Bank & Trust Company Repurchase Agreement,
5.91% due January 2, 1997 .................................... $485,563 485,563 .8%
Total Repurchase Agreement (Cost--$485,563)* 485,563
Total Investments (Cost--$35,912,681) $60,275,531 100%
<FN>
*Acquired on December 31, 1996. Collateralized by $528,575 of various U.S.
government mortgage-backed securities, due through 06/15/2023. The maturity
value is $485,722. 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>
The accompanying notes are an integral part of the financial statements
Northeast Investors Growth Fund
<TABLE>
<CAPTION>
Statement of Assets
and Liabilities
December 31, 1996
<S> <C>
Assets
Investments--at market value
(cost $35,912,681) -- Notes B, D &F.... $60,275,531
Dividends and interest receivable........ 77,180
Receivable for shares of beneficial
interest sold.......................... 34,764
Total Assets............ 60,387,475
Liabilities
Payable for shares of beneficial interest
repurchased........................... 31,042
Accrued expenses......................... 50,835
Accrued investment advisory fee-- ........
Note C......................................... 30,845
Total Liabilities....... 112,722
Net Assets............................... $60,274,753
Net Assets Consist of -- Note B:
Capital paid-in.......................... 35,810,524
Undistributed
net investment income................. 13,941
Accumulated
net realized gains on investments..... 87,438
Net unrealized appreciation of ..........
investments ............................ 24,362,850
-----------
Net Assets, for 1,653,924 shares
outstanding........................... $60,274,753
===========
Net Asset Value, offering price
and redemption price per share
($60,274,753 / 1,653,924 shares) $36.45
======
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Investment Income
<S> <C>
Dividends................................ $863,278
Interest................................. 19,252
Total Income............. 882,530
Expenses
Investment advisory fee--
Note C.................. $352,644
Administrative expenses
and salaries.............. 99,950
Computer and
related expenses....... 35,020
Auditing fees................. 33,765
Printing, postage
and stationery.......... 26,620
Registration and
filing fees............. 24,825
Legal fees................... 22,505
Custodian fees................ 17,140
Trustees fees--Note C......... 6,000
Insurance .................... 3,639
Interest-Note G .............. 3,389
Other expenses................ 10,999
Total Expenses.......... 636,496
Net Investment Income.... 246,034
Realized and Unrealized Gain
on Investments -- Note B:
Net realized gain from investment
transactions......................... 4,575,461
Change in unrealized appreciation
of investments....................... 6,944,193
Net Gain on Investments.................. 11,519,654
Net Increase in Net Assets Resulting
from Operations....................... $11,765,688
</TABLE>
The accompanying notes are an integral part of the financial statements.
Northeast Investors Growth Fund
Statements of Changes
in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C>
1996 1995
Increase in Net Assets
From Operations:
Net investment income..................................................... $ 246,034 $ 303,099
Net realized gain from investment transactions............................ 4,575,461 2,025,092
Change in unrealized appreciation of investments.......................... 6,944,193 10,108,493
Net Increase in Net Assets Resulting from
Operations........................................................... 11,765,688 12,436,684
Distributions to Shareholders:
From net investment income................................................ (243,418) (301,333)
From net realized gains on investments.................................... (4,488,023) (1,894,093)
Total Distributions................................................... (4,731,441) (2,195,426)
From Net Fund Share Transactions--Note E.................................... 4,903,209 2,636,657
Total Increase in Net Assets......................................... 11,937,456 12,877,915
Net Assets:
Beginning of Period....................................................... 48,337,297 35,459,382
End of Period (including undistributed net investment income
of $13,941 and $1,766, respectively)................................. $60,274,753 $48,337,297
</TABLE>
The accompanying notes are an integral part of the financial statements.
Northeast Investors Growth Fund
Notes to the Financial Statements
for the period ended Decemeber 31, 1996
Note A--Organization
Northeast Investors Growth Fund (the OFundO) 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 and 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 FundOs 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 OAdvisorO). 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 FundOs 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. All trustees except Messrs.
John R. Furman and John C. Emery areofficers or directors of the Advisor. The
compensation of all disinterested trustees of the Fund is borne by the Fund.
Northeast Investors Growth Fund
Notes to the Financial Statements - continued
Note D--Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments, other than
short-term securities, aggregated $14,329,148 and $13,254,339 respectively, for
the year ended December 31, 1996.
Note E--Shares of Beneficial Interest
At December 31, 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>
Years Ended December 31,
1996 1995
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold............................................. 241,920 $8,609,169 221,312 $6,723,415
Shares issued to shareholders in reinvestment of
distributions from net investment income and
realized gains from security transactions............ 121,732 4,382,349 63,002 2,021,120
------------ -------------- ------------ -------------
363,652 12,991,518 284,314 8,744,535
Shares repurchased...................................... (231,030) (8,088,309) (216,757) (6,107,878)
------------ -------------- ------------ -------------
Net Increase ........................................ 132,622 $4,903,209 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 FundOs 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 December 31, 1996, the Fund had unused lines of credit
amounting to $5,000,000.
The following information relates to aggregate short-term borrowings during
the year ended December 31, 1996: Average amount outstanding (total of daily
outstanding principal balances divided by
number of days during the year).................................. $40,281
Weighted average interest rate (actual interest expense on short-term borrowing
divided by average short-term borrowings outstanding).....................8.39%
Note H--Other Tax Information
For federal income tax purposes, the cost of investments owned at December
31, 1996 was $35,912,681. At December 31, 1996, gross unrealized appreciation of
investments was $24,689,607 and gross unrealized depreciation was $326,757,
resulting in net unrealized appreciation of $24,362,850.
Northeast Investors Growth Fund
Financial Highlights
<TABLE>
<CAPTION>
Years Ended December 31
Per Share Data 1996 1995 1994 1993 1992~ 1991~ 1990~ 1989~ 1988~ 1987~
---- ---- ---- ---- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment
Operations:
Net investment income.. .16 .21 .19 .20 .20 .26 .28 .23 .27 .14
Net realized and
unrealized gain (loss)
on investments....... 7.62 8.70 (.22) .47 (.44) 8.3 .08 5.75 1.91 (.79)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations........... 7.78 8.91 (.03) .67 (.24) 8.58 .36 5.98 2.18 (.65)
Less Distributions:
Net investment income. (.16) (.21) (.19) (.20) (.20) (.36) (.26) (.28) (.27) (.12)
Capital gains........ (2.95) (1.32) (.50) (4.46) (1.57) (.55) (.33) (.30) (.47) (.62)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Distributions.... (3.11) (1.53) (.69) (4.66) (1.77) (.91) (.59) (.58) (.74) (.74)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
End of period........ $36.45 $31.78 $24.40 $25.12 $29.11 $31.12 $23.45 $23.68 $18.28 $16.84
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ---------- ----- ----- ----- ----- ----- ----- -----
Total Return........... 24.60% 36.46% (.07%) 2.44% (.73%) 36.91% 1.52% 32.73% 12.91% (3.54%)
Ratios & Supplemental Data
Net assets end of
period (000Os omitted) $60,275 $48,337 $35,459 $38,694 $42,609 $40,873 $27,189 $27,205 $19,248 $20,847
Ratio of operating
expenses* to average
net assets........... 1.21% 1.37% 1.53% 1.45% 1.42% 1.50% 1.74% 1.77% 1.74% 1.60%
Ratio of net investment
income to average
net assets........... .47% .74% .74% .62% .71% 1.02% 1.19% 1.11% 1.25% .60%
Portfolio turnover rate 25.27% 26.53% 25.55% 35.14% 28.91% 15.63% 37.18% 22.97% 15.83% 35.90%
Average broker
commission&.......... $0.07
<FN>
* Includes state taxes incurred through June 30, 1987.
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.
~ Audited by other Auditors
& For fiscal years beginning on or after January 1, 1996 the Fund is
required to disclose its
average commission rate per share paid for security trades.
</FN>
</TABLE>
Report of Coopers & Lybrand L.L.P.
Independent Accountants
To the Shareholders and Trustees of
Northeast Investors Growth Fund:
We have audited the accompanying statement of assets and liabilities of
Northeast Investors Growth Fund, including the schedule of investments, as of
December 31, 1996, and the related statement of operations for the year then
ended, the changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the four years in the period then
ended. These financial statements and financial highlights are the
responsibility of the FundOs management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the years ended December 31, 1987 through
1992, presented herein, were audited by other auditors whose report dated
January 15, 1993, expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Northeast Investors Growth Fund at December 31, 1996, and the results of its
operations for the year then ended and the changes in its net assets for each of
the two years of the period then ended and the financial highlights for each of
the four years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND
L.L.P.
January 24, 1997
This page intentionally left blank
Northeast Investors Growth Fund
Trustees
William A. Oates, Jr. John R. Furman
Ernest E. Monrad John C. Emery
Robert B. Minturn, Jr.
Officers
William A. Oates, Jr., President
Ernest E. Monrad, Assistant Treasurer
Robert B. Minturn, Jr., Vice President & Clerk
Gordon C. Barrett, Vice President & Treasurer
Investment Advisor
Northeast Management & Research Company, Inc.
50 Congress Street
Boston, Massachusetts 02109
Custodian
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Legal Counsel
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Transfer Agent
Northeast Investors Growth Fund
50 Congress Street
Boston, Massachusetts 02109
Independent Accountants
Coopers & Lybrand L.L.P
One Post Office Square
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 FundOs future performance, and that the FundOs investments are subject to
market risks.
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
Seventeenth Annual Report
For the Year Ended
December 31, 1996
