[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
ANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
HIGH INCOME FUND
[ARTWORK APPEARS HERE]
DECEMBER 31, 1995
<PAGE>
JANUARY 31, 1996
DEAR SHAREHOLDER,
ItOs a real pleasure to present to you the 1995 Annual Report for New
England High Income Fund, containing your portfolio managerOs
commentary and complete financial information.
FAVORABLE ECONOMIC CONDITIONS IN 1995
In 1995 subdued economic growth with little or no inflation created a
very favorable backdrop for the bond and stock markets. Long term
interest rates dipped on the positive inflation news, with the yield
on the 30-year Treasury bond falling to a low of 5.95% at year end.
The stock market, fueled by lower interest rates and solid corporate
earnings growth, advanced 37.6%, as measured by the Standard & PoorOs
500 Index,* for its best showing since 1958. In July and in
December, the Federal Reserve Board lowered short term rates,
signaling its belief that the economy was indeed on a path towards
slow, non-inflationary growth.
NEW ENGLAND FUNDS - WHERE THE BEST MINDS MEET
Over this past year we launched our new corporate identity - Where the
Best Minds Meet -which we believe reflects the essence of New England
Funds. Our unique multiple adviser structure brings together some of
the best investment minds in the business. As recent examples,
consider New England Star Advisers Fund, managed by four prominent
equity advisers, and New England Star Worldwide Fund, a global fund
introduced this January which builds off the Star Advisers concept.
In addition, last May we launched New England Strategic Income Fund,
under the management of Dan Fuss of Loomis Sayles. One of the
industryOs most respected managers, Dan Fuss was named 1995Os OBond
Fund Manager of the YearO by Morningstar for his past record of
accomplishment in fund management at Loomis Sayles.**
* Standard & PoorOs 500 is an unmanaged index representing 500
major companies, the majority of which are listed on the New York
Stock Exchange.
** Morningstar is a third party, independent mutual fund rating
service.
<PAGE>
1995 DALBAR AWARD FOR SERVICE EXCELLENCE
Where the Best Minds Meet also refers to your financial adviser and
all the people at New England Funds who provide you with quality
service. We are proud to report that in recognition of our ongoing
quality initiatives, New England Funds has been named a 1995 Quality
Tested Service Seal Winner by DALBAR, an independent mutual fund
service rating company. The coveted DALBAR award was given to only
seven companies for Oproviding the highest tier of service excellence
in the mutual fund industry.O
OUTLOOK FOR 1996
Looking ahead, we believe interest rates are likely to remain flat as
the economy continues on its slow, steady, non-inflationary growth
path. While this scenario is extremely positive for the long term, it
is unlikely that 1996 will see a repeat of last yearOs stellar
performance. At this time itOs worth reiterating that long-term
investors should not focus on one yearOs performance. Instead, we
recommend that you review your asset allocation program with your
financial adviser, then remain committed to that program to carry out
its objectives.
We believe you will find your portfolio managerOs commentary
informative. If you have any questions or comments, please contact
your financial representative or New England Funds directly at 800-225-
5478. Also, please contact New England Funds for a prospectus on any
of the funds mentioned above. The prospectus details investment
objectives and risks, as well as management fees and expenses. You
should read it carefully before investing or sending money.
Sincerely,
/s/PETER S. VOSS /s/HENRY L. P. SCHMELZER
Peter S. Voss Henry L.P. Schmelzer
Chairman President
<PAGE>
NEW ENGLAND HIGH INCOME FUND
INVESTMENT RESULTS THROUGH DECEMBER 31, 1995
Putting Performance into Perspective
The graph comparing your FundOs performance to a benchmark index
provides you with a general sense of how your Fund performed. To put
this information in context, it may be helpful to understand the
special differences between the two. Your FundOs total return for the
period shown appears with and without sales charges and includes Fund
expenses and management fees. A securities index measures the
performance of a theoretical portfolio. Unlike a fund, the index is
unmanaged; there are no expenses that affect the results. In addition,
few investors could purchase all of the securities necessary to match
the index. And, if they could, they would incur transaction costs and
other expenses.
A $10,000 INVESTMENT IN CLASS A SHARES
COMPARED TO THE FIRST BOSTON HIGH YIELD INDEX4
AND THE COST OF LIVING5
[A chart in the form of a line graph appears here, illustrating the
growth of a $10,000 investment in Class A Shares compared to Lehman
Municipal Index(4) and the Cost of Living(5). The data points from the
graph are as follows:]
New England High Income Fund - Net Asset Value(1)
Year Amount
- ----- ------
1995 $20,003
1994 $17,895
1993 $18,508
1992 $15,885
1991 $13,721
1990 $10,054
1989 $11,586
1988 $11,215
1987 $10,933
1986 $11,096
12/31/84 $10,000
New England High Income Fund - With Maximum Sales Charge(2)
Year Amount
- ----- ------
1995 $19,103
1994 $17,090
1993 $17,675
1992 $15,170
1991 $13,104
1990 $9,602
1989 $1,065
1988 $10,710
1987 $10,441
1986 $10,597
12/31/84 $9,550
First Boston High Yield(4)
Year Amount
- ----- ------
1995 $29,908
1994 $25,477
1993 $25,727
1992 $21,636
1991 $18,546
1990 $12,902
1989 $13,781
1988 $13,727
1987 $12,319
1986 $11,564
12/31/84 $10,000
Cost of Living(5)
Year Amount
- ----- ------
1995 $14,055
1994 $13,697
1993 $13,340
1992 $12,983
1991 $12,617
1990 $12,242
1989 $11,537
1988 $11,025
1987 $10,558
1986 $10,110
13/31/84 $10,000
This illustration represents past performance of Class A shares
and cannot predict future results. Investment return and
principal value may vary, resulting in a gain or loss on the sale
of shares. Class B share performance will be greater or less than
that shown based on differences in inception date, fees and sales
charges. All Index and Fund performance assumes reinvested
distributions.
<PAGE>
NEW ENGLAND HIGH INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/95
<TABLE><CAPTION>
<S> <C> <C> <C>
CLASS A (INCEPTION 2/22/84) 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 11.78% 14.75% 7.18%
With Max. Sales Charge(2) 6.73 13.69 6.68
Lipper High Yield Average(6) 16.44 16.70
CLASS B (INCEPTION 9/20/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 11.19% 4.83%
With CDSC(3) 7.19 3.70
First Boston High Yield(4) 17.39
Lipper High Yield Average(6) 16.44
<FN>
These returns represent past performance. Investment return and
principal value will fluctuate so that shares, upon
redemption, may be worth more or less than original cost.
Notes to Charts and Performance Update
1 Net Asset Value (NAV) performance assumes reinvestment of all
distributions and does not reflect the payment of a sales charge
at the time of purchase.
2 With Maximum Sales Charge assumes reinvestment of all
distributions and reflects the maximum sales charge of 4.5% at the
time of purchase of Class A shares.
3 With Contingent Deferred Sales Charge (CDSC) performance assumes a
maximum 4% sales charge is applied to a redemption of Class B
shares. The sales charge will decrease over time, declining to
zero five years after the purchase of shares.
4 First Boston High Yield Index is an unmanaged index of bonds rated
below investment grade by Standard and PoorOs or MoodyOs Investors
Service issued by U.S. corporations. The Index performance has not
been adjusted for ongoing management, distribution and operating
expenses and sales charges applicable to mutual fund investments.
5 Cost of Living is based on the Consumer Price Index, a widely
recognized measure of the cost of goods and services in the United
States, calculated by the U.S. Bureau of Labor Statistics.
6 Lipper Average is an average of the total return performance
(calculated on the basis of net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services,
an independent mutual fund ranking service.
</TABLE>
<PAGE>
NEW ENGLAND HIGH INCOME FUND
[PHOTO]
NEW ENGLAND HIGH INCOME FUND
1995 ANNUAL REPORT
Portfolio Manager: Charles Glueck
Back Bay Advisors, L.P.
Optimism about declining interest rates and continued low inflation
fueled a strong rally in the bond markets, in 1995, while prospects
for economic growth sent the stock market to new highs. U.S. Treasury
securities and corporate bonds were the principal beneficiaries of the
fixed-income marketOs exuberance.
While the performance of high-income bonds was positive for the year,
it was inhibited by the lagging effect of 1994Os economic slowdown and
interest rate increases.
How Your Fund Performed
For the 12 months ended December 31, 1995, New England High Income
Fund provided a total return on net asset value of 11.78% for Class A
shares. By historical standards, this is a solid return; however, it
does reflect the overall underperformance of high-income bonds versus
Treasury securities during 1995.
We are pleased to report that the Fund generated a high level of
current income over the 12-month period. On December 31, the FundOs 30-
day yield was 9.48% for Class A shares.1 Past performance does not
guarantee future results.
1 Yield is calculated using a standard formula established by the
Securities and Exchange Commission, and is an annualized
percentage based on the yield earned for the FundOs Class A
shares during the 30 days ending December 31, 1995.
<PAGE>
NEW ENGLAND HIGH INCOME FUND
How We Managed Your Fund
In response to 1994Os rate increases and the slowdown in overall
credit improvement, the Fund assumed a defensive posture in the first
half of 1995 by increasing credit quality and decreasing portfolio
duration, the measure of overall sensitivity to changes in interest
rates.
We changed emphasis in the early summer as rates dropped, and it
became increasingly evident that the U.S. economy would achieve the
hoped for soft landing. At that time, we added to our holdings of B-
rated bonds in anticipation of improving credit quality; we also
lengthened the duration of the Fund by including more zero coupon and
deferred interest bonds and Treasury strips. Duration, which averaged
4.5 years in the first six months, was extended to a slightly more
bullish 4.64 years by December.
Given the volatility in the high-income market, diversification is
essential to successful investing. Throughout the year, the Fund
continued to be broadly diversified, holding more than 100 issues
across nearly 30 sectors. Please refer to OPortfolio CompositionO in
the attached financial report for a more complete listing of all the
sectors and individual holdings.
<PAGE>
NEW ENGLAND HIGH INCOME FUND
Economic Outlook
As we enter 1996, we anticipate a continuation of interest rate
declines and low inflation an environment that historically has been
favorable to high-yield bonds. In light of this economic outlook, we
expect to continue lengthening portfolio duration gradually and
assuming
a more aggressive posture as we seek strong returns with high current
yields for shareholders.
NEW ENGLAND HIGH INCOME
TOP TEN SECTORS AS OF 12/31/95
SECTOR PERCENTAGE
1. COMMUNICATIONS 9.6%
2. MANUFACTURING 7.1
3. PAPER & FOREST PRODUCTS 6.7
4. FOOD/TOBACCO 6.0
5. OIL & GAS 5.7
6. STEEL & IRON 5.6
7. RETAIL STORES 5.4
8. CHEMICALS 4.6
9. ENTERTAINMENT 4.0
10. GOVERNMENT ISSUES 3.4
*Portfolio holdings and asset allocations may change.
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
HIGH INCOME FUND
DECEMBER 31, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1995
BONDS AND NOTES--94.2% OF TOTAL NET ASSETS
<TABLE><CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
- --
ADVERTISING--0.5%
$250,000 Lamar Advertising 11.000%, 05/15/2003 $260,000
-----------
AIR TRANSPORT--0.1%
250,000 People Express Airlines, Inc., secured equip.
cts., 14.375%, 04/15/1996 (e) 30,000
-----------
AUTOMOTIVE--2.7%
500,000 Am General Corp., 12.875%, 05/01/2002 500,000
500,000 Johnstown America Industries, 11.750%, 08/15/2005 450,000
250,000 Motor Wheel Corp. 11.500%, 03/01/2000 225,000
150,000 SPX Corp. 11.750%, 06/01/2002 159,000
-----------
1,334,000
-----------
AVIATION/PARTS & SERVICE--0.7%
350,000 Fairchild Corp. 13.125%, 03/15/2006 332,500
-----------
BUILDING MATERIALS--3.2%
500,000 Beazer USA Inc. 9.000%, 03/01/2004 485,000
750,000 Color Tile, Inc. 10.750%, 12/15/2001 (e) 75,000
250,000 NVR, Inc. 11.000%, 04/15/2003 251,562
250,000 Pacific Lumber Co. 10.500%, 03/01/2003 236,875
500,000 Schuller International Group,
Inc. 10.875%, 12/15/2004 561,250
-----------
1,609,687
-----------
CHEMICALS--4.6%
250,000 Agriculture Minerals & Chemicals 10.750%,
09/30/2003 276,250
400,000 Harris Chemical North America, Inc. 10.750%,
10/15/2003 366,000
250,000 Huntsman Corp. 11.000%, 04/15/2004 286,500
1,000,000 Indspec Chemical Corp., 0/11.500, 12/01/2003 (f) 800,000
500,000 Waters Corp. 12.750%, 09/30/2004 565,000
-----------
2,293,750
-----------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
COMMUNICATIONS--9.6%
$900,000 Bell Cablemedia PLC, 0/11.875%, 09/15/2005 (f) $562,500
200,000 Cablevision Industries Corp. 10.750%, 01/30/2002 216,000
500,000 Cablevision System Corp. 9.250%, 11/01/2005 522,500
250,000 Cencall Communications Corp., 0/10.125,
01/15/2004 (f) 141,250
500,000 Continental Cablevision Inc. 11.000%, 06/01/2007 558,575
500,000 Diamond Cable Communication, 0/11.75%,
12/15/2005 (f). 293,750
500,000 Dictaphone Corp. 11.750%, 08/01/2005. 495,000
200,000 International Cabletel, Inc., 0/10.875%,
10/15/2003 (f) 144,000
500,000 Jones Intercable Inc. 9.625%, 03/15/2002 537,500
200,000 Katz Corp. 12.750%, 11/15/2002. 221,000
350,000 Metrocall Inc. 10.375%, 10/01/2007 371,175
500,000 Nextel Communications, Inc., 0/9.75%,
08/15/2004 (f) 271,250
750,000 Telewest PLC, 0/11%, 10/01/2007 (f) 452,813
-----------
4,787,313
-----------
COMPUTERS--1.3%
310,000 Anacomp, Inc. 15.000%, 11/01/2000. 217,000
500,000 Merisel, Inc. 12.500%, 12/31/2004. 410,000
-----------
627,000
-----------
CONGLOMERATES--1.9%
250,000 Kaiser Aluminum & Chemical Corp. 12.750%,
2/01/2003 273,750
500,000 Talley Industries, Inc., 0/12.250, 10/15/2005 (f) 368,750
300,000 Talley Manufacturing & Technology, Inc.
10.750%, 10/15/2003 300,750
-----------
943,250
-----------
CONSUMER PRODUCTS--3.2%
750,000 Apparel Retailers, Inc., 0/12.750, 08/15/2005 (f) 457,500
200,000 Revlon, Inc. 10.875%, 07/15/2010 203,000
500,000 Revlon, Inc., Zero Coupon Bond, 03/15/1998 371,250
750,000 U.S. Leather, Inc. 10.250%, 07/31/2003 562,500
-----------
1,594,250
-----------
CONTAINERS--2.2%
250,000 Calmar, Inc. 11.500%, 8/15/05 253,125
750,000 Owens Illinois, Inc. 11.000%, 12/01/2003 847,500
-----------
1,100,625
-----------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
ELECTRIC UTILITIES--1.4%
$500,000 Consolidated Hydropower, Inc., 0/12.00%,
07/15/2003 (f).$320,545
1,000,000 Kenetech Corp. 12.750%, 12/15/2002 370,000
-----------
690,545
-----------
ENTERTAINMENT--4.0%
400,000 ACT III Theaters, Inc. 11.875%, 02/01/2003 434,000
2,000 Capital Gaming International Inc.
Zero Coupon Bond,08/01/1995 0
204,450 Capital Gaming International Inc.
11.500%, 02/01/2001 (d)80,091
250,000 Grand Casino Inc. 10.125%,12/01/2003. 262,188
500,000Lady Luck Gaming Financing Corp. 10.500%, 03/01/2001 385,000
500,000 Players International Inc, 10.875%, 04/15/2005 470,000
500,000 Roadmaster Industries, Inc. 11.750%, 07/15/2002. 340,000
-----------
1,971,279
-----------
FOOD/TOBACCO--6.0%
750,000 Carrols Corp. 11.500%, 08/15/2003. 757,500
250,000 Dr. Pepper Bottling Co., 0/11.625, 02/15/2003 (f) 205,000
500,000 Family Restaurants Inc., 0/10.875%, 02/01/2004 (f) 60,000
1,000,000 Grand Union Co. 12.000%, 09/01/2004 865,000
200,000 PMI Acquisition Corp. 10.250%, 09/01/2003. 205,500
400,000 Ralph's Grocery Co., 13.750%, 06/15/2005 426,500
250,250 Smitty's Super Value, Inc. 12.750%, 06/15/2004 (d).240,000
500,000 Specialty Foods Acquisition Corp., 0/13%,
08/15/2005 (f) 230,000
-----------
2,989,500
-----------
HEALTH SERVICES--2.8%
293,419 Amerisource DistrIbution Corp. 11.250%,
7/15/2005 (c). 318,360
500,000 Dade International, Inc. 13.000%, 02/01/2005. 560,000
450,000 Ornda Healthcorp 12.250%, 05/15/2002. 495,000
-----------
1,373,360
-----------
HOTELS--0.5%
250,000 Trump Plaza Funding, Inc. 10.875%, 06/15/2001 258,750
-----------
INSURANCE--2.1%
1,000,000 Reliance Group Holdings, Inc. 9.750%,
11/15/200 31,030,000
-----------
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
MANUFACTURING--7.1%
$1,000,000 American Standard, Inc., 0/10.50%, 06/01/2005 (f).$857,500
227,000 Carbide/Graphite Group, Inc. 11.500%, 09/01/2003 245,160
500,000 Eagle Industries, Inc., 0/10.50%, 07/15/2003 (f) 418,750
800,000 Fairfield Manufacturing 11.375%, 07/01/2001 780,000
250,000 HS Res., Inc. 9.875%, 12/01/2003 246,250
750,000 Mafco, Inc. 11.875%, 11/15/2002 772,500
250,000 Reeves Industries, Inc. 11.000%, 07/15/2002 213,750
-----------
3,533,910
-----------
METALS/MINING--1.8%
1,000,000 Jorgensen Earle 10.750%, 03/01/2000 917,500
-----------
OIL & GAS--5.7%
500,000 Clark R & M Holdings, Zero Coupon Bond, 02/15/2000.332,500
500,000 Maxus Energy Corp., 9.375%, 11/01/2003 490,000
400,000 Nuevo Energy Co. 12.500%, 06/15/2002. 435,000
500,000 Petroleum Heat & Power, Inc. 10.125%, 04/01/2003 490,000
250,000 Petroleum Heat & Power, Inc. 12.250%, 02/01/2005 275,625
200,000 Santa Fe Energy Resource, Inc. 11.000%, 05/15/2004.218,000
300,000 Tesoro Petroleum Corp., sub. deb., 13.000%,
12/01/2000 309,000
250,000 United Meridian Corp. 10.375%, 10/15/2005. 264,375
-----------
2,814,500
-----------
PAPER & FOREST PRODUCTS--6.7%
500,000 Ivex Holdings Corp., 0/13.25%, 03/15/2005 (f) 280,000
200,000 Ivex Packaging 12.500%, 12/15/2002 212,000
500,000 P.T. Indorayon Utama 9.125%, 10/15/2000 .465,000
250,000 SD Warren Co. 12.000%, 12/15/2004. 275,625
500,000 Stone Container Corp. 11.500%, 09/01/1999. 502,500
500,000 Stone Container Corp. 10.750%, 10/01/2002. 516,250
1,000,000 Tjiwi Kimia International Finance 13.250%,
08/01/200 11,072,500
-----------
3,323,875
-----------
REAL ESTATE--2.7%
340,000 Continental Homes 12.000%, 08/01/1999 367,200
500,000 Engle Homes 11.750%, 12/15/2000 470,000
150,000 Oriole Homes Corp. 12.500%, 01/15/2003 124,500
250,000 Ryland Group, Inc. 9.625%, 06/01/2004 241,250
154,296 U.D.C. Homes, Inc. 12.500%, 05/01/2000 148,004
-----------
1,350,954
-----------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
RETAIL STORES--5.4%
$500,000 Cole National Group. Inc. 11.250%, 10/01/2001 $501,250
1,000,000 Finlay Enterprises, Inc., 0/12.00%, 05/01/2005 (f).660,000
200,000 Levitz Furniture 12.375%, 04/15/1997. 181,000
250,000 Levitz Furniture 9.625%, 07/15/2003 137,500
500,000 Loehmanns Holdings, Inc. 13.750%, 02/15/1999. 470,000
200,000 Pace Industries, Inc. 10.625%, 12/01/2002. 176,000
200,000 Repap Wis, Inc. 9.875%, 05/01/2006 189,000
350,000 Waban, Inc. 11.000%, 05/15/2004 358,750
-----------
2,673,500
-----------
STEEL & IRON--5.6%
750,000 AK Steel Corp. 10.750%, 04/01/2004 832,500
750,000 Acme Metals, Inc. 12.500%, 08/01/2002 757,500
750,000 GS Technologies Oper. Inc. 12.000%, 09/01/2004 741,562
500,000 Wheeling Pittsburgh Corp. 9.375%, 11/15/2003. 472,500
-----------
2,804,062
-----------
TEXTILES & APPAREL--0.6%
250,000Bibb Co. 14.000%, 10/01/1999 97,500
200,000Dan River, Inc. 10.125%, 12/15/2003 182,000
100,000NTC Group, Inc. 13.875%, 08/01/1999 38,000
-----------
317,500
-----------
TRUCKING--0.2%
500,000 Burlington Motor Holdings, Inc.
11.500%, 11/01/2003 (e) 80,000
-----------
MISCELLANEOUS--8.4%
250,000 Alliant Techsystems Inc, 11.750%, 03/01/2003. 275,625
1,000,000 Cemex SA & Tolmex, 9.5000% 906,250
200,000 Day International Group, 11.125%, 06/01/2005. 204,000
500,000 MVE Inc., 12.500%, 02/15/2002 515,000
500,000 Primeco Inc., 12.750%, 03/01/2005. 515,000
500,000 RBX Corp. 11.250%, 10/15/2005 495,000
250,000 Sherritt Inc. SR Notes 10.500%, 03/31/2014 272,813
500,000 Terex Corp., 13.750%, 05/15/2002 433,750
265,000 UCAR Global Enterprises, 12.000%, 01/15/2005. 306,075
250,000 Webcraft Technologies, Inc. 9.375%, 02/15/2002 240,000
-----------
4,163,513
-----------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
U.S. Government--3.4%
$300,000U.S. Treasury Notes 8.250%, 07/15/1998 $321,092
6,405,000U.S. Treasury Bond Strip, Zero Coupon,
08/15/2020.1,394,240
-----------
1,715,332
-----------
Total Bonds and Notes
(Identified Cost $49,857,407) 46,920,455
-----------
COMMON STOCKS--0.4%
SHARES DESCRIPTION
- ----------------------------------------------------------------------
6,713 Bucyrus Erie Co. 52,865
5,334 Capital Gaming International, Inc 667
66 Continental Airlines Inc. Cl A 2,805
181 Continental Airlines Inc. Cl B 7,874
667 Finlay Enterprises Inc. 7,837
9,887 Grand Union Co.(d) 66,294
2,688 Great Bay Power Corp 21,504
376 Host Marriott Corp 4,982
376 Marriott International, Inc 14,382
7,500 Specialty Foods Acquisition Corp 30,000
-----------
Total Common Stocks
(Identified Cost $1,072,518). 209,210
-----------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
BONDS AND NOTES--continued
FACE
AMOUNT DESCRIPTION VALUE (A)
- ----------------------------------------------------------------------
$1,260,000 Repurchase agreement with State Street
Bank & Trust Company dated 12/29/95 at
5.00% to be repurchased at $1,260,700 on
01/02/95 collateralized by $1,195,000 U.S.
Treasury Note 7.125% due 09/30/99
with a value of $1,287,450 1,260,000
-----------
Total Short-Term Investment
(Identified Cost $1,260,000) 1,260,000
-----------
Total Investments--97.2%
(Identified Cost $52,189,925) (b). 48,389,665
Cash and Receivables 1,716,086
Liabilities (332,677)
-----------
Total Net Assets--100% $49,773,074
===========
- ----------------------------------------------------------------------
<FN>
(a) See Note 1a.
(b) Federal Tax Information: At December 31, 1995 the net unrealized
depreciation on investments based on cost of $52,168,611 for
federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 1,985,122
Aggregate gross unrealized depreciation for
all investments in which there is an excess of tax
cost over value (5,764,068)
-------------
Net unrealized depreciation $(3,778,946)
=============
As of December 31, 1995, the Fund had a net tax basis capital
loss carryforward as follows:
Expiring December 31, 1996 $253,489
Expiring December 31, 1997 $1,341,040
Expiring December 31, 1998 $527,465
Expiring December 31, 1999 $1,300,610
(c) Pay-in-kind securities.
(d) Warrants attached.
(e) Non-income producing; issuer filed petition under Chapter 11 of
the Federal Bankruptcy Code.
(f) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date.
</TABLE>
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
December 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value $48,389,665
Cash 3,793
Receivable for:
Fund shares sold 32,359
Securities sold 411,776
Dividends and interest 1,264,158
Prepaid registration expense. 4,000
-----------
50,105,751
-----------
LIABILITIES
Payable for:
Fund shares redeeme. $ 80,520
Dividends declared 117,262
Accrued expenses:
Management fees 86,102
Deferred trustees' fees 836
Other expenses. 47,957
--------
332,677
-----------
NET ASSETS $49,773,074
===========
Net Assets consist of:
Capital paid in $57,039,956
Distributions in excess of net investment income (44,018)
Accumulated net realized losses (3,422,604)
Unrealized depreciation on investments (3,800,260)
-----------
NET ASSETS $49,773,074
===========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($39,147,716 divided by 4,358,261 shares of beneficial
interest) $8.98
======
Offering price per share (100/95.50 of $8.98) $9.40*
======
Net asset value and offering price of Class B shares
($10,625,358 divided by 1,183,866 shares of beneficial
interest) $8.98**
=======
Identified cost of investments. $52,189,925
===========
<FN>
* Based upon single purchases of less than $100,000. Reduced sales
charges apply for purchases in excess of these amounts.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charges.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends. $57,312
Interest 5,100,949
----------
5,158,261
Expenses
Management fees $342,554
Service and distribution fees--Class A 130,876
Service and distribution fees--Class B 82,798
Trustees' fees and expenses 12,291
Custodian 83,075
Transfer agent 91,461
Audit and tax services. 22,000
Legal 18,480
Printing 23,337
Registration 21,713
Miscellaneous. 9,859
----------
Total expenses 838,444
Less expenses waived by the investment adviser (53,843) 784,601
---------- ----------
Net investment income. 4,373,660
REALIZED and UNREALIZED GAIN on INVESTMENTS
Realized gain on:
Investments--net. 357,087
Unrealized appreciation on
Investments--net. 165,613
----------
Net gain on investment transactions 522,700
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,896,360
==========
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------------------
FROM OPERATIONS
Net investment income $ 3,332,558 $ 4,373,660
Net realized gain on investments 1,911 357,087
Unrealized appreciation (depreciation)
on investments (4,649,556) 165,613
----------- -----------
Increase (decrease) in net assets
from operations (1,315,087) 4,896,360
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A (3,033,987) (3,631,062)
Class B (259,930) (742,598)
In excess of net investment income
Class A 0 (172,611)
Class B (2,275) (42,339)
----------- -----------
(3,296,192) (4,588,610)
----------- -----------
Increase in net assets derived from
capital share transactions. 11,109,456 10,559,256
----------- -----------
Total increase in net assets. 6,498,177 10,867,006
NET ASSETS
Beginning of the year 32,407,891 38,906,068
----------- -----------
End of the year $38,906,068 $49,773,074
=========== ===========
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME
Beginning of the year $(236,676) $101,090
=========== ===========
End of the year $101,090 $(44,018)
=========== ===========
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
Class A
-----------------------------------------------
Year ended December 31,
-----------------------------------------------
1991 1992 1993 1994 1995
----- ------ ------ ------ ------
Net Asset Value,
Beginning of Period $7.56 $9.07 $9.46$ 10.06 $8.89
----- ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income 1.02 0.94 0.90 0.88 0.88
Net Realized and Unrealized
Gain (Loss) on
Investments 1.58 0.44 0.61 (1.19) 0.13
----- ------ ------ ------ ------
Total From Investment
Operations 2.60 1.38 1.51 (0.31) 1.01
----- ------ ------ ------ ------
Less Distributions
Distributions From Net
Investment Income (1.02) (0.94) (0.90) (0.86) (0.88)
Distributions in Excess
of Net Investment
Income. 0.00 0.00 (0.01) 0.00 (0.04)
Distributions From
Paid-in Capital (0.07) (0.05) 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (1.09) (0.99) (0.91) (0.86) (0.92)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $9.07 $9.46 $ 10.06 $8.89 $8.98
======= ======= ====== ====== ======
Total Return (%)(b) 36.3 15.8 16.5 (3.3) 11.8
Ratio of Operating Expenses
to Average
Net Assets (%)(a) 1.50 1.50 1.54 1.60 1.60
Ratio of Net Investment
Income to Average
Net Assets (%) 11.56 9.74 9.17 9.18 9.71
Portfolio Turnover Rate (%) 30 19 43 33 30
Net Assets,
End of Period (000) $12,280 $20,992 $31,176$33,673 $39,148
<FN>
(a) Commencing October 1, 1993 expenses were voluntarily limited to
1.60% of Class A average net assets. See Note 4.
From May 18, 1989 through September 30, 1993 expenses were
voluntarily limited to 1.50% of average net assets.
The ratios of operating expenses to average net assets, assuming
the foregoing expense limitations had not been in effect, would
have been 3.02%, 2.63%, 2.00%, 1.83% and 1.72% for the years
ended December 31, 1991, 1992, 1993, 1994, and 1995 respectively.
(b) A sales charge of 4.50% (maximum) was not reflected in total
return calculations. As of January 1, 1993 the fund discontinued
the use of equalization accounting.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--continued
<TABLE><CAPTION>
<S> <C> <C> <C>
CLASS B
------------------------------------------
SEPTEMBER 20,(A)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31,DECEMBER 31, DECEMBER 31,
1993 1994 1995
------------------------------------------
Net Asset Value,
Beginning of Period $ 9.87 $10.06 $8.88
------ ------ -------
Income From Investment Operations
Net Investment Income 0.23 0.79 0.83
Net Realized and Unrealized
Gain (Loss) on
Investments. 0.20 (1.18) 0.13
------ ------ -------
Total From Investment Operations 0.43 (0.39) 0.96
------ ------ -------
Less Distributions
Distributions From Net Investment
Income (0.23) (0.78) (0.81)
Distributions in Excess
of Net Investment
Income (0.01) (0.01) (0.05)
Distributions From
Paid-in Capital 0.00 0.00 0.00
------ ------ -------
Total Distributions (0.24) (0.79) (0.86)
------ ------ -------
Net Asset Value, End of Period $10.06 $ 8.88 $8.98
====== ====== =======
Total Return (%) (c) 4.4 (4.0) 11.2
Ratio of Operating Expenses
to Average
Net Assets (%) (b) 2.25(d) 2.25 2.25
Ratio of Net Investment Income
to Average
Net Assets (%). 7.66(d) 8.53 8.96
Portfolio Turnover Rate (%) 43 33 30
Net Assets, End of Period (000) $1,232 $5,233 $ 10,625
<FN>
(a) Commencement of operations.
(b) Commencing October 1,1993 expenses were voluntarily limited
to 2.25% of Class B average net assets. See Note 4.
The ratios of operating expenses to average net assets, assuming
the foregoing expense limitations had not been in effect for
Class B shares, would have been 2.53% for the period ended
December 31, 1993, 2.48% for the year ended December 31, 1994 and
2.37% for the year ended December 31, 1995.
(c) Periods less than one year are not annualized.
(d) Computed on an annualized basis.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1.The Fund is a series of New England Funds Trust II, a Massachusetts
business trust (the "Trust"), and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Declaration of Trust permits the
Trustees to issue an unlimited number of shares of the Trust in
multiple series (each series of shares a "Fund").
The Fund offers both Class A and Class B shares. The Fund commenced
its public offering of Class B shares on September 20, 1993. Class A
shares are sold with a maximum front end sales charge of 4.50%. Class
B shares do not pay a front end sales charge, but pay a higher ongoing
distribution fee than Class A shares for eight years (at which point
they automatically convert to Class A shares), and are subject to a
contingent deferred sales charge if those shares are redeemed within
five years of purchase. Expenses of the Fund are borne pro-rata by the
holders of both classes of shares, except that each class bears
expenses unique to that class (including the Rule 12b-1 service and
distribution fees applicable to such class), and votes as a class only
with respect to its own Rule 12b-1 Plan. Shares of each class would
receive their pro-rata share of the net assets of the Fund, if the
Fund were liquidated. In addition, the Trustees approve separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles for investment companies.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those
estimates.
A. SECURITY VALUATION.The Fund's investment adviser, Back Bay
Advisors, L.P. ("Back Bay Advisors"), under the supervision of the
Fund's trustees, determines the value of the Fund's portfolio of
securities, using valuations provided by a pricing service selected by
Back Bay Advisors and other information with respect to transactions
in securities, including quotations from securities dealers.
Valuations of securities and other assets owned by the Fund for which
market quotations are readily available are based on those quotations.
Short-term obligations that will mature in 60 days or less are stated
at amortized cost, which, when combined with accrued interest or
discount earned, approximates market value. All other securities and
assets are valued at their fair value as determined in good faith by
Back Bay Advisors under the supervision of the Fund's trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME.Security
transactions are accounted for on the trade date (the date the buy or
sell is executed). Dividend income is recorded on the ex-dividend date
and interest income is recorded on the
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
accrual basis. Interest income is increased by the accretion of
discount. In determining net gain or loss on securities sold, the cost
of securities has been determined on the identified cost basis.
C. FEDERAL INCOME TAXES.The Fund intends to meet the requirements of
the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its income and
any net realized capital gains at least annually. Accordingly, no
provision for federal income tax has been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS.Dividends are declared
daily to shareholders of record at the time and are paid monthly.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax
regulations which may differ from generally accepted accounting
principles. These differences primarily relate to interest on
defaulted securities and differing treatments for income recognition
on pay-in-kind securities. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassification
to paid in capital.
E. REPURCHASE AGREEMENTS.The Fund, through its custodian, receives
delivery of the underlying securities collateralizing repurchase
agreements. It is the Fund's policy that the market value of the
collateral be at least equal to 100% of the repurchase price. Back Bay
Advisors is responsible for determining that the value of the
collateral is at all times at least equal to the repurchase price.
Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to dispose of the underlying
securities.
2.PURCHASES AND SALES OF SECURITIES (excluding short-term investments)
for the year ended December 31, 1995 were $23,036,663 and $12,840,618,
respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS With Affiliates.During the
year ended December 31, 1995, the Fund incurred management fees
payable to its investment adviser, Back Bay Advisors. Certain officers
and directors of the adviser and its affiliated companies are also
officers or trustees of the Fund. Back Bay Advisors is a wholly owned
subsidiary of New England Investment Companies, L.P. ("NEIC") which is
a majority owned subsidiary of New England Mutual Life Insurance
Company. The management agreement in effect during the year ended
December 31, 1995 provided for fees as set forth below:
<TABLE><CAPTION>
<C> <C> <C>
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
- ----------- ----------------------- -----------------------------
$342,554(a) 0.750% all net assets
<FN>
(a) Before reduction pursuant to voluntary expense limitations. See
Note 4.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
Effective January 1, 1996, New England Funds Management, L.P. became
the adviser for the Fund with the aforementioned adviser being
retained as the Fund's sub-adviser.
B. SERVICE AND DISTRIBUTION FEES.Pursuant to Rule 12b-1 under the 1940
Act, the Trust has adopted Service and Distribution Plans relating to
the Fund's Class A and Class B shares (the "Plans").
Under the Plans, the Fund pays New England Funds, L.P. ("New England
Funds") a monthly service fee at the annual rate of up to 0.25% of the
average daily net assets attributable to the Fund's Class A shares and
Class B shares, as compensation for services provided and expenses
(including certain payments to securities dealers, who may be
affiliated with New England Funds) incurred by New England Funds in
providing personal services to investors in Class A and Class B shares
and/or the maintenance of shareholder accounts. For the year ended
December 31, 1995, the Fund paid New England Funds $93,472 and $15,554
in service fees under the Class A and B Plans respectively.
Also under the Plans, the Fund pays New England Funds monthly
distribution fees, at the annual rate of up to 0.10% of the average
daily net assets attributable to the Fund's Class A shares and up to
0.75% of the average daily net assets attributable to the Fund's Class
B shares, as compensation for services provided and expenses
(including certain payments to securities dealers, who may be
affiliated with New England Funds) incurred by New England Funds in
connection with the marketing or sale of Class A and Class B shares,
respectively. For the year ended December 31, 1995, the Fund paid New
England Funds $37,404 and $67,244 in distribution fees under the Class
A and B Plans respectively.
Commissions (including contingent deferred sales charges) on Fund
shares paid to New England Funds by investors in shares of the Fund
during the year ended December 31, 1995 amounted to $182,220.
C. TRANSFER AGENT FEES.New England Funds is the transfer and
shareholder servicing agent to the Fund. For the year ended December
31, 1995, the Fund paid New England Funds $67,656 as compensation for
its services in that capacity.
D. TRUSTEES FEES AND EXPENSES.The Fund does not pay any compensation
directly to its officers or trustees who are directors, officers or
employees of Back
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
Bay Advisors, New England Funds, NEIC or their affiliates, other than
registered investment companies. Each other trustee is compensated by
the Fund as follows:
Annual Retainer $800
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Retainer $125/year
A deferred compensation plan is available to the trustees on a
voluntary basis. Each participating trustee will receive an amount
equal to the value that such deferred compensation would have had, had
it been invested in the Fund on the normal payment date.
4.EXPENSE LIMITATIONS.Commencing October 1, 1993 and until further
notice to the Fund, Back Bay Advisors has voluntarily agreed to reduce
its management fee and, if necessary, to assume expenses of the Fund
in order to limit the Fund's expenses to an annual rate of 1.60% of
Class A average daily net assets and 2.25% of Class B average daily
net assets. From May 18, 1989 through September 30, 1993 expenses were
voluntarily limited to 1.50% of the Fund's average daily net assets.
As a result of the Fund's expenses exceeding the foregoing expense
limitations during the year ended December 31, 1995, Back Bay Advisors
reduced its management fee of $342,554 by $53,843.
5.CONCENTRATION OF CREDIT; LOWER RATED SECURITIES.The Fund invests in
securities offering high current income which generally will be rated
below investment grade by recognized rating agencies. Certain of these
lower rated securities are regarded as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance
with the terms of the obligations and generally involve more credit
risk than securities in the higher rating categories. In addition, the
trading market for lower rated securities may be less liquid than the
market for higher-rated securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
6.CAPITAL SHARES.At December 31, 1995 there was an unlimited number of
shares of beneficial interest authorized, divided into two classes,
Class A and Class B capital stock. Transactions in capital shares were
as follows :
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------- -------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- -------- --------
Shares sold. 1,496,591$14,387,334 1,182,928 $10,739,791
Shares issued in
connection with the
reinvestment of:
Distributions from
net investment income 219,370 2,073,464 289,825 2,629,615
---------- ---------- --------- ----------
1,715,96116,460,798 1,472,753 13,369,406
Shares repurchased. (1,026,473) (9,770,807) (901,955) (8,189,417)
---------- ---------- --------- ----------
Net increase (decrease) 689,488 $ 6,689,991 570,798 $ 5,179,989
========== ========== ========= ==========
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------- -------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- -------- --------
Shares sold. 498,542 $ 4,729,198 690,304 $ 6,247,681
Shares issued in connection
with the reinvestment of:
Distributions from net
investment income 14,967 137,763 31,651 286,885
---------- ---------- --------- ----------
513,509 4,868,961 721,955 6,634,566
Shares repurchased (46,997) (447,496) (127,062) (1,155,299)
---------- ---------- --------- ----------
Net increase (decrease) 466,512 $ 4,419,465 594,893 $ 5,379,267
---------- ---------- --------- ----------
Increase (decrease) derived
from capital share
transactions. 1,156,000 $11,109,456 1,165,691 $10,559,256
========== ========== ========= ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of the New England Funds Trust II and the
Shareholders of the NEW ENGLAND HIGH INCOME FUND
We have audited the accompanying statement of assets and liabilities,
including the schedule of portfolio investments, of the New England
High Income Fund as of December 31, 1995, and the related statement of
operations for the year then ended, and the statements of changes in
net assets for each of the two years in the period then ended, and
financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
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, 1995, 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 the New England High Income Fund as of December
31, 1995, the results of its operations for the year then ended, the
changes in its net assets for the two years in the period then ended
and the financial highlights for the periods indicated herein, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 2, 1996
<PAGE>
SHAREHOLDER MEETING
(unaudited)
At a special shareholders' meeting held on December 28, 1995, shareholders of
the High Income Fund voted for the following proposals:
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
<C>
VOTED VOTED ABSTAINED BROKER TOTAL
FOR AGAINST VOTES NON-VOTES VOTES
------ ------- --------- --------- -----
1. To approve new investment
advisory arrangements to
be effective upon the
merger of New England
Mutual Life Insurance
Company into Metropolitan
Life Insurance Company,
such arrangements to be
substantially identical
to the investment
advisory arrangements in
effect for the Fund
immediately prior to such
merger 3,451,554.741 60,800.947 104,402.961 3,616,758.649
============= =========== ===========
2. To approve a new Advisory
Agreement between the
Fund and New England
Funds Management, L.P.
("NEFM") 3,438,612.080 75,153.787 102,992.782 3,616,758.649
============= =========== ===========
3. To approve a related Sub-
Advisory Agreement
between NEFM and such
Fund's current investment
adviser 3,414,935.538 79,968.991 121,854.120 3,616,758.649
============= =========== ===========
4. To approve changes in the
Fund's fundamental
investment restrictions,
in order to permit the
Fund to engage in
transactions in options
and futures
contracts 2,482,145.457 142,273.200 117,909.992874,430.000 3,616,758.649
============= =========== ====================== =============
</TABLE>
<PAGE>
NEW ENGLAND FUNDS
STOCK FUNDS
Growth Fund of Israel
International Equity Fund
Star Worldwide Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
Bond Funds
High Income Fund
Strategic Income Fund
Government Securities Fund
BOND INCOME FUND
Limited Term U.S. Government Fund
Adjustable Rate U.S. Government Fund
TAX EXEMPT FUNDS
Municipal Income Fund
Massachusetts Tax Free Income Fund
Intermediate Term Tax Free Fund of California
Intermediate Term Tax Free Fund of New York
MONEY MARKET FUNDS
Cash Management Trust
- Money Market Series
- U.S. Government Series
Tax Exempt Money Market Trust
To learn more, and for a free prospectus,
contact your financial representative.
New England Funds, L.P.
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors
when it is preceded or accompanied by the FundOs current prospectus,
which contains information about distribution charges, management and
other items of interest. Investors are advised to read the prospectus
carefully before investing.
<PAGE>
Bulk Rate
U.S. Postage
Paid
Brockton, MA
Permit No. 770
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
399 Boylston Street
Boston, Massachusetts
02116
[LOGO]
QUALITY
TESTED SERVICE
1996
DALBAR
HONORS COMMITMENT TO:
INVESTORS
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<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OSee accompanying notes to financial statementsO) are
omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points, leaders and similar graphic symbols are omitted.
(7) Page numbering is different.
