Northeast Investors Growth
Dear Shareholders:
The year 1999 set another record in the stock market and was also
another record year for Northeast Investors Growth Fund. Our total
return of +29.13% topped that of the S&P 500-(an unmanaged index)
+21.00%- by a considerable amount. In fact, as set forth below,
our numbers compare most favorably with that of the S&P, as we have
outperformed this index in the four most recent years:
<TABLE>
<S> <C> <C>
S&P 500 NEIG
1995 37.12% 36.46%
1996 22.88% 24.60%
1997 33.10% 37.28%
1998 28.34% 33.34%
1999 21.04% 29.13%
</TABLE>
Records were also set for the size of the fund, which grew from
$211,258,849 at year end, 1998, to $357,649,547 at year end, 1999.
The number of shareholders also hit a new high, 9,605 as interest
in the fund continued to grow. Also ofnote is our expense ratio
which continues in the right direction now well under 1% at .85%
and below the .94% recorded for the prior year. To help explain the
larger than usual number of additions, eliminations and new holdings
cover all of 1999's activity as seen on page 3, starting in mid-year
we reduced the number of holdings, then totaling about 82, to 59 by
year end. This was done to adjust the investment focus and to
implement a strategy of more meaningful investment positions in
those companies where our conviction is the greatest. Although we
are not there yet, we would like to have postions of at least
1-1/2 to 2-1/2% in each investment held. In general, our turnover rate
remains low, although it was slightly higher in 1999 at 31.39%
for the reasons set forth above. Ours is especially low when
compared with many other mutual funds where the turnover rate is
well in excess of 100%. As you know, this turnover figure attempts
to measure how much buying and sell-ing a fund does and has direct
linkage both to a fund's transaction expense and to the short and
long term gain distributions paid by a fund at year end, distributions
on which you the shareholder must then pay the ultimate tax. A high
trunover rate suggests to me more of a horse race -- a gambling
approach to investing, and an approach which I expect Northeast
Investors Growth Fund will avoid. Some changes, some weeding of the
investment garden, is always appropriate, but true investing for
the futurealways involves planting a seed and watching, with
patience, its progress. Northeast Investors Growth Fund has had a
commendable investment record fueled by the solid returns generated by
deep rooted, mostly U.S. companies, and by the continued support of
many long-time investors, as well as many new investors who are
hearing about the fund and its common sense approach. This
circle of investors has grown from a small group of family, fellow
workers and many, many friends, and I look forward to more growth
with a widening band of shareholders and contiued honorable results
for all of us as the economic prospects for our great country and
that of the world continue to expand. As in the past, I encourage
shareholders to contact me with any questions regarding the fund at
any time. For those of you non-shareholders reading this report for
the first time, we hope you will join us in this endeavor as well.
Again, we are delighted with the results of the past year.
In fact, we are most pleased with the performance and direction
of the fund since its inception in 1980.
Ever
sincerely,
William A. Oates, Jr. President
February 7, 2000
<PAGE>
<TABLE>
<S> <C> <C>
January 1, 1999-December 31, 1999
Additions to Existing Holdings Additions Now Own
America Online, Inc. 73,400 133,400
American Express Company 2,700 31,500
Bristol Myers Squibb Company 51,900 81,800
Chase Manhattan Corporation 6,500 30,300
Chevron Corporation 6,500 33,200
Cisco Systems, Inc. 143,750 212,700
Dell Computer Corporation 43,400 86,800
EMC Corporation 83,800 117,400
Eli Lilly & Co. 19,600 65,700
Fifth Third Bancorp 29,200 71,525
General Electric Company 45,500 109,600
General Motors Corporation 54,600 66,800
Home Depot, Inc. 22,025 66,075
International Business Machines 80,200 77,000
Johnson & Johnson 23,600 49,800
Lucent Technologies, Inc. 79,400 109,800
McGraw-Hill Companies Inc. 29,400 50,800
MCI Worldcom, Inc. 104,600 134,400
Medtronic, Inc. 50,300 75,800
Mellon Financial* 142,700 237,400
Merck & Company, Inc. 53,100 86,400
Microsoft Corporation 121,200 169,200
Pfizer, Inc. 129,350 176,550
Procter & Gamble Company 5,000 40,300
State Street Corporation 32,900 78,100
Tellabs, Inc. 47,500 65,000
Time Warner, Inc. 80,000 187,400
Vodafone Airtouch PLC-Spons ADR 76,200 82,000
Wal-Mart Stores, Inc. 111,600 159,600
Warmer Lambert Company 7,400 66,975
Yahoo! Inc. 15,200 25,000
Zions Bancorporation 23,500 130,600
</TABLE>
<PAGE>
<TABLE>
<S> <C>
New Holdings Now Own
AT&T Corporation 51,000
American International Group 45,046
Amgen, Inc. 69,000
Broadcom Corporation 19,900
CMGI, Inc. 19,000
Carnival Corporation 49,800
Citigroup, Inc. 69,000
Corning, Inc. 13,000
Cox Communications 119,400
Eaton Vance Corporation 125,000
Exxon Mobil Corporation* 77,441
FleetBoston Financial Corporation* 248,434
Hewlett Packard Corporation 30,900
Intel Corporation 106,200
Nokia Corporation-Spons-ADR 27,800
Oracle Corporation 42,200
Paine Webber Group, Inc. 34,500
Qualcomm, Inc. 37,600
Qwest Communications 104,800
Royal Dutch Petroleum 53,200
Sony Corporation 22,400
Sun Microsystems, Inc. 94,800
Viacom, Inc. Class A 35,000
Visx, Inc. 35,000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Eliminations/Reductions of Holdings
Sold Now Own
Abbott Laboratories* 49,200 0
American Home Products* 63,700 0
Boston Scientific Corporation 34,000 0
Cabot Corporation 33,000 0
Cabot Industrial Trust 68,900 0
Caterpillar, Inc. 23,000 0
Chubb Corporation 59,200 0
Coca-Cola Company* 97,000 0
CVS Corporation 41,800 0
Disney Productions* 169,000 0
Eastman Kodak Company 14,300 0
Entremed Corporation 22,200 0
First Republic Security 191,456 0
Fort James Corporation 22,400 0
Gillette Company* 129,300 0
Glaxo Wellcome PLC-Spons-ADR 19,900 0
Monsanto Company* 56,000 0
National Bancorp of Alaska, Inc. 32,000 0
New York Times Co. A 35,000 0
Ohio Casualty Corporation 31,400 0
Pepsico, Inc. 40,000 0
Phillip Morris Companies, Inc 19,900 0
Pioneer Hi-Bred International, Inc. 63,500 0
Polaris Industries, Inc. 24,700 0
Saville Systems Ireland Spons-ADR 19,200 0
St. Paul Companies, Inc. 37,900 0
Staples, Inc.* 102,600 0
Triac Companies 50,000 0
Washington Mutual, Inc.* 215,850 0
Xerox, Inc.* 49,800 0
* Includes purchase made in 1999.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
One year ended December 31, 1999..............................29.13%
Five years ended December 31, 1999.................... .......31.90%
Ten years ended December 31, 1999.............................18.81%
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, 1999.
<S> <S>
June 15, 1999 December 15, 1999
Net Investment Income $ 0.01835 Net Investment Income $0.000
Short-Term Capital Gains 0.00 Short-Term Capital Gains 0.000
Long-Term Capital Gains 0.00665 Long-Term Capital Gains 0.300
</TABLE>
Under the Internal Revenue Code, 100% of ordinary income
distributions 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). Pursuant to section 842 of
the Internal Revenue Code, the Fund hereby designates $4,180,561 as
capital gain for taxable year ended December 31, 1999.
<PAGE>
<TABLE>
December 31, 1999
Ten Largest Investment Holdings
<S> <C> <C>
Cost Market Value
Cisco Systems Inc. $8,689,399 $22,785,488
Microsoft Corporation 8,219,768 19,754,100
General Electric Company 9,040,613 16,960,600
TIme Warner 8,939,425 13,551,363
EMC Corporation 5,198,873 12,825,950
Wal-Mart Stores Inc. 5,841,434 11,032,350
Yahoo! Inc. 2,431,422 10,817,188
America Online Inc. 1,854,983 10,038,350
Intel Corporation 2,814,153 8,741,588
FleetBoston Financial Corporation 4,559,522 8,648,609
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stocks-- Market Percent of
Number of Value Net
Name of Issuer Shares (Note B) Assets
Automobile & Truck
General Motors Corporation . 66,800 $ 4,855,525 1.36%
Banks
Chase Manhattan Corporation . 30,300 2,353,931
Citigroup Inc. . . . . . . . 69,000 3,842,438
Fifth Third Bancorp.. . . . . 71,525 5,248,147
FleetBoston Financial Corp*. 248,434 8,648,609
J P Morgan & Company . . . .. 24,500 3,102,313
Mellon Financial . . . . . . 237,400 8,086,438
Zions Bancorporation . . . . 130,600 7,729,888
39,011,764 10.91%
Biotechnology
Amgen Inc.^. . . . . . . . . .69,000 4,144,313 1.16%
Computer & Data Processing
Dell^ . . . . . . . . . . . . 86,800 4,426,800
EMC Corporation^* . . . . . 117,400 12,825,950
Hewlett Packard. . . . . . . 30,900 3,514,875
IBM* . . . . . . 77,000 8,306,375
Sun Microsystems^ . . . . . . 94,800 7,341,075
36,415,075 10.18%
Computer Software & Services
America Online, Inc.^ . . .. 133,400 10,038,350
CMGI Inc.^. . . . . . . . . . 19,000 5,260,625
Microsoft Corporation^*. . . 169,200 19,754,100
Oracle Corporation^ . . . . . 42,200 4,729,038
Yahoo! Inc.^ . . . . .. . . . 25,000 10,817,188
50,599,301 14.15%
Entertainment
Carnival Corporation .. . . . 49,800 2,381,063
Time Warner . . . . . . . . 187,400 13,551,363
Viacom Inc Class A^. .. . . . 35,000 2,115,313
18,047,739 5.05%
Electronic Equipment
General Electric Company . . 109,600 16,960,600
Corning Inc. . .. . . . . . . 13,000 1,676,188
18,636,788 5.21%
Electronics
Broadcom Corporation^ . . . 19,900 5,420,263
Cisco Systems Inc.^ . .. . . 212,700 22,785,488
Intel Corporation . . . . . 106,200 8,741,588
Lucent Technologies. . . . . 109,800 8,248,725
Nokia Corporation-Spons-ADR^ .27,800 5,311,538
Qualcomm Inc.^ . . .. . . . . 37,600 6,627,000
Sony Corporation . . . . . .. 22,400 6,378,400
63,513,002 17.76%
Financial Services
American Express Company . .. 31,500 5,236,875
Donaldson Lufkin & Jenrette.. 37,600 1,818,900
Eaton Vance Corp. . .. . . . 125,000 4,750,000
Morgan Stanley Dean Witter Co.43,410 6,196,778
Paine Webber Group Inc. . . . 34,500 1,339,031
State Street Corp . . . . . 78,100 5,706,181
25,047,765 7.00%
Health Care-Supplies
Johnson & Johnson . . . . . . 49,800 4,643,850
Warner Lambert Co. . . . . . 66,975 5,487,764
10,131,614 2.83%
Household Products
Procter & Gamble* . . . . . . 40,300 4,415,369 1.23%
Insurance
American International Group .45,046 4,870,599 1.36%
Medical
Medtronics, Inc. . . . . . . 75,800 2,761,963 0.77%
Petroleum, Coal, Gas
Chevron Corporation . . . . . 33,200 2,875,950
Exxon Mobile Corporation . . .77,441 6,238,841
Royal Dutch Petroleum . . . . 53,200 3,221,925
12,336,716 3.45%
Pharmaceuticals
Bristol Myers Squibb Co. . . 81,800 5,250,538
Eli Lilly & Co. . . . . . . . 65,700 4,369,050
Merck & Co.* . . . . . . . . 86,400 5,805,000
Pfizer Inc.* . . . . . . . . 176,550 5,726,841
21,151,429 5.91%
Precision Instruments
Visx Inc.^ . . . . . . . .. . 35,000 1,811,250 0.51%
Publishing/Printing
McGraw-Hill Companies Inc. .. 50,800 3,130,550 0.88%
Retail
Home Depot. . . . . . . . . . 66,075 4,542,656
Wal-Mart Stores Inc. . . . . 159,600 11,032,350
15,575,006 4.35%
Telecommunications
AT&T Corp . . . . . . . . . . 51,000 2,591,438
Cox Communications^ . . . .. 119,400 6,149,100
MCI Worldcom Inc.^ . . . . . 134,400 7,131,600
Qwest Communications^ . . . 104,800 4,506,400
Tellabs^ . . . . . . . . . . 65,000 4,172,188
Vodafone Airtouch PLC . . . . 82,000 4,059,000
28,609,726 8.00%
Total Common Stocks (Cost--$211,570,293) $365,065,494 102.07%
* Pledged to
collateralize short-term borrowings (See Note G)
^ Non-income producing.
ADR stands for American Depository Receipt representing ownership
of foreign securities.
The accompanying notes are an integral
part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
December 31, 1999
Assets
Investments--at market value (cost $211,570,293)--Notes B, D & F.......$365,065,494
Dividends and interest receivable ............................. 227,056
Receivable for shares of beneficial interest sold.................. 1,423,674
Total Assets ........................................... $366,716,224
Liabilities
Payable for shares of beneficial interest repurchased ............. 204,941
Accrued expenses................................................... 117,113
Notes Payable ....................................................... 8,591,251
Accrued Investment advisory fee--Note C ........................... 153,372
Total Liabilities ................................ $9,066,677
Net Assets ........................................................... $357,649,547
Net Assets Consist of--Note B:
Capital paid-in....................................................... $204,581,069
Distributions in excess of net realized gains .................... (426,716)
Net unrealized appreciation of investments ......................... 153,495,194
Net Assets, for 13,714,780 shares outstanding ............. .......... $357,649,547
Net Asset Value, offering price and redemption price per share
($357,649,547/13,714,780 shares) . ................... $26.08
The accompanying notes are an integral part of the financial statements.
Year Ended December 31, 1999
Investment Income
Dividends.............................................................. $ 2,480,675
Interest.................. ................................................. 8,602
Other Income--Note I ....................................................... 26,170
Total Income........................................................... $ 2,515,447
Expenses
Investment advisory fee--Note C ................................ $ 1,542,605
Administrative expenses and salaries.......... ....................... 246,806
Interest--Note G ................... .................................... 284,431
Printing, postage and stationery................................... 83,460
Legal Fees........................................................... 50,895
Computer and related expenses ........................................... 50,001
Registration and filing fees........................................... 42,693
Auditing fees........................................................ 23,193
Insurance ............................................................ 19,955
Custodian fees .................................................... 14,431
Trustees fees--Note C................................................ 10,048
Other expenses .......................................................... . 37,875
Total Expenses .................................................... 2,406,393
Net Investment Income ................................................. 109,054
Realized and Unrealized Gain on Investments--Note B:
Net realized gain from investment transactions ................. 3,909,780
Change in unrealized appreciation of investments .................... 71,527,151
Net Gain on Investments ............................................ 75,436,931
Net Increase in Net Assets Resulting from Operations....................$75,545,985
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Years Ended December 31,
1999 1998
Increase in Net Assets
From Operations:
Net investment income ................ $ 109,054 $ 529,082
Net realized gain from investment transactions.. 3,909,780 5,367,820
Change in unrealized appreciation of investments 71,527,151 37,027,890
Net Increase in Net Assets Resulting from
Operations........................ 75,545,985 42,924,792
Distributions to Shareholders:
From net investment income ..........................(140,843) (486,335)
In excess of net investment income ............. (106,194)
From net realized gains on investments..... (4,010,686) (5,203,325)
In excess of net realized gains on investments...... (126,771)
Total Distributions .................... (4,384,494) (5,689,660)
From Net Fund Share Transactions--Note E. 75,229,207 65,434,064
Total Increase in Net Assets.......... 146,390,698 102,669,196
Net Assets:
Beginning of Period ............................ 211,258,849 108,589,653
----------- -----------
End of Period (including undistributed net invest-
ment income of $0 and $31,789 respectively) $357,649,547 $211,258,849
------------ ------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
Note A-Organization
Northeast Investors Growth Fund (the "Fund") is a diversified,
no-load,open-end, series-type management investment company
registered under theInvestment 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 income 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
NortheastManagement & 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 aver-age 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
$171,158,617 and $95,045,108, respectively, for the year ended
December 31, 1999. Note E-Shares of Beneficial Interest At December
31, 1999, there was an unlimited number of shares of beneficial
interest authorized with no par value. Transactions in shares of
beneficial interest were as follows:
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Years Ended December 31,
1999 1998
Shares Amount Shares Amount
Shares sold ........................7,239,820 $161,699,116 6,132,271 $111,339,313
Shares issued to shareholders in
reinvestment of distributions from
net investment income and realized
gains from security transactions .....165,009 3,980,887 274,986 5,161,310
.................................. 7,404,829 165,680,003 6,407,257 116,500,623
Shares repurchased.................(4,015,168) (90,450,796) (2,939,702) (51,066,559)
----------- ------------- ------------ ------------
Net Increase ..................... 3,389,661 $ 75,229,207 3,467,555 $ 65,434,064
</TABLE>
Note F-Repurchase Agreement
On a daily basis, the Fund invests uninvested cash balances into
repurchaseagreements 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 theagreement, 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, 1999,
the Fund had unused lines of credit amounting to $6,408,749. The
following information relates to aggregate short-term borrowings
during the year ended December 31, 1999:
<PAGE>
<TABLE>
<S> <C>
Average amount outstanding (total of daily outstanding principal balances
divided by number of days during the year)....................... $4,895,102
Weighted average interest rate (actual interest expense on short-term
borrowing divided by average short-term borrowings outstanding) ...... 5.89%
</TABLE>
Note H-Other Tax Information
For federal income tax purposes, the cost of investments owned at
December 31, 1999 was $211,570,293. At December 31, 1999, gross
unrealized appreciation of investments was $154,298,352 and gross
unrealized depreciation was $803,158, resulting in net unrealized
appreciation of $153,495,194. Note I-Securities Lending The Fund
may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as
collateral in an amount equal to at least 102% of the current market
value of any loaned securities plus accrued interest. By reinvesting
any cash collateral it receives in these transactions, the Fund
could realize additional gains and losses. If the borrower fails to
return the securities and the value of the collateral has declined
during the term of the loan, the Fund will bear the loss. At December
31, 1999, the value of securities loaned and the value of
collateral were $8,533,700.03 and $8,784,000, respectively. During
the year ended December 31, 1999, income from securi-ties lending
amounted to $26,170.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Years Ended December 31
Per Share Data# 1999 1998 1997 1996 1995
Net asset value:
Beginning of period..... $20.47 $15.84 $12.15 $10.59 $8.13
Income From Investment
Operations:
Net investment income...... .01 .05 .06 .05 .07
Net realized and
unrealized gain (loss)
on investments.............5.93 5.18 4.46 2.54 2.90
---- ---- ---- ---- ----
Total from investment
operations ................5.94 5.23 4.52 2.59 2.97
---- ---- ---- ---- ----
Less Distributions:
Net investment income .. (.02) (.05) (.06) (.05) (.07)
Capital gains ............ (.31) (.55) (.77) (.98) (.44)
Total Distributions ..... (.33) (.60) (.83) (1.03) (.51)
Net asset value:
End of period...... $26.08 $20.47 $15.84 $12.15 $10.59
------ ------ ------ ------ ------
Total Return ........ 29.13% 33.34% 37.28% 24.60% 36.46%
Ratios & Supplemental Data
Net assets end of
period (000's omitted) $357,650 $211,259 $108,590 $60,275 $48,337
Ratio of operating
expenses to average
net assets...................85% .94% .97% 1.21% 1.37%
Ratio of net investment
income to average
net assets.................. 03% .44% .45% .47% .74%
Portfolio turnover rate ..31.39% 18.54% 16.36% 25.27% 26.53%
# All per share data as of December 31, 1996 and earlier has been restated to reflect
a 3 for 1 stock split effective September 25, 1997.
Years Ended December 31
Per Share Data# 1994 1993 1992~ 1991~ 1990~
Net asset value:
Beginning of period.......$8.37 $9.70 $10.37 $7.81 $7.89
Income From Investment
Operations:
Net investment income .......06 .07 .07 .09 .09
Net realized and
unrealized gain (loss)
on investments........... (.07) .16 (.15) 2.77 .03
Total from investment
operations .......... (.01) .23 (.08) 2.86 .12
Less Distributions:
Net investment income .. (.06) (.07) (.07) (.12) (.09)
Capital gains........... (.17) (1.49) (.52) (.18) (.11)
----- ------ ----- ----- -----
Total Distributions....... (.23) (1.56) (.59) (.30) (.20)
Net asset value:
End of period.. $8.13 $8.37 $9.70 $10.37 $7.81
----- ----- ----- ------ -----
Total Return....... (.07%) 2.44% (.73%) 36.91% 1.52%
Ratios & Supplemental Data
Net assets end of
period (000's omitted) ...$35,459 $38,694 $42,609 $40,873 $27,189
Ratio of operating
expenses to average
net assets......... 1.53% 1.45% 1.42% 1.50% 1.74%
Ratio of net investment
income to average
net assets.......... .74% .62% .71% 1.02% 1.19%
Portfolio turnover rate . 25.55% 35.14% 28.91% 15.63% 37.18%
~ Audited by other Auditors
# All per share data as of December 31, 1996 and earlier has been restated to
reflect a 3 for 1 stock split effective September 25, 1997.
</TABLE>
Report of Independent Accountants
To the Shareholders and Trustees of Northeast Investors Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements
of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial
position of Northeast Investors Growth Fund (the "Fund") at
December 31, 1999, and the results of its operations, the changes
in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of investments owned at
December 31, 1999 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000
