[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
ANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
MASSACHUSETTS TAX
FREE 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 Massachusetts Tax Free 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 MASSACHUSETTS TAX FREE 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 LEHMAN MUNICIPAL INDEX(4) AND THE COST OF LIVING(5)
[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 Massachusetts Tax Free Income Fund - Net Asset Value(1)
Year Amount
- ----- ------
1995 $21,705
1994 $18,419
1993 $19,896
1992 $17.701
1991 $16,229
1990 $14,559
1989 $13,839
1988 $12,815
1987 $11,678
1986 $11,599
3/23/84 $10,000
New England Massachusetts Tax Free Income Fund - With Maximum Sales
Charge(2)
Year Amount
- ----- ------
1995 $20,783
1994 $17,637
1993 $19,050
1992 $16,948
1991 $15,539
1990 $13,940
1989 $13,251
1988 $12,271
1987 $11,182
1986 $11,106
3/23/84 $9,575
Lehman Municipal Index(4)
Year Amount
- ----- ------
1995 $24,203
1994 $20,606
1993 $21,729
1992 $19,352
1991 $17,786
1990 $15,860
1989 $14,782
1988 $13,343
1987 $12,112
1986 $11,932
3/23/84 $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
3/23/84 $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 MASSACHUSETTS TAX FREE INCOME FUND
<TABLE><CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/95*
CLASS A 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 17.84% 8.31% 8.06%
With Max. Sales Charge(2) 12.83 7.38 7.59
Lipper MA Municipal Average(6)16.82 8.70 8.11
CLASS B (INCEPTION 9/13/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 17.03% 3.47%
With CDSC(3) 13.03 2.28
Lehman Municipal Index(4) 17.46 5.63
Lipper MA Municipal Average(6) 16.82 4.58
YIELDS AS OF 12/31/95*
CLASS A CLASS B
SEC 30-day Yield 4.96% 4.54%
Taxable Equivalent Yield 9.33 8.54
<FN>
SEC Yield is based on the FundOs net investment income over a 30-day
period and is calculated in accordance with Securities and Exchange
Commission guidelines. Taxable equivalent yield is based on the
maximum combined federal and Massachusetts state income tax bracket of
46.85%. The alternative minimum tax may apply. Some federal and state
taxes may apply.
* 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 performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 4.25% 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 Lehman Municipal Index is an unmanaged index of bonds issued by
states, municipalities and other governmental entities having
maturities of more than one year. 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 MASSACHUSETTS TAX FREE INCOME FUND
[PHOTO]
MASSACHUSETTS TAX FREE
INCOME FUND
Portfolio Manager: James Welch
Back Bay Advisers, L.P.
For investors in both stocks and bonds, 1995 was an outstanding year.
The stock market, as measured by the Dow Jones Industrial Average1,
repeatedly reached record highs, and the bond market provided
attractive yields and total returns. In large measure, this reflected
the Federal Reserve BoardOs success at bringing the economy in for a
Osoft landingO: At year-end, economic growth was moderate, and
inflation under control.
Almost all sectors of the bond market participated in a rally that
sustained itself for most of the year. There was a modest pull back
during the second quarter, as investors turned their attention to the
stock market, but momentum was regained over the final six months of
the year. The rally was driven by a sharp decline in interest rates.
From the beginning to the end of the FundOs fiscal year, the yield on
30-year Treasury bonds fell by 1.75 percentage points, from 7.70% to
5.95%. Although U.S. government bonds were the biggest beneficiaries
of this decline, most other fixed-income securities, including
municipal bonds, received a significant boost as well.
How Your Fund Performed
The FundOs Class A shares posted a positive total return of 17.84% for
the 12-month period, based on net asset value. We had anticipated the
economyOs soft landing,
<PAGE>
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND
and had positioned the Fund early on to take advantage of such an
environment. We began upgrading the quality of the securities in the
FundOs portfolio during the prior fiscal year, and continued to do so
throughout 1995. As interest rates declined, the Oyield gapO between
bonds of higher and lower quality narrowed, making it possible to
invest in relatively high quality bonds without sacrificing
performance. This strategy also helped the Fund perform very well
relative to other funds with similar objectives. The FundOs total
return stands up nicely when compared to the 16.82% return for the
Lipper Massachusetts Municipal Average2.
In addition to its strong total return, your Fund continued to provide
a high level of tax-exempt income during the year. On December 31,
1995, the FundOs yields for Class A and Class B shares were 4.96% and
4.54%, respectively.a. These translate into taxable equivalent yields
of 9.33% for Class A shares and 8.54% for Class B shares, based on the
maximum combined federal and Massachusetts state income tax rate of
46.85%3.
How We Managed Your Fund
The stateOs economy has fully recovered from the lows of the early
O90s. We now plan to invest in general obligation bonds issued by the
state and local municipalities, although revenue bonds continue to
receive emphasis.
a. 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 and
Class B shares during the 30 days ending December 31, 1995.
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND
<PAGE>
Because the Fund had been positioned in high-quality, longer-term
Massachusetts municipal bonds, it received the full benefit of
declining interest rates. At year end the average maturity of the
securities in the portfolio was 20 years, and the average quality
rating was AA-.
Given the likelihood of further consolidation in the healthcare
industry and the CongressOs stated desire to reform Medicare and
Medicaid, we have dramatically reduced our investments in the
healthcare sector. As healthcare bonds were sold, assets were
invested in other sectors, including transportation and utilities.
Utility bonds offer liquidity; they also tend to enhance portfolio
stability. The transportation sector showed particular improvement as
the economy picked up steam. The technology sector was also a source
of some attractive investments. This sector, which continues to play
a prominent role in the stateOs economy, has strengthened in recent
years as a result of the reorganizations of many formerly troubled
companies.
Outlook For the Municipal Market
We believe the long-term outlook for the Massachusetts municipal bond
market is positive. The impact of events such as the impasse over the
federal governmentOs debt ceiling and ongoing discussions about tax
reform should prove to be short-term in nature. In fact, lower prices
that resulted from the marketOs concerns about tax reform were taken
as a buying opportunity for the Fund.
Municipal bonds may also continue to enjoy their
current attractiveness compared to Treasury securities.
<PAGE>
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND
With some municipal bonds yielding as much as 90% of Treasuries at
year-end, they offer exceptional value for investors. This becomes
even more apparent when municipal bond yields are compared to
Treasuries on a taxable-equivalent basis.
In recent years, there has been a steady decline in the volume of new
issue municipal bonds in Massachusetts - $4.7 billion were issued in
1995, down 5% from 1994. This trend should continue in the future.
The combination of relatively low supply and steady demand from
investors seeking relief from federal and state income taxes suggests
a favorable environment for Massachusetts municipal bonds and for the
Fund.
A special note
Shareholders of the Fund recently approved a proposal to eliminate the
restriction on the FundOs ability to purchase securities that could
generate interest subject to the Federal Alternative Minimum Tax
(AMT).
We believe the FundOs change will enhance its ability to achieve a
higher yield. While the amount of income subject to AMT may increase,
causing some shareholders to pay additional taxes, most shareholders
are not affected. You may wish to consult your tax adviser to learn if
you are affected.
1 The Dow Jones Industrial Average is an unmanaged index of the
price of 30 stocks, all of which are traded on the New York Stock
Exchange.
2 The Lipper Average is an average of the total return performance
(calculated on the basis of net asset value) of funds with
similar objectives, as calculated by Lipper Analytical Services,
an independent mutual fund ranking service.
3 Alternative minimum tax (AMT) may apply. Some federal or state
taxes may apply.
<PAGE>
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO QUALITY AS OF 12/31/95
[A pie chart appears here, illustrating the portfolio quality of New
England Massachusetts Tax Free Income Fund at June 30, 1995. The pie
chart is broken in pieces representing credit ratings in the following
percentages:]
CREDIT RATINGS PERCENTAGE
- -------------------------------
AAA 43.3%
AA 7.9%
A 32.1%
BBB 12.2%
Below BBB 4.5%
- -------------------------------
AVERAGE CREDIT QUALITY = AA-
AVERAGE PORTFOLIO MATURITY = 20 YEARS
Credit ratings supplied by Standard & PoorOs
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
MASSACHUSETTS TAX
FREE INCOME FUND
DECEMBER 31, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1995
TAX EXEMPT BONDS--99.5% OF TOTAL NET ASSETS
<TABLE><CAPTION>
<C> <S> <C> <C> <C>
RATINGS (C)
(UNAUDITED)
-------------
FACE STANDARD
AMOUNT ISSUER MOODY'S & POOR'S VALUE (A)
- --------------------------------------------------------------------------------
- ------------
MASSACHUSETTS STATE GENERAL OBLIGATION--3.0%
$2,000,000 Massachusetts State Consolidated Loan, Series A,
7.625%, 06/01/08 AAA AAA $2,349,520
1,500,000 Massachusetts State Consolidated Loan, Series A,
5.000%, 01/01/13 A1 A+ 1,441,860
------------
3,791,380
------------
MASSACHUSETTS STATE HEALTH & EDUCATION FACILITY
AUTHORITY--23.7%
2,000,000 Baystate Medical Center, Series D,
5.000%, 07/01/20 (AMBAC) AAA AAA 1,889,420
1,000,000 Berkshire Health System, Series C,
5.900%, 10/01/11 -- BBB- 896,800
3,000,000 Boston University Ribs, Series L,
9.092%, 10/01/31 (MBIA). Aaa AAA 3,519,630
2,500,000 Central Massachusetts Medical Center, Series A,
7.100%, 07/01/21 (AMBAC) Aaa AAA 2,858,875
1,750,000 Charlton Memorial Hospital, Series B, 7.250%,
07/01/13 A A- 1,878,888
1,000,000 Children's Hospital, Series E, 6.125%, 10/01/12Aa AA 1,050,600
5,000,000 Dana Farber, Series G-1, 6.250%, 12/01/22 A1 A 5,169,450
1,410,000 Faulkner Hospital, Series C, 6.000%, 07/01/13 Baa1 BBB+ 1,386,030
2,400,000 Medical Center of Central Mass, Issue A,
7.000%, 07/01/12 A1 A- 2,579,400
1,000,000 New England Baptist Hospital, Series B,
7.300%, 07/01/11 A BBB+ 1,068,210
1,220,000 New England Deaconess Hospital, Series D,
6.875%, 04/01/22 (AMBAC) Aaa AAA 1,347,368
1,190,000 New England Medical Center, Series F,
6.625%, 07/01/25 (FGIC). Aaa AAA 1,293,958
1,000,000 Tufts University, Series D, 7.750%, 08/01/13 A1 A+ 1,108,120
1,500,000 Valley Regional Health System, Series B,
8.000%, 07/01/18 AAA -- 1,752,630
1,000,000 Valley Regional Health System, Series C,
6.250%, 07/01/11 (CONNIE LEE) -- AAA 1,100,640
1,000,000 Wentworth Institute of Technology Series A,
7.400%, 04/01/10 (AMBAC) Aaa AAA 1,139,820
------------
30,039,839
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
TAX EXEMPT BONDS--CONTINUED
RATINGS (C)
(UNAUDITED)
-------------
FACE STANDARD
AMOUNT ISSUER MOODY'S & POOR'S VALUE (A)
- --------------------------------------------------------------------------------
- ------------
Massachusetts State Housing Finance Agency--17.7%
$215,000 Housing Revenue, Series A., 9.000%, 12/01/18 -- A+ $ 225,941
635,000 Housing Revenue, Series A., 7.750%, 12/01/19 -- A 654,438
4,640,000 Housing Revenue, Series A, 6.375%, 4/01/21 A1 A+ 4,764,816
1,350,000 Housing Revenue, Series B, 6.500%, 07/01/25
(AMBAC) Aaa AAA 1,415,745
715,000 Multifamily Residential Development, Series A,
7.650%, 02/01/28 (FNMA). Aaa AAA 753,345
2,500,000 Residential Development, Series E,
6.250%, 11/15/12 (FNMA). Aaa AAA 2,601,475
2,000,000 Residential Development, Series F, 6.250%,
11/15/12 Aaa AAA 2,096,800
1,300,000 Residential Development, Series I,
6.900%, 11/15/25 (FNMA). AAA AAA 1,401,075
2,000,000 Residential Development-FNMA COLL-A,
6.900%, 11/15/24 (FNMA). Aaa AAA 2,148,820
1,000,000 Residential Development-FNMA COLL-D,
6.800%, 11/15/12 Aaa AAA 1,080,270
1,175,000 Single Family Mortgage, Series A., 6.300%,
10/01/13 A A+ 1,213,047
400,000 Single Family Mortgage, Series 4, 7.375%,
06/01/14 Aa A+ 413,276
1,555,000 Single Family Mortgage, Series 13, 7.950%,
06/01/23 Aa A+ 1,654,924
2,000,000 Single Family Mortgage, Series 32, 6.600%,
12/01/26 Aa A+ 2,088,380
------------
22,512,352
------------
MASSACHUSETTS STATE INDUSTRIAL FINANCE
AGENCY--6.6%
1,000,000 Harvard Community Health Plan, Series B,
7.750%, 10/01/08 (MBIA). Aaa AAA 1,109,600
3,000,000 Holy Cross College, 6.450%, 01/01/12 A1 A+ 3,246,330
1,500,000 First Healthcare Corp Project, 7.750%, 4/01/19 -- -- 1,519,605
475,000 Ogden Haverhill Project, 7.250%,12/01/06
(AMBAC). Aaa AAA 497,905
1,000,000 Ogden Haverhill Project, 7.375%, 12/01/11
(AMBAC). Aaa AAA 1,049,690
1,000,000 Refusetech Inc., Series A, 6.300%, 07/01/05 Baa1 BBB 1,060,650
------------
8,483,780
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
TAX EXEMPT BONDS--CONTINUED
RATINGS (C)
(UNAUDITED)
-------------
FACE STANDARD
AMOUNT ISSUER MOODY'S & POOR'S VALUE (A)
- --------------------------------------------------------------------------------
- ------------
Other Massachusetts Obligations--30.3%
$2,500,000 Massachusetts Bay Transportation Authority, Series
A, 5.750%, 03/01/18 A1 A+ $2,547,225
1,310,000 Massachusetts Educational Loan Authority,
7.250%, 01/01/09 (MBIA). Aaa AAA 1,354,239
1,500,000 Massachusetts Municipal Wholesale Electric,
6.750%, 07/01/08 A BBB+ 1,655,190
2,500,000 Massachusetts Municipal Wholesale Electric,
6.750%, 07/01/11 A BBB+ 2,725,300
2,400,000 Massachusetts Municipal Wholesale Electric,
5.000%, 07/01/14 (AMBAC) Aaa AAA 2,318,496
4,450,000 Massachusetts Municipal Wholesale Electric,
5.000%, 07/01/17 (AMBAC) Aaa AAA 4,285,439
4,000,000 Massachusetts Pollution Control, Boston Edison,
Series A, 5.750%, 02/01/14. Baa2 BBB 4,002,800
2,690,000 Massachusetts Port Authority, Series A, 5.000%,
07/01/15 Aa AA- 2,592,649
3,315,000 Massachusetts State Convention Center, Series A,
5.375%, 09/01/13 A1 A+ 3,328,359
2,100,000 Massachusetts Water Pollution Abatement, Series B,
5.250%, 08/01/14 Aa A+ 2,132,382
1,250,000 Massachusetts Water Resource Authority, Series A,
6.750%, 07/15/12 Aaa AAA 1,433,950
3,185,000 Massachusetts Water Resource Authority, Series B,
5.500%, 03/01/17 A A 3,149,424
3,000,000 Massachusetts Water Resource Authority, Series B,
4.750%, 12/01/21 (MBIA). AAA AAA 2,768,820
4,300,000 Massachusetts Water Resource Authority, Series B,
5.000%, 03/01/22 (MBIA). Aaa AAA 4,118,239
------------
38,412,512
------------
MASSACHUSETTS MUNICIPALITIES--5.5%
3,635,000 Boston Water & Sewer Commission
5.250%, 11/01/11 (FGIC). Aaa AAA 3,676,439
1,000,000 Haverhill, Series A, 7.000%, 06/15/12 (FGIC). Aaa AAA 1,112,440
1,000,000 Nantucket 6.800%, 12/01/11 A -- 1,096,270
1,000,000 Worcester 6.900%, 05/15/07 (MBIA). Aaa AAA 1,155,560
------------
7,040,709
------------
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
TAX EXEMPT BONDS--CONTINUED
RATINGS (C)
(UNAUDITED)
-------------
FACE STANDARD
AMOUNT ISSUER MOODY'S & POOR'S VALUE (A)
- --------------------------------------------------------------------------------
- ------------
PUERTO RICO OBLIGATIONS--3.0%
$750,000 Puerto Rico Aqueduct & Sewer Authority
10.250%, 07/01/09 Aaa AAA $1,068,203
1,000,000 Puerto Rico Aqueduct & Sewer Authority
6.250%, 07/01/13 BAA1 A 1,085,920
1,600,000 Commonwealth of Puerto Rico, Highway &
Transportation Authority,
5.500%, 07/01/13 BAA1 A 1,603,552
------------
3,757,675
------------
OTHER OBLIGATIONS--9.7%
1,000,000 Guam Airport Authority Revenue Bond, Series B,
6.400%, 10/01/05 -- BBB 1,029,060
2,500,000 Guam Airport Authority Revenue Bond, Series B,
6.600%, 10/01/10 -- BBB 2,562,800
2,925,000 Guam Power Authority Revenue Bond, Series A,
5.250%, 10/01/13 -- BBB 2,675,234
2,000,000 Guam Government, Series A, 5.375%, 11/15/13. -- BBB 1,831,180
3,850,000 Virgin Islands Public Financial Authority,
Series A, 7.250%, 10/01/18 -- -- 4,140,366
------------
12,238,640
------------
Total Investments--99.5%
(Identified Cost $118,447,282)(b) 126,276,887
Cash and Receivables 3,739,589
Liabilities. (3,090,218)
------------
Total Net Assets--100%. $126,926,258
============
<PAGE>
PORTFOLIO COMPOSITION--continued
Investments as of December 31, 1995
<FN>
(a) See Note 1a to the financial statements.
(b) Federal Tax Information: At December 31, 1995 the net unrealized
appreciation on investments based on cost of $118,505,421 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 $ 7,959,847
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (188,381)
-----------
Net unrealized appreciation $ 7,771,466
==========
As of December 31, 1995, the Fund had a net tax
basis capital loss carryforward as follows:
Expiring December 31, 2002 $ 2,495,494
(c) The ratings shown are believed to be the most recent ratings
available at December 31, 1995. Securities are generally rated at
the time of issuance. The rating agencies may revise their
ratings from time to time. As a result there can be no assurance
that the same ratings would be assigned if the securities were
rated at December 31, 1995. The Fund's adviser independently
evaluates the Fund's portfolio securities and in making
investment decisions does not rely solely on the ratings of
agencies.
</TABLE>
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
December 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value $126,276,887
Cash 838,496
Receivable for:
Fund shares sold 99,706
Securities sold 514,338
Accrued interest 2,284,049
Prepaid registration expense 3,000
------------
130,016,476
LIABILITIES
Payable for:
Securities purchased. $2,781,882
Fund shares redeemed. 57,275
Dividends declared 128,143
Accrued expenses:
Management fees 76,654
Deferred trustees' fees 1,451
Other expenses. 44,813
----------
3,090,218
------------
NET ASSETS. $126,926,258
===========
Net Assets consist of:
Capital paid in $121,748,064
Distributions in excess of net investment income (60,268)
Accumulated net realized losses (2,591,144)
Unrealized appreciation on investments. 7,829,606
------------
NET ASSETS. $126,926,258
===========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($120,229,135 divided by 7,135,425 shares of beneficial
interest) $16.85
========
Offering price per share (100/95.75 of $16.85) $17.60*
========
Net asset value and offering price of Class B shares
($6,697,123 divided by 398,139 shares of beneficial
interest) $16.82**
========
Identified cost of investments $118,447,282
=============
<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
Interest $ 7,541,154
Expenses
Management fees. $697,878
Service and distribution fees--Class A 399,216
Service and distribution fees--Class B 55,139
Trustees' fees and expenses 21,465
Custodian 92,445
Transfer agent 164,861
Audit and tax services 16,000
Legal 20,481
Printing 24,865
Registration. 15,331
Miscellaneous 7,218
---------
Total expenses. 1,514,899
Less expenses waived by the investment
adviser (462,668) 1,052,231
--------- ---------
Net investment income 6,488,923
REALIZED and UNREALIZED GAIN on INVESTMENTS
Realized gain on Investments--net. 964,359
Unrealized appreciation on investments--net. 12,009,442
-----------
Net gain on investment transactions 12,973,801
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $19,462,724
===========
</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 $6,848,147 $6,488,923
Net realized gain (loss) on investments.(3,539,373) 964,359
Unrealized appreciation (depreciation)
on investments, (12,872,878) 12,009,442
------------ ------------
Increase (decrease) in net assets
from operations (9,564,104) 19,462,724
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A (6,682,041) (6,224,656)
Class B (166,109) (264,268)
In excess of net investment income
Class A (142,043) (20,659)
Class B (3,669) (1,520)
------------ ------------
(6,993,862) (6,511,103)
------------ ------------
Increase (decrease) in net assets
derived from capital
share transactions. (1,440,896) 1,887,316
------------ ------------
Total increase (decrease) in net
assets (17,998,862) 14,838,937
NET ASSETS
Beginning of the year 130,086,183 112,087,321
------------ ------------
End of the year. $112,087,321 $126,926,258
=========== ===========
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME
Beginning of the year$ 40,189 $ (55,525)
=========== ===========
End of the year. $ (55,525) $ (60,268)
=========== ===========
</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 $ 16.01 $ 16.37 $16.62 $17.27 $15.10
------ ------ ------- ------- -------
Income From Investment
Operations
Net Investment Income 1.08 1.03 0.97 0.89 0.88
Net Realized and
Unrealized Gain
(Loss) on Investments 0.69 0.40 1.05 (2.15) 1.76
------ ------ ------- ------- -------
Total From Investment
Operations 1.77 1.43 2.02 (1.26) 2.64
------ ------ ------- ------- -------
Less Distributions
Distributions
From Net Investment
Income (1.07) (1.03) (0.97) (0.89) (0.89)
Distributions
in Excess of Net
Investment Income 0.00 0.00 0.00 (0.02) 0.00
Distributions From
Net Realized
Capital Gains (0.34) (0.15) (0.40) 0.00 0.00
------ ------ ------- ------- -------
Total Distributions. (1.41) (1.18) (1.37) (0.91) (0.89)
------ ------ ------- ------- -------
Net Asset Value,
End of Period $ 16.37 $ 16.62 $17.27 $15.10 $16.85
======= ====== ====== ====== ======
Total Return (%) (b). 11.5 9.1 12.4 (7.4) 17.8
Ratio of Operating
Expenses to
Average Net Assets (%) (a).1.00 0.85 0.85 0.85 0.85
Ratio of Net
Investment Income to
Average Net Assets (%) 6.62 6.25 5.58 5.63 5.46
Portfolio
Turnover Rate (%) 86 29 42 48 127
Net Assets,
End of Period (000) $68,534 $91,932 $128,797 $107,565 $120,229
<FN>
(a) Commencing May 1,1991 expenses were voluntarily limited to 0.85%
of Class A average net assets. See Note 4. The ratio of
operating expenses to average net assets, without giving effect
to this expense limitation would have been 1.34%, 1.26%, 1.21%
and 1.24% for the years ended December 31, 1991, 1992, 1993 and
1994 respectively and 1.24% for the year ended December 31,
1995. From May 18, 1989 through April 30,1991 expenses were
voluntarily limited to 1.35% of average net assets.
(b) A sales charge of 4.25% (maximum) was not reflected in total
return calculations.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--continued
<TABLE><CAPTION>
<S> <C> <C> <C>
CLASS B
--------------------------------------------
SEPTEMBER 13,(A)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31,DECEMBER 31, DECEMBER 31,
1993 1994 1995
----- ----- -----
Net Asset Value,
Beginning of Period $17.78 $17.26 $15.08
------ ------ ------
Income From Investment
Operations
Net Investment Income 0.25 0.77 0.78
Net Realized and Unrealized
Gain (Loss) on
Investments (0.15) (2.14) 1.74
------ ------ ------
Total From Investment Operations. 0.10 (1.37) 2.52
------ ------ ------
Less Distributions
Distributions From Net
Investment Income. (0.22) (0.79) (0.78)
Distributions in Excess
of Net Investment
Income. 0.00(0.02) 0.00
Distributions From Net
Realized Capital
Gains (0.40) 0.00 0.00
Distributions From Paid-in Capital 0.00 0.00 0.00
------ ------ ------
Total Distributions. (0.62) (0.81) (0.78)
------ ------ ------
Net Asset Value, End of Period. $17.26 $15.08 $16.82
====== ====== ======
Total Return (%) (d) 0.4 (8.0) 17.0
Ratio of Operating Expenses to
Average Net
Assets (%) (b). 1.50(c) 1.50 1.50
Ratio of Net Investment Income
to Average
Net
Assets (%) 4.26(c) 4.98 4.81
Portfolio Turnover Rate (%). 42 48 126
Net Assets, End of Period (000) $1,289 $4,523 $6,697
<FN>
(a) Commencement of operations.
(b) Effective September 13, 1993 expenses were voluntarily limited to
1.50% of Class B average net assets. See Note 4. The ratio of
operating expenses for Class B shares would have been 1.86% for
the period ended December 31, 1993, 1.89% for the year ended
December 31, 1994 and 1.89% for the year ended December 31,
1995.
(c) Computed on an annualized basis.
(d) Periods less than one year are not annualized.
</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 such 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 13, 1993. Class A
shares are sold with a maximum front end sales charge of 4.25%. 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 for the Fund is increased by the
accretion of original issue discount. Interest income is reduced by
the amortization of premium. 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 relate primarily to the amortization of
market discount. 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
$150,806,533 and $148,384,593, 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
Insurance Company. The management agreement for the Fund in effect
during the year ended December 31, 1995 provided for fees as set forth
below:
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
- ----------- ----------------------- -----------------------------
$697,878(a) 0.600% the first $100 million
0.500% the excess over $100 million
(a) Before reduction pursuant to voluntary expense limitations. See
Note 4.
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 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 $285,120 and
$39,381 in service fees for Class A and Class B shares 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 $114,096 and $15,758 in distribution fees for Class A
and Class B shares 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 $185,109.
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 $128,315 as compensation for
its services in that capacity.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
December 31, 1995
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 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 $2,400
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Annual Retainer $125
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 May 1, 1991 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 0.85% of the
Fund's Class A average daily net assets and, effective September 13,
1993, 1.50% of Class B average daily net assets. From May 18, 1989
through April 30, 1991 Back Bay Advisors reduced its management fee
and assumed expenses of the Fund in order to limit the Fund's expenses
to an annual rate of 1.35%. As a result of the Fund's expenses
exceeding the applicable voluntary expense limitation during the year
ended December 31, 1995, management fees of $697,878 were reduced by
$462,668.
5.CONCENTRATION OF CREDIT.The Fund primarily invests in debt
obligations
issued by the Commonwealth of Massachusetts and its political
subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Fund is more susceptible to factors
adversely affecting issuers of Massachusetts municipal securities than
is a comparable municipal bond fund that is not so concentrated.
Uncertain economic and fiscal conditions may affect the ability of
issuers of Massachusetts municipal securities to meet their financial
obligations.
<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 1,495,711 $ 24,082,024 1,129,898 $ 18,233,627
Shares issued in
connection with
the reinvestment of:
Distributions from net
investment income 319,675 5,081,475 287,896 4,667,423
------- --------- -------- ----------
1,815,386 29,163,499 1,417,794 22,901,050
Shares repurchased (2,152,761) (34,240,511) (1,404,246) (22,616,973)
------- --------- -------- ----------
Net increase (decrease) (337,375) $ (5,077,012) 13,548 $ 284,077
========= =========== ========= ===========
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ------ ------ ------ ------
Shares sold 236,907 $3,824,321 108,712 $1,767,504
Shares issued in
connection with
the reinvestment of:
Distributions from net
investment income 8,342 130,950 12,879 208,742
245,249 3,955,271 121,591 1,976,246
Shares repurchased. (19,965) (319,155) (23,445) (373,007)
------- --------- -------- ----------
Net increase (decrease).225,284 $3,636,116 98,146 $1,603,239
========= =========== ========= ===========
Increase (decrease)
derived from
capital share
transactions. (112,091) $ (1,440,896) 111,694 $1,887,316
========= =========== ========= ===========
</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 MASSACHUSETTS TAX FREE INCOME FUND
We have audited the accompanying statement of assets and liabilities,
including the schedule of portfolio investments, of the New England
Massachusetts Tax Free 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 Funds' 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 Massachusetts Tax Free Income
Fund as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND LLP
Boston, Massachusetts
February 2, 1996
<PAGE>
SHAREHOLDER MEETING
(unaudited)
At a special shareholders' meeting held on December 28, 1995, shareholders of
the Massachusetts Tax Free 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. 4,277,898.148 142,109.010 155,405.160 4,575,412.318
============= =========== ===========
2. To approve a new Advisory
Agreement between the Fund
and New England Funds
Management, L.P.
("NEFM") 4,192,156.651 187,308.679 174,084.980 21,862.008 4,575,412.318
============= =========== =========== ==========
3. To approve a related Sub-
Advisory Agreement between
NEFM and such Fund's
current investment
adviser 4,141,831.401 198,082.532 213,636.380 21,862.005 4,575,412.318
============= =========== =========== ==========
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 3,312,652.062 502,882.637 202,562.610 557,315.009 4,575,412.318
============= =========== =========== ==========
5. To approve a change in the
Fund's fundamental
investment policies, in
order to permit the Fund,
under normal market
conditions, to invest up
to 20% of its net assets
in securities that produce
income that is subject to
the regular federal income
tax, the Massachusetts
personal income tax or the
federal alternative
minimum tax 3,182,400.260 610,908.436 220,604.620 561,499.002 4,575,412.318
============= =========== =========== ==========
</TABLE>
<PAGE>
REGULAR INVESTING PAYS
FIVE GOOD REASONS TO INVEST REGULARLY
1. ItOs an easy way to build assets
2. ItOs convenient and effortless
3. It requires a low minimum to get started
4. It can help you reach important long-term goals like retirement
or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England FundsO automatic investment
program, you can invest as little as $50 a month in your New
England Fund automatically - without even writing a check. And,
as you can see from the chart below, your monthly investments can
really add up over time.
THE POWER OF MONTHLY INVESTING
[A line graph appears here, illustrating the hypothetical accumulation
of monthly investments at an 8% annual rate of return. The data points
of the graph are as follows:]
Monthly investments of $50
Years Growth of Monthly Investments
0 $0
5 $3,661
10 $9,040
15 $16,943
20 $28,555
25 $45,618
Monthly investments of $100
Years Growth of Monthly Investments
0 $0
5 $7,322
10 $18,079
15 $33,886
20 $57,111
25 $91,236
Monthly investments of $200
Years Growth of Monthly Investments
0 $0
5 $14,643
10 $36,158
15 $67,772
20 $114,222
25 $182,472
Monthly investments of $500
Years Growth of Monthly Investments
0 $0
5 $36,608
10 $90,396
15 $169,429
20 $285,555
25 $456,181
For illustrative purposes only. These figures represent hypothetical
accumulation at an 8% annual rate of return, and are not indicative of
future performance of any New England Fund. The value of a New England
Fund will fluctuate with changing market conditions.
This program cannot assure a profit nor protect against a loss in a
declining market. It does, however, ensure that you buy more shares
when the price is low and fewer shares when the price is high.
You can start an Investment Builder program with your current New
England Fund account, or with any of our other funds. To open an
Investment Builder account today, call your financial representative
or New England Funds at 1-800-225-5478.
<PAGE>
INFORMATION ON CALL
YOU CAN CALL NEW ENGLAND FUNDS DAY OR NIGHT
Do you like to keep on top of your New England Funds but canOt always
call us during regular business hours? With Tele#Facts, New England
FundsO 24-hours a day automated telephone system, you can call us any
time thatOs convenient for you - day or night!
By calling 1-800-346-5984 from any Touch-Tone(R) telephone, you can:
- - Check the current value of your New England Fund account
- - Find out the current yield and total return on any New England Fund
- - Buy, sell or exchange fund shares
Just remember to have these four items with you before calling:
1.YOUR PERSONAL IDENTIFICATION NUMBER which is the last four digits of
your Social Security number
2.THE FUND NUMBER - two- or three-digit number listed on the
Tele#Facts
wallet card
3.FUNCTION NUMBER - listed on the Tele#Facts wallet card
4.ACCOUNT NUMBER - listed on all your statements
You can get the information you need to use Tele#Facts from the back
of your statement. If you need another Tele#Facts wallet card or have
questions about getting started, please call us at 1-800-225-5478.
So go ahead and give Tele#Facts a try. We think youOll enjoy this easy-
to-use and convenient service from New England Funds!
<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
MA56
[RECYCLE LOGO] PRINTED ON RECYCLED PAPER
<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.
