Dear Fellow Shareholders:
During the six month period ending June 30, 1997, Northeast Investors Growth
Fund posted a total return of +21.46%, slightly exceeding that recorded by the
S&P 500 of +20.61% and that of the Dow Jones Industrial Average of +20.12%.
During this time, the size of the fund grew from $60,274,753 at year end, 1996,
to $88,241,000 on June 30, 1997. We experienced a strong net inflow of new money
and with this money made investments in seventeen companies new to the portfolio
in addition to increasing our positions in a number of existing holdings. In
early June, we paid a $0.05 cent dividend from income and a $0.05 capital gain
distribution. The large majority of you chose to reinvest both payments.
Further, our expense ratio continued to decline and we negotiated a more
favorable commission schedule for all purchases and sales of securities. And
finally, we experienced a pleasing increase in the number of shareholders as
well as in the number of shares outstanding.
The fund's ten largest holdings illustrate the types of companies in which
we feel most comfortable investing. Each company is a leader in its field with
an established, commendable record of performance. Each is well-capitalized and
global in its approach. Not all our holdings fall into this category, however,
and the Fund's portfolio includes positions of less well-known entities, but
with equally dynamic investment fundamentals. But in the main, the investment
approach has emphasized larger companies rather than smaller entities, or
emerging new companies.
For the past several years, we have maintained a fully invested position. As
new money has come into the fund, new investments have been made. We have
generally not tried to "time" the market when making investments and certainly
the results of the past two and one-half years have supported our approach.
We anticipate continuing to hold to this investment course as the underlying
forces for continued growth in corporate profits appear solid. Inflation is low,
and the Federal Reserve Bank appears prepared to try to keep it low. The federal
deficit is declining. Congress wants it eliminated, but has never quite been
able to do it, and this goal now appears achievable. We live in a country with
the most free markets in the world.
Moving into the second half of the year, we look forward to continued growth
in the net assets and to having the Fund top $100 million. We are at $94,911,082
as of this writing. No one can predict the future, but we are currently
investing on the premise that earnings will be greater two years from now than
they are today and that this increase in profitability will be reflected in
higher per share prices.
As always, I urge shareholders to contact me about any questions regarding
the Fund at any time. We are delighted with the performance of the Fund since
its inception in 1980, and especially with the results of the past two and
one-half years. We are encouraged with the momentum and quality of the
investment portfolio.
Yours sincerely,
/s/ William A. Oates, Jr.
William A. Oates, Jr.
President
July 21, 1997
- --------------------------------------------------------------------------------
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
PORTFOLIO TRANSACTIONS
(UNAUDITED)
January 1, 1997 - June 30, 1997
- --------------------------------------------------------------------------------
ADDITIONS TO EXISTING HOLDINGS
<CAPTION>
Additions Now Own
- --------------------------------------------------------------
<S> <C> <C>
Astra AB Spons ADR A 20,916 33,466
Caterpillar, Inc. 4,300 11,500
Corning, Inc. 23,400 34,900
Eaton Vance Corporation 42,700 54,700
Eli Lilly & Company 5,900 12,200
First American Corporation 13,200 26,400
First Security Corporation 23,150 53,250
Fleet Financial Group, Inc. 3,400 22,400
General Electric Company 21,500 43,000
Hewlett-Packard Company 2,000 16,900
IBM Corporation 3,600 14,200
Ionics, Inc. 1,900 11,700
Intel Corporation 2,700 18,700
Lucent Technologies, Inc. 10,000 17,800
Mellon Bank Corporation 12,200 19,800
Merck & Company, Inc. 4,000 13,600
Minnesota Mining & Mfg.Company 1,000 6,000
Monsanto Company 10,100 15,100
Morgan St, Dean Witter, Disc. & Co. 4,810 12,210
National Bancorp of Alaska, Inc. 1,250 4,250
Royal Dutch Petroleum Company 30,000 40,000
Zions Bancorporation 30,000 40,000
</TABLE>
<TABLE>
<CAPTION>
NEW HOLDINGS
Now Own
- --------------------------------------------------------------
<S> <C>
Boston Scientific Corporation 16,900
Cabot Corporation 9,000
Chase Manhattan Corporation 6,500
Diebold, Inc. 12,950
Dow Jones & Company, Inc. 16,900
Medtronic, Inc. 11,900
Mobil Corporation 7,000
New York Times Company - Class A 12,000
Paine Webber Group, Inc. 16,500
Quaker Oats Company 16,050
Riggs National Corporation 21,000
State Street Corporation 33,200
Time Warner, Inc. 26,500
Triarc Companies 34,500
V F Corporation 5,600
Washington Mutual, Inc. 17,600
Waste Management, Inc. 14,000
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO TRANSACTIONS - CONTINUED
(UNAUDITED)
January 1, 1997 - June 30, 1997
- --------------------------------------------------------------------------------
ELIMINATIONS/REDUCTIONS OF HOLDINGS
- --------------------------------------------------------------------------------
Sold Now Own
- --------------------------------------------------------------
<S> <C> <C>
Abbott Laboratories 1,800 10,200
BankBoston Corporation 12,600 69,000
Eastman Kodak Company 5,000 15,000
Gillette Company 2,400 26,100
Home Depot, Inc. 6,750 7,750
James River Corporation 2,800 14,700
Johnson & Johnson 6,700 25,500
McDonald's Corporation 5,000 7,000
Sun Microsystems, Inc. 14,000 14,400
Thermo Electron Corporation 13,500 0
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN (UNAUDITED)
<S> <C>
One year ended June 30, 1997 36.87%
Five years ended June 30, 1997 18.12%
Ten years ended June 30, 1997 12.94%
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE PER SHARE (UNAUDITED)
High Low
---- ---
<S> <C> <C>
1997 $44.60 $36.17
1996 $40.65 $30.57
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST INVESTMENT HOLDINGS
JUNE 30, 1997 (UNAUDITED)
Percent
Market of Net
Value Assets
<S> <C> <C>
BankBoston Corporation $4,972,312 5.6%
Walt Disney Company 2,889,000 3.3%
General Electric Company 2,811,125 3.2%
Microsoft Corporation 2,717,063 3.1%
Intel Corporation 2,651,894 3.0%
Gillette Company 2,472,975 2.8%
Procter & Gamble Company 2,330,625 2.6%
Royal Dutch Petroleum Company 2,175,000 2.5%
General Re Corporation 2,020,200 2.3%
Corning, Inc. 1,941,313 2.2%
</TABLE>
- --------------------------------------------------------------------------------
Page 2
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
Common Stocks
<TABLE>
<CAPTION>
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
- -------------------------------------------------------------=========---------========-----==========
Apparel
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nike, Inc. - Class B.......................... 22,400 $ 1,307,600
V F Corporation............................... 5,600 476,700
-----------
1,784,300 2.0%
Banks
- ------------------------------------------------------------------------------------------------------
BankBoston Corporation ....................... 69,000 4,972,312
Chase Manhattan Corporation .................. 6,500 630,906
Fifth Third Bancorp........................... 16,500 1,353,516
First American Corporation.................... 26,400 1,013,100
First Security Corporation.................... 53,250 1,454,391
Fleet Financial Group, Inc.................... 22,400 1,416,800
Mellon Bank Corporation....................... 19,800 893,475
National Bancorp of Alaska, Inc............... 4,250 359,125
Riggs National Corporation.................... 21,000 433,125
Washington Mutual, Inc........................ 17,600 1,051,600
Zions Bancorporation.......................... 40,000 1,505,000
-----------
15,083,350 17.1%
Chemical
- ------------------------------------------------------------------------------------------------------
Cabot Corporation............................. 9,000 255,375
Monsanto Company.............................. 15,100 650,244
-----------
905,619 1.0%
Computer & Data Processing
- ------------------------------------------------------------------------------------------------------
Hewlett-Packard Company....................... 16,900 946,400
IBM Corporation .............................. 14,200 1,280,662
Sun Microsystems, Inc.^ ...................... 14,400 535,950
-----------
2,763,012 3.1%
Computer Software & Services
- ------------------------------------------------------------------------------------------------------
Microsoft Corporation^........................ 21,500 2,717,063
Parametric Technology Corporation^............ 22,900 974,681
-----------
3,691,744 4.2%
Diversified Operations
- ------------------------------------------------------------------------------------------------------
General Electric Company...................... 43,000 2,811,125
Triarc Companies^ ............................ 34,500 702,938
-----------
3,514,063 4.0%
- --------------------------------------------------------------------------------
Page 3
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Common Stocks--continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
- -------------------------------------------------------------=========---------========-----==========
Electronics
- ------------------------------------------------------------------------------------------------------
Cascade Communications Corporation^........... 12,200 $ 337,025
Cisco Systems, Inc.^.......................... 18,800 1,261,950
Intel Corporation............................. 18,700 2,651,894
Lucent Technologies, Inc...................... 17,800 1,282,712
Motorola, Inc................................. 16,000 1,216,000
-----------
6,749,581 7.7%
Entertainment
- ------------------------------------------------------------------------------------------------------
Carnival Corporation.......................... 14,900 614,625
Mirage Resorts, Inc.^......................... 16,500 416,625
Time Warner, Inc.............................. 26,500 1,278,625
Walt Disney Company........................... 36,000 2,889,000
-----------
5,198,875 5.9%
Environmental Industry
- ------------------------------------------------------------------------------------------------------
Ionics, Inc.^................................. 11,700 532,350 .6%
Fast food service
- ------------------------------------------------------------------------------------------------------
McDonald's Corporation........................ 7,000 338,188 .4%
Financial Services
- ------------------------------------------------------------------------------------------------------
Beneficial Corporation........................ 13,400 952,237
Eaton Vance Corporation....................... 54,700 1,521,344
First Data Corporation........................ 18,700 821,631
H & R Block, Inc.............................. 10,200 328,950
Morgan Stanley, Dean Witter, Discover & Co.... 12,210 525,793
Paine Webber Group, Inc....................... 16,500 577,500
State Street Corporation...................... 33,200 1,562,475
-----------
6,289,930 7.1%
Food & Beverage
- ------------------------------------------------------------------------------------------------------
Coca-Cola Company............................. 19,600 1,367,100
Pepsico, Inc.................................. 30,000 1,126,875
Quaker Oats Company........................... 16,050 720,244
-----------
3,214,219 3.7%
- --------------------------------------------------------------------------------
Page 4
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Common Stocks--continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
- -------------------------------------------------------------=========---------========-----==========
Health Care
- ------------------------------------------------------------------------------------------------------
American Home Products Corporation............ 11,800 $ 902,700
Johnson & Johnson 25,500 1,625,625
Warner Lambert Company........................ 14,800 1,838,900
-----------
4,367,225 4.9%
Household Products
- ------------------------------------------------------------------------------------------------------
Corning, Inc.................................. 34,900 1,941,313
Procter & Gamble Company...................... 16,500 2,330,625
-----------
4,271,938 4.8%
Industrial Services & Manufacturing
- ------------------------------------------------------------------------------------------------------
Caterpillar, Inc.............................. 11,500 1,237,687
Waste Management, Inc......................... 14,000 449,750
-----------
1,687,437 1.9%
Insurance
- ------------------------------------------------------------------------------------------------------
American International Group, Inc............. 9,350 1,396,656
Chubb Corporation............................. 15,000 1,003,125
General Re Corporation........................ 11,100 2,020,200
-----------
4,419,981 5.0%
Medical
- ------------------------------------------------------------------------------------------------------
Boston Scientific Corporation^................ 16,900 1,038,294
Medtronic, Inc................................ 11,900 963,900
-----------
2,002,194 2.3%
Office Equipment
- ------------------------------------------------------------------------------------------------------
Xerox Corporation............................. 20,400 1,609,050 1.8%
Oilfield Services
- ------------------------------------------------------------------------------------------------------
Schlumberger Ltd.............................. 5,900 737,500 .8%
Paper & Forest Products
- ------------------------------------------------------------------------------------------------------
James River Corporation....................... 14,700 543,900 .6%
Petroleum, Coal & Gas
Chevron Corporation........................... 24,000 1,774,500
Mobil Corporation............................. 7,000 489,125
Royal Dutch Petroleum Company................. 40,000 2,175,000
-----------
4,438,625 5.0%
- --------------------------------------------------------------------------------
Page 5
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Common Stocks--continued
Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
- -------------------------------------------------------------=========---------========-----==========
Pharmaceuticals
- ------------------------------------------------------------------------------------------------------
Abbott Laboratories............................. 10,200 $ 680,850
Astra AB Spons ADR A.......................... 33,466 635,854
Eli Lilly & Company........................... 12,200 1,333,612
Isis Pharmaceuticals, Inc.^................... 20,000 291,250
Merck & Company, Inc.......................... 13,600 1,407,600
Pfizer, Inc................................... 15,100 1,804,450
-----------
6,153,616 7.0%
Precision Instruments
- ------------------------------------------------------------------------------------------------------
Eastman Kodak Company......................... 15,000 1,151,250 1.3%
Product & Manufacturing
- ------------------------------------------------------------------------------------------------------
Diebold, Inc.................................. 12,950 505,050
Minnesota Mining & Manufacturing Company 6,000 612,000
-----------
1,117,050 1.3%
Publishing & Printing
- ------------------------------------------------------------------------------------------------------
Dow Jones & Company, Inc...................... 16,900 679,169
New York Times Company - Class A.............. 12,000 606,000
-----------
1,285,169 1.5%
Retail
- ------------------------------------------------------------------------------------------------------
Home Depot, Inc............................... 7,750 534,266 .6%
Toiletries & Cosmetics
- ------------------------------------------------------------------------------------------------------
Gillette Company.............................. 26,100 2,472,975 2.8%
----------- ----
Total Common Stocks (Cost-$50,902,825)...... $86,857,407 98.4%
=========== ====
<FN>
^ Non-income producing.
ADR stands for American Depository Receipt representing ownership of foreign
securities.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Page 6 The accompanying notes are an integral part of the financial statements.
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Assets
and Liabilities (unaudited)
June 30, 1997
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investments-- at market value
(cost $50,902,825)--Notes B & D ........ $86,857,407
Dividends and interest receivable .......... 95,356
Receivable for shares of beneficial
interest sold ......................... 5,274,382
-----------
Total Assets ..................... 92,227,145
Liabilities
- --------------------------------------------------------------------------------
Short-term Borrowings --Note G.............. 3,863,684
Payable for shares of beneficial interest
repurchased ............................ 19,106
Accrued expenses............................ 66,002
Accrued investment advisory fee --
Note C ................................. 37,189
-----------
Total Liabilities ................ 3,985,981
-----------
Net Assets.................................. $88,241,164
===========
Net Assets Consist of--Note B:
Capital paid-in............................. $50,224,382
Undistributed net investment
income ................................. 46,439
Accumulated net realized gain
on investments ......................... 2,015,761
Net unrealized appreciation of
investments ............................ 35,954,582
-----------
Net Assets, for 1,997,811 shares
outstanding ............................ $88,241,164
===========
Net Asset Value, offering price
and redemption price per share
($88,241,164 / 1,997,811 shares) ....... $44.17
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
(unaudited)
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1997
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
<S> <C>
Dividends .................................. $ 511,336
Interest ................................... 22,483
TOTAL INCOME ..................... 533,819
EXPENSES
Investment advisory fee
Note C ................................ $ 213,660
Administrative expenses
and salaries .......................... 62,337
Computer and
related expenses....................... 28,195
Auditing fees ............................. 22,085
Printing, postage
and stationery ........................ 19,125
Legal fees ................................ 16,290
Registration and
filing fees ........................... 14,271
Custodian fees ............................ 11,075
Interest-Note G ........................... 5,051
Trustee fees-Note C ....................... 4,000
Insurance ................................. 1,232
Other expenses ............................ 6,870
Total Expenses................... 404,191
Net Investment Income ........... 129,628
Realized and Unrealized Gain
on Investments--Note B:
- --------------------------------------------------------------------------------
Net realized gain from investment
transactions........................... 2,025,452
Change in unrealized appreciation
of investments......................... 11,591,732
Net Gain on Investments.................... 13,617,184
Net Increase in Net Assets
Resulting from Operations ............. $13,746,812
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. Page 7
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes
in Net Assets (unaudited)
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets
From Operations:
Net investment income ...................................... $ 129,628 $ 246,034
Net realized gain from investment transactions ............. 2,025,452 4,575,461
Change in unrealized appreciation of investments ........... 11,591,732 6,944,193
------------ ------------
Net Increase in Net Assets Resulting from
Operations ............................................ 13,746,812 11,765,688
Distributions to Shareholders:
From net investment income ................................. (97,130) (243,418)
From net realized gains on investments ..................... (97,129) (4,488,023)
------------ ------------
Total Distributions ........................... (194,259) (4,731,441)
From Net Fund Share Transactions--Note E ........................ 14,413,858 4,903,209
------------ ------------
Total Increase in Net Assets ............................ 27,966,411 11,937,456
Net Assets:
Beginning of Period ........................................ 60,274,753 48,337,297
------------ ------------
End of Period (including undistributed net investment income
of $46,439 and $13,941, respectively) ................. $ 88,241,164 $ 60,274,753
============ ============
</TABLE>
- --------------------------------------------------------------------------------
Page 8 The accompanying notes are an integral part of the financial statements.
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Notes to the Financial Statements
for the period ended June 30, 1997 (unaudited)
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. 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.
Note D--Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments, other than
short-term securities, aggregated $18,033,903 and $4,583,649 respectively, for
the six months ended June 30, 1997.
- --------------------------------------------------------------------------------
Page 9
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Notes to the Financial Statements for the period ended
June 30, 1997 - continued (unaudited)
Note E--Shares of Beneficial Interest
At June 30, 1997, 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, 1997 December 31, 1996
--------------------------- ---------------------------
Shares Amount Shares Amount
-------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Shares sold .................................... 906,742 $36,920,195 241,920 $8,609,169
Shares issued to shareholders in reinvestment of
distributions from net investment income and
realized gain from security transactions ....... 3,983 171,998 121,732 4,382,349
-------- ----------- -------- ----------
910,725 37,092,193 363,652 12,991,518
Shares repurchased ............................. (567,097) (22,678,335) (231,030) (8,088,309)
-------- ----------- -------- ----------
Net Increase ............................... 343,628 $14,413,858 132,622 $4,903,209
======== =========== ======== ==========
</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
prime rates in effect during the period in which such loans are outstanding. The
fund has a total line of credit of $5,000,000 with an unused balance at June 30,
1997 of $1,136,316.
The following information relates to aggregate short-term borrowings for
the six month period ended June 30, 1997:
Average amount outstanding (total of daily outstanding principal balances
divided by number of days during the period) ................. $119,178
Weighted average interest rate (actual interest expense on short-term borrowings
divided by average short-term borrowings outstanding)
(Annualized) ................................................. 8.48%
Note H--Other Tax Information
For federal income tax purposes, the cost of investments owned at June
30, 1997 was $50,902,825. At June 30, 1997, gross unrealized appreciation of
investments was $36,522,946 and gross unrealized depreciation was $568,364,
resulting in net unrealized appreciation of $35,954,582.
- --------------------------------------------------------------------------------
Page 10
<PAGE>
Northeast Investors Growth Fund
- --------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997
Per Share Data (unaudited) 1996 1995 1994 1993 1992~ 1991~ 1990~ 1989~ 1988~ 1987~
- -------------- ----------- ---- ---- ---- ---- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of Period .. $36.45 $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 ..... .06 .16 .21 .19 .20 .20 .26 .28 .23 .27 .14
Net realized and
unrealized gain (loss)
on investments ....... 7.76 7.62 8.70 (.22) .47 (.44) 8.30 .08 5.75 1.91 (.79)
Total from investment
operations ........... 7.82 7.78 8.91 (.03) .67 (.24) 8.58 .36 5.98 2.18 (.65)
Less Distributions:
Net investment income (.05) (.16) (.21) (.19) (.20) (.20) (.36) (.26) (.28) (.27) (.12)
Capital gains ........ (.05) (2.95) (1.32) (.50) (4.46) (1.57) (.55) (.33) (.30) (.47) (.62)
Total Distributions .......(0.10) (3.11) (1.53) (.69) (4.66) (1.77) (.91) (.59) (.58) (.74) (.74)
Net Asset Value:
End of Period ........$44.17 $36.45 $31.78 $24.40 $25.12 $29.11 $31.12 $23.45 $23.68 $18.28 $16.84
Total Return .............. 21.46% 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 (000's omitted) $88,241 $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 ........... 1.12%** 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 ........... .38%** .47% .74% .74% .62% .71% 1.02% 1.19% 1.11% 1.25% .60%
Portfolio turnover rate ... 13.16%** 25.27% 26.53% 25.55% 35.14% 28.91% 15.63% 37.18% 22.97% 15.83% 35.90%
Average broker
commission+ .......... $0.06 $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.
~ 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>
- --------------------------------------------------------------------------------
Page 11
<PAGE>
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
200 Clarendon Street
Boston, Massachusetts 02117
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 fund's future performance, and that the Fund's 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 Fund section of most major newspapers under several abbreviations
including: NE Inv GR, NE Investors.
NORTHEAST
INVESTORS GROWTH
FUND
A NO-LOAD FUND
Semi-Annual Report
-----------------------------------------------
For the Six Months Ended
-----------------------------------------------
June 30, 1997
