<PAGE>
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ANNUAL REPORT
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[Logo](R)
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
---------------------------------------------------------------------
New England
Money Market Funds
[Graphic Omitted]
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JUNE 30, 1997
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<PAGE>
AUGUST 1997
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[Photo of Henry L.P. Schmelzer]
- -------------------------------
DEAR NEW ENGLAND FUNDS SHAREHOLDER,
Spurred by bright economic prospects, the broader U.S. stock market continued
its record run during the first half of the year, experiencing only short-lived
setbacks along the way. These fresh gains come on top of significant increases
in 1995 and 1996, leaving many investors wary of what might come next. Bond
markets, meanwhile, contended with some volatility in interest rates, but have
been relatively stable this year.
Building a portfolio for variable markets Investors should not abandon
well-conceived financial programs for fear of a down market. Whether today's
market levels are excessive -- only hindsight will tell. So you should remain
patient and realistic, alert to the possibility of periodic market declines.
Consultation with your financial representative should be a regular part of your
planning. Your representative can help you take prudent steps to adjust your
portfolio, whatever the next trend may bring.
Strategic initiatives deliver shareholder benefits Four years ago New England
Funds embarked on a new strategic direction. Expressed in our corporate slogan
Where The Best Minds Meet(R), this new thrust has meant improved performance for
many of our funds, award-winning service and a host of behind-the-scenes
enhancements designed to help our shareholders and their financial
representatives.
Our sights, like yours, are focused on the long term. At the same time, we work
to enhance service every day. We also keep a disciplined eye on the performance
that each fund manager achieves. Through these persistent efforts we're
convinced we'll merit your continued commitment and loyalty. Thank you for your
confidence in New England Funds.
Sincerely,
/s/ Henry L.P. Schmelzer
Henry L.P. Schmelzer, President
<PAGE>
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NEW ENGLAND MONEY MARKET FUNDS
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AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 6/30/97
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1-YEAR 5-YEARS
(CLASS A&B) (CLASS A)
NEW ENGLAND CASH MANAGEMENT TRUST-- 4.77% 3.99%
MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST-- 4.50 3.87
U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT 3.20 2.78
MONEY MARKET TRUST
Investment results in this table represent returns including reinvestment of
distributions. Figures quoted above represent past performance and are not a
guarantee of future results.
ANNUALIZED 7-DAY YIELDS AS OF 6/30/97
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CLASS A & B
NEW ENGLAND CASH MANAGEMENT TRUST-- 5.07%
MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST-- 4.66
U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT 3.69
MONEY MARKET TRUST
Yields will fluctuate with changes in market conditions.
<PAGE>
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NEW ENGLAND MONEY MARKET FUNDS
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QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGERS
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[Photo of Scott Nicholson]
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Scott Nicholson
Back Bay Advisors, L.P.
Q. How did New England Cash Management Trust perform over the last 12 months?
New England Money Market Series and New England U.S. Government Series performed
as they were intended, providing shareholders with a high degree of safety and
liquidity. The Funds maintained a constant share price of $1.00* and generated
competitive money market returns. For the 12 months ended June 30, 1997, the
Money Market Series and the U.S. Government Series produced returns of 4.77% and
4.50%, respectively. Their respective seven-day effective yields on June 30 were
5.20% and 4.77%.
Q. What was the environment like for the Funds?
Short-term interest rates -- the chief influence on money market performance --
ended the period largely unchanged from one year ago, although they fluctuated
significantly during the period. Throughout the past year, investors were
concerned that stronger than expected economic growth would stimulate inflation.
As a preemptive strike against inflation, the Federal Reserve Board raised the
benchmark federal funds rate -- the rate at which banks may borrow money
overnight -- by one-quarter percentage point to 5.5% in March 1997. DespitE
these concerns, inflation has remained well contained and, with the economy
slowing from its frantic first quarter pace, investors have become more sanguine
about the prospects of rising prices.
*Past performance doesn't guarantee future results. Money market funds are
neither insured nor guaranteed by the U.S. government. These funds seek but
cannot assure a stable share price of $1.00.
<PAGE>
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NEW ENGLAND MONEY MARKET FUNDS
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Q. What strategies did you use in managing the Funds?
We managed the Funds' average maturity and targeted attractive relative value
among money market instruments. We sought to shorten the average maturity when
interest rates were rising and lengthen it when we thought rates would decline.
A shorter average maturity enables the portfolios to benefit faster from the
higher-rate environment. A longer average maturity helps preserve the Funds'
yield for a longer period of time. Toward the end of the period, we were
investing primarily in instruments with two- to four-month maturities.
Q. What is your outlook for the coming months?
We foresee that investors' expectations about economic activity and its effect
on inflation will continue to guide the direction of short-term rates. While
economic growth appears to have slowed considerably in the second quarter, we
are anticipating a rebound later this year. We think the magnitude of that
rebound will be key to any changes in short-term rates.
<PAGE>
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NEW ENGLAND MONEY MARKET FUNDS
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[Photo of John Maloney]
- -----------------------
John Maloney
Back Bay Advisors, L.P.
Q. How did New England Tax Exempt Money Market Trust perform over the last 12
months?
New England Tax Exempt Money Market Trust produced attractive returns, while
providing a high degree of safety and liquidity. As of June 30, 1997, the Fund's
tax exempt seven-day yield was 3.69%, equivalent to a taxable yield of 6.11% for
investors in the 39.6% federal income tax bracket. On June 30, the Fund's
seven-day effective yield was 3.76%, which generates a taxable yield of 6.23%
for investors in the same tax bracket. Throughout the period, New England Tax
Exempt Money Market Trust maintained a constant $1.00* share price.
Q. What strategies did you use in managing the Fund?
We based our strategies for managing the Fund's average maturity on our outlook
for the direction of interest rates, as well as on seasonal factors that affect
the tax-exempt market. Fund redemptions tend to rise in April, when individuals
draw from their accounts to pay their income taxes. The heaviest issuance of new
supply occurs in June, as many municipalities approach their fiscal year-ends.
During this time, one-year notes are available at attractive values.
*Past performance doesn't guarantee future results. Money market funds are
neither insured nor guaranteed by the U.S. government. These funds seek but
cannot assure a stable share price of $1.00.
<PAGE>
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NEW ENGLAND MONEY MARKET FUNDS
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To prepare for redemptions in April, we increased our position in variable-rate
securities, whose coupons reset daily and weekly. Yields on these securities
typically rise during this time of year because dealers price them cheaply as a
way to avoid unwanted inventories. These holdings enabled the Fund to capture
higher yields while shortening the Fund's average maturity. Shorter maturities,
in turn, gave us the flexibility (in June) to invest in one-year securities,
seeking the highest yields for the longest length of time. The Fund's average
maturity rose from 17 days at the beginning of June to 56 days on June 30, 1997.
Q. What is your outlook for the Fund?
We expect many of the same trends that existed over the past year to continue.
Economic strength in the third quarter would play an important role in the
direction of interest rates. The economy appears to have slowed significantly in
the second quarter, but we expect it to strengthen later in the year. Much will
depend on whether the economy grows above the targets set by the Federal Reserve
Board.
<PAGE>
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CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
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Investments as of June 30, 1997
INVESTMENTS--99.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------------------
BANKERS ACCEPTANCES--1.5%
<C> <S> <C>
$ 5,800,000 Dai Ichi Kangyo New York, 5.600%, 7/21/97 .............. $ 5,781,955
5,000,000 Dai Ichi Kangyo New York, 5.600%, 7/31/97 .............. 4,976,667
------------
Total Bankers Acceptances (Cost $10,758,622) ........... 10,758,622
------------
BANK NOTE--1.4%
10,000,000 Morgan Guaranty Trust New York, 5.615%, 7/01/97 (b) .... 9,996,607
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Total Bank Note (Cost $9,996,607) ...................... 9,996,607
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CERTIFICATES OF DEPOSIT--14.9%
5,000,000 Banque Nationale de Paris, 5.700%, 7/07/97 ............. 5,000,000
5,000,000 Sanwa Bank Limited New York, 5.680%, 7/10/97 ........... 5,000,025
5,000,000 Industrial Bank of Japan, Ltd., 5.670%, 7/11/97 ........ 5,000,040
8,000,000 Dai Ichi Kangyo Bank, 5.850%, 7/18/97 .................. 8,000,486
5,000,000 Canadian Imperial, 5.580%, 7/21/97 ..................... 4,999,897
10,000,000 Sumitomo Bank, Ltd. New York, 5.690%, 7/24/97 .......... 10,000,064
10,000,000 Sumitomo Bank, Ltd. New York, 5.690%, 8/01/97 .......... 10,000,086
5,000,000 Societe Generale New York, 5.900%, 8/05/97 ............. 5,000,627
10,000,000 Sanwa Bank Limited New York, 5.690%, 8/18/97 ........... 10,000,132
5,000,000 Bank of Tokyo Mitsubishi New York, 5.780%, 8/22/97 ..... 5,000,545
5,000,000 Societe Generale New York, 5.840%, 10/06/97 ............ 5,001,049
12,000,000 Societe Generale New York, 5.730%, 10/15/97 ............ 12,003,805
7,000,000 Deutsche Bank AG New York, 5.550%, 11/10/97 ............ 6,998,701
5,000,000 Societe Generale New York, 5.590%, 11/14/97 ............ 4,992,300
7,000,000 Banque Nationale de Paris, 5.780%, 2/04/98 ............. 6,992,635
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Total Certificates of Deposit (Cost $103,990,392) ...... 103,990,392
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CERTIFICATES OF DEPOSIT (EURODOLLARS)--15.2%
10,000,000 National Westminster Bank PLC, 5.690%, 7/03/97 ......... 9,999,983
12,000,000 Sanwa Bank, 5.730%, 7/31/97 ............................ 12,000,099
5,000,000 ABN Amro, 5.510%, 8/11/97 .............................. 4,999,749
11,000,000 Bank of Tokyo Mitsubishi, 5.700%, 8/20/97 .............. 11,000,151
10,000,000 Deutsche Bank, 6.065%, 9/12/97 ......................... 10,009,134
15,000,000 Canadian Imperial Bank Commission, 5.710%, 9/24/97 ..... 14,994,848
5,000,000 Rabobank Nederland Euro, 5.810%, 10/15/97 .............. 4,999,474
18,000,000 Toronto Dominion Bank London, 5.870%, 11/20/97 ......... 18,003,418
12,000,000 Svenska Handelsbank, 5.870%, 12/09/97 .................. 12,001,564
8,000,000 Lloyds Bank PLC, 6.260%, 4/16/98 ....................... 8,015,669
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Total Certificates of Deposit (Eurodollars) (Cost
$106,024,089) ......................................... 106,024,089
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COMMERCIAL PAPER--66.5%
ASSET BACKED--3.0%
7,000,000 Clipper Receivables Corp., 5.580%, 7/17/97 ............. 6,982,640
5,000,000 Clipper Receivables Corp., 5.600%, 7/29/97 ............. 4,978,378
9,000,000 Clipper Receivables Corp., 5.580%, 8/08/97 ............. 8,946,990
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20,908,008
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AUTOMOTIVE & RELATED--10.5%
7,500,000 General Motors Acceptance Corp., 5.400%, 7/14/97 ....... 7,485,375
10,000,000 American Honda Finance, 5.570%, 7/24/97 ................ 9,964,414
11,500,000 American Honda Finance, 5.570%, 7/25/97 ................ 11,457,296
8,000,000 American Honda Finance, 5.600%, 7/30/97 ................ 7,963,911
13,000,000 General Motors Acceptance Corp., 5.400%, 8/04/97 ....... 12,933,700
5,500,000 General Motors Acceptance Corp., 5.300%, 8/18/97 ....... 5,461,133
7,000,000 Ford Motor Credit Co., 5.280%, 8/27/97 ................. 6,941,480
7,000,000 General Motors Acceptance Corp., 5.820%, 10/28/97 ...... 6,865,332
4,500,000 Ford Motor Credit Co., 5.600%, 12/02/97 ................ 4,392,200
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73,464,841
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BANKS--8.7%
4,000,000 UBS Finance Delaware, Inc., 6.200%, 7/01/97 ............ 4,000,000
10,000,000 Bank of Montreal, 5.380%, 7/03/97 ...................... 9,997,011
5,000,000 Bank of Montreal, 5.630%, 7/03/97 ...................... 4,998,436
5,000,000 Societe Generale Canada, 5.640%, 7/07/97 ............... 4,995,300
7,000,000 Bankers Trust New York Corp., 5.400%, 7/17/97 .......... 6,983,200
4,000,000 BNP Canada, 5.400%, 7/31/97 ............................ 3,982,000
5,000,000 Bankers Trust New York Corp., 5.310%, 8/12/97 .......... 4,969,025
7,000,000 ABN Amro Bank NV New York, 5.410%, 9/19/97 ............. 6,915,844
4,000,000 ABN Amro Bank NV New York, 5.650%, 11/03/97 ............ 3,921,528
10,000,000 BNP Canada, 5.650%, 12/10/97 ........................... 9,745,750
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60,508,094
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DRUGS--4.2%
5,000,000 American Home Products Corp., 6.150%, 7/01/97 .......... 5,000,000
10,000,000 American Home Products Corp., 5.600%, 7/16/97 .......... 9,976,667
7,000,000 American Home Products Corp., 5.590%, 7/28/97 .......... 6,970,652
7,000,000 American Home Products Corp., 5.650%, 8/05/97 .......... 6,961,549
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28,908,868
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FINANCE--19.8%
5,000,000 Associates Corp. North America, 5.620%, 7/01/97 ........ 5,000,000
8,000,000 Heller Financial, Inc., 5.660%, 7/01/97 ................ 8,000,000
6,000,000 Transamerica Financial Group, 5.650%, 7/01/97 .......... 6,000,000
7,000,000 General Electric Capital Corp., 5.630%, 7/09/97 ........ 6,991,242
5,000,000 Heller Financial, Inc., 5.670%, 7/10/97 ................ 4,992,913
6,000,000 Sears Roebuck Acceptance Corp., 5.570%, 7/10/97 ........ 5,991,645
5,000,000 Beneficial Corporation, 5.560%, 7/11/97 ................ 4,992,278
5,000,000 Sears Roebuck Acceptance Corp., 5.550%, 7/11/97 ........ 4,992,292
7,000,000 Avco Financial Services, Inc., 5.610%, 7/14/97 ......... 6,985,819
5,000,000 General Electric Capital Corp., 5.600%, 7/21/97 ........ 4,984,444
4,000,000 Dillard Investment Co., 5.550%, 7/23/97 ................ 3,986,433
5,000,000 Heller Financial, Inc., 5.600%, 7/23/97 ................ 4,982,889
7,000,000 Household Finance Corp., 5.560%, 7/23/97 ............... 6,976,216
5,000,000 Heller Financial, Inc., 5.610%, 8/06/97 ................ 4,971,950
7,000,000 Transamerica Financial Group, 5.320%, 8/07/97 .......... 6,961,726
5,000,000 Avco Financial Services, Inc., 5.620%, 8/13/97 ......... 4,966,436
8,000,000 Heller Financial, Inc., 5.610%, 8/28/97 ................ 7,927,693
7,000,000 Avco Financial Services, Inc., 5.600%, 9/03/97 ......... 6,930,311
5,000,000 Sears Roebuck Acceptance Corp., 5.650%, 10/07/97 ....... 4,923,097
5,000,000 General Electric Capital Corp., 5.720%, 10/21/97 ....... 4,911,022
5,000,000 General Electric Capital Corp., 5.600%, 10/27/97 ....... 4,908,222
5,000,000 Sears Roebuck Acceptance Corp., 5.650%, 10/30/97 ....... 4,905,049
8,000,000 General Electric Capital Corp., 5.850%, 12/31/97 ....... 7,762,100
4,000,000 General Electric Capital Corp., 5.650%, 1/06/98 ........ 3,881,350
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137,925,127
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INSURANCE--1.4%
5,000,000 Prudential Funding Corp., 5.550%, 7/16/97 .............. 4,988,437
5,000,000 Prudential Funding Corp., 5.550%, 7/22/97 .............. 4,983,813
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9,972,250
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LEASING--2.4%
4,900,000 PHH Corp., 5.650%, 7/15/97 ............................. 4,889,234
5,000,000 PHH Corp., 5.670%, 7/15/97 ............................. 4,988,975
7,000,000 PHH Corp., 5.550%, 7/18/97 ............................. 6,981,654
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16,859,863
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SECURITIES--14.4%
10,000,000 Goldman Sachs Group, 5.320%, 7/07/97 ................... 9,991,133
10,000,000 Lehman Brothers Holdings, Inc., 5.650%, 7/08/97 ........ 9,989,014
2,000,000 Lehman Brothers Holdings, Inc., 5.650%, 7/09/97 ........ 1,997,489
5,000,000 Morgan Stanley Group, Inc., 5.570%, 7/21/97 ............ 4,984,528
7,000,000 Lehman Brothers Holdings, Inc., 5.600%, 8/06/97 ........ 6,960,800
5,000,000 Lehman Brothers Holdings, Inc., 5.650%, 9/02/97 ........ 4,950,563
8,000,000 Lehman Brothers Holdings, Inc., 5.620%, 9/10/97 ........ 7,911,329
5,000,000 Merrill Lynch & Co., 5.450%, 9/10/97 ................... 4,946,257
7,000,000 Merrill Lynch & Co., 5.450%, 9/11/97 ................... 6,923,700
10,000,000 Merrill Lynch & Co., 5.700%, 9/25/97 ................... 9,863,833
5,000,000 Merrill Lynch & Co., 5.700%, 10/01/97 .................. 4,927,167
6,000,000 Goldman Sachs Group, 5.680%, 10/27/97 .................. 5,888,293
6,000,000 Goldman Sachs Group, 5.680%, 11/04/97 .................. 5,880,720
6,000,000 Goldman Sachs Group, 5.820%, 11/17/97 .................. 5,865,170
5,000,000 Merrill Lynch & Co., 5.730%, 1/05/98 ................... 4,850,383
5,000,000 Goldman Sachs Group, 5.800%, 1/13/98 ................... 4,842,111
------------
100,772,490
------------
TELECOMMUNICATION--0.7%
5,000,000 Bell Atlantic Financial Services, 5.560%, 7/02/97 ...... 4,999,228
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TOBACCO--1.4%
5,000,000 Philip Morris Companies, Inc., 5.530%, 7/02/97 ......... 4,999,232
5,000,000 B.A.T. Capital Corp., 5.580%, 7/22/97 .................. 4,983,725
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9,982,957
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Total Commercial Paper (Cost $464,301,726) ............. 464,301,726
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Total Investments--99.5% (Identified Cost $695,071,436)(c) 695,071,436
Other assets less liabilities .......................... 3,587,489
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Total Net Assets--100% .................................. $698,658,925
============
</TABLE>
(a) See note 1a.
(b) Variable rate interest certificates are instruments whose interest rates
vary with changes in a designated base rate on a specific date. This
certificate resets interest daily based on the prime interest rate. The
maturity date shown is the next interest reset date. The final maturity on
this certificate is 2/19/98.
(c) The aggregate cost for federal income tax purposes was $695,071,436.
Percentage of Net Assets invested in obligations of foreign banks or foreign
branches of U.S. Banks at June 30, 1997:
Canada 7.59% Japan 12.42%
England 2.58% Netherlands 2.98%
France 8.26% Sweden 1.72%
Germany 2.43% Switzerland 0.57%
See accompanying notes to financial statements.
<PAGE>
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CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
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Investments as of June 30, 1997
INVESTMENTS--99.0% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------------------
U.S. GOVERNMENT--33.5%
<C> <S> <C>
$ 4,000,000 United States Treasury Bill, 5.140%, 11/13/97 .......... $ 3,922,900
3,000,000 United States Treasury Bill, 5.190%, 11/13/97 .......... 2,941,613
3,000,000 United States Treasury Bill, 5.220%, 2/05/98 ........... 2,904,735
4,000,000 United States Treasury Bill, 5.465%, 4/02/98 ........... 3,833,014
3,000,000 United States Treasury Bill, 5.345%, 6/25/98 ........... 2,840,095
------------
Total U.S. Government (Cost $16,442,357) ................ 16,442,357
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REPURCHASE AGREEMENT--65.5%
32,200,000 Repurchase agreement with Goldman Sachs dated 6/30/97 at
5.75% to be repurchased at $32,205,143 on 7/01/97
collateralized by $32,075,000 U.S. Treasury Bond,
6.875% due 8/15/25, with a value of $32,876,875
Total Repurchase Agreement (Cost $32,200,000) ......... 32,200,000
------------
Total Investments--99.0% (Identified Cost $48,642,357)(b) 48,642,357
Other assets less liabilities .......................... 493,595
------------
Total Net Assets--100% .................................. $ 49,135,952
============
</TABLE>
(a) See Note 1a.
(b) The aggregate cost for federal income tax purposes was $48,642,357.
See accompanying notes to financial statements.
<PAGE>
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TAX EXEMPT MONEY MARKET TRUST
- -------------------------------------------------------------------------------
Investments as of June 30, 1997
TAX EXEMPT OBLIGATIONS--113.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT ISSUER VALUE (a)
- --------------------------------------------------------------------------------------------
<C> <S> <C>
ALABAMA--3.0%
$ 2,000,000 Athens Industrial Development Board Revenue, 4.350%, (b) .. $ 2,000,000
------------
ARIZONA--1.5%
1,000,000 Arizona State Transportation Board Excise Tax, 6.800%,
7/01/98 ................................................. 1,028,630
------------
CALIFORNIA--15.3%
3,600,000 Los Angeles Regional Airport Lease, 4.100%, (b) ........... 3,600,000
2,000,000 Los Angeles County, 4.500%, 6/30/98 (c) ................... 2,012,480
3,000,000 Riverside County, 4.500%, 6/30/98 ......................... 3,015,810
1,700,000 San Bernadino Multifamily, 4.250%, (b) .................... 1,700,000
------------
10,328,290
------------
DISTRICT OF COLUMBIA--5.3%
3,600,000 District of Columbia, 4.100%, (b) ......................... 3,600,000
------------
3,600,000
------------
FLORIDA--13.6%
600,000 Alachua County Health Facilities Authority, 3.850%, 7/18/97 600,000
1,000,000 Alachua County Health Facilities Authority, 3.900%, 8/11/97 1,000,000
600,000 Alachua County Health Facilities Authority, 3.800%, 8/14/97 600,000
1,000,000 Sarasota County Public Hospital, 3.800%, 9/19/97 .......... 1,000,000
3,100,000 Broward County Multi Family Housing, 4.300%, (b) .......... 3,100,000
2,900,000 Dade County Special Obligation, 4.450%, (b) (d) ........... 2,900,000
------------
9,200,000
------------
HAWAII--8.4%
2,410,000 Hawaii State Department of Budget & Finance, 4.800%, (b) .. 2,410,000
3,300,000 Hawaii State Housing Finance & Development Corp., 4.300%, (b) 3,300,000
------------
5,710,000
------------
IDAHO--1.5%
1,000,000 Idaho State, 5.625%, 6/30/98 .............................. 1,007,150
------------
ILLINOIS--21.4%
1,000,000 Chicago, 3.650%, 2/05/98 .................................. 1,000,000
3,000,000 Illinois Development Finance Authority Industrial Revenue,
4.100%, (b) ............................................. 3,000,000
3,300,000 Illinois Health Facilities Authority Revenue, 4.100%, (b) . 3,300,000
2,500,000 Jackson/Union Counties, 4.200%, (b) ....................... 2,500,000
3,000,000 St. Charles Industrial Development Revenue, 4.200%, (b) ... 3,000,000
1,685,000 Elmhurst Revenue, 4.300%, (b) ............................. 1,685,000
------------
14,485,000
------------
INDIANA--1.7%
1,150,000 Rockport Pollution Control Revenue, 4.200%, (b) ........... 1,150,000
------------
IOWA--3.5%
2,365,000 Iowa Municipalities Workers, 4.100%, 7/01/97 .............. 2,365,000
------------
KENTUCKY--5.0%
1,200,000 Pendleton County Revenue, 3.950%, 7/01/98 ................. 1,200,000
2,200,000 Mayfield Multi City Lease, 4.300%, (b) .................... 2,200,000
------------
3,400,000
------------
LOUISIANA--5.8%
800,000 West Feliciana Parish, 4.100%, (b) ........................ 800,000
3,100,000 Louisiana Public Facilities Hospital Authority, 4.450%, (b) 3,100,000
------------
3,900,000
------------
MICHIGAN--3.0%
2,000,000 Detroit School District, 4.500%, 5/01/98 .................. 2,009,680
------------
MINNESOTA--7.3%
3,245,000 Mendota Heights Housing Mortgage Revenue, 4.450%, (b) ..... 3,245,000
1,700,000 St. Paul Housing & Redevelopment Authority, 4.450%, (b) ... 1,700,000
------------
4,945,000
------------
MISSISSIPI--1.5%
1,015,000 Tupelo Water & Sewer Revenue, 6.250%, 8/01/97 ............. 1,017,171
------------
NEW YORK--0.4%
300,000 New York City, 5.500%, (b) ................................ 300,000
------------
OKLAHOMA--0.8%
570,000 Norman Regional Hospital Authority Hospital, 3.850%,
9/01/97 ................................................. 570,000
------------
OREGON--3.1%
2,100,000 Port Portland Pollution Control, 4.100%, (b) .............. 2,100,000
------------
PENNSYLVANIA--4.4%
3,000,000 Emmaus General Authority Revenue, 4.200%, (b) ............. 3,000,000
------------
SOUTH CAROLINA--0.1%
100,000 Charleston County Industrial Revenue, 4.050%, (b) ......... 100,000
------------
TEXAS--6.4%
1,000,000 Grapevine Industrial Development Corporation Revenue,
4.100%, (b) ............................................. 1,000,000
2,000,000 Texas State, 4.750%, 8/29/97 .............................. 2,002,486
1,325,000 Nueces County Health Facilities, 4.200%, (b) .............. 1,325,000
------------
4,327,486
------------
WEST VIRGINIA--0.4%
295,000 West Virginia State, 5.000%, 11/01/97 ..................... 296,058
------------
Total Investments--113.4% (Identified Cost $76,839,465)(e) 76,839,465
Other assets less liabilities ............................. (9,103,323)
------------
Total Net Assets--100% .................................... $ 67,736,142
============
(a) See Note 1a.
(b) Floating rate notes are instruments whose interest rates vary with changes in a designated
base rate (such as the prime interest rate) on a specified date (such as coupon date or
interest payment date). These instruments are payable on demand and are secured by letters
of credit or other credit support agreements from major banks.
(c) Purchased on a delayed delivery basis. See Note 1d.
(d) This security is being used to collateralize the delayed delivery purchase indicated in
note (c) above.
(e) The aggregate cost for federal income tax purposes was $76,839,465.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- -------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
-------------------------------------- TAX EXEMPT
U. S. MONEY
MONEY MARKET GOVERNMENT MARKET
SERIES SERIES TRUST
---------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments at value
Securities ................................. $695,071,436 $16,442,357 $76,839,465
Repurchase Agreements ...................... -- 32,200,000 --
------------ ----------- -----------
Total Investments ............................ 695,071,436 48,642,357 76,839,465
Cash ......................................... 273,114 29,392 33,721
Receivable for:
Shares of the Trust sold ................... 21,122,933 644,660 79,670
Interest ................................... 3,282,346 5,143 403,588
Prepaid registration ......................... 2,000 2,000 7,000
------------ ----------- -----------
719,751,829 49,323,552 77,363,444
LIABILITIES
Payable for:
Securities purchased ....................... 10,000,086 -- 9,245,120
Shares of the Trust redeemed ............... 10,536,432 86,370 277,706
Dividends declared ......................... 34,809 665 2,856
Accrued expenses:
Management fees ............................ 236,349 17,280 19,958
Deferred trustees' fees .................... 34,637 31,592 36,269
Accounting and administrative .............. 9,499 -- 2,091
Other ...................................... 241,092 51,693 43,302
------------ ----------- -----------
21,092,904 187,600 9,627,302
------------ ----------- -----------
NET ASSETS ..................................... $698,658,925 $49,135,952 $67,736,142
============ =========== ===========
Net Assets consist of:
Capital paid in Class A shares ............. $687,503,223 $48,243,855 $67,546,356
Capital paid in Class B shares ............. 11,040,635 831,157 189,786
Undistributed net investment income ........ 118,640 60,940 --
Accumulated net realized losses ............ (3,573) -- --
------------ ----------- -----------
NET ASSETS ..................................... $698,658,925 $49,135,952 $67,736,142
============ =========== ===========
Shares of beneficial interest outstanding, no par value
Class A shares ............................. 687,503,223 48,243,855 67,546,356
Class B shares ............................. 11,040,635 831,157 189,786
------------ ----------- -----------
Shares of beneficial interest outstanding ..... 698,543,858 49,075,012 67,736,142
============ =========== ===========
Net asset value per share Class A and Class
B shares* ................................ $1.00 $1.00 $1.00
===== ===== =====
COST OF INVESTMENTS ............................ $695,071,436 $48,642,357 $76,839,465
============ =========== ===========
* Shares of the series are sold and redeemed at net asset value (net assets/shares of beneficial interest outstanding).
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
Year ended June 30, 1997
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
------------------------------------ TAX EXEMPT
MONEY U. S. MONEY
MARKET GOVERNMENT MARKET
SERIES SERIES TRUST
--------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest ........................................ $37,472,876 $2,988,280 $2,535,660
----------- ---------- ----------
Expenses
Management fees ............................... 2,825,485 236,900 273,588
Trustees' fees ............................... 23,874 17,537 17,337
Accounting and administrative ................. 137,144 12,059 14,230
Custodian ..................................... 118,786 33,706 39,614
Transfer agent ................................ 2,512,003 124,409 130,180
Audit and tax services ........................ 27,000 27,000 29,000
Legal ......................................... 23,144 21,790 23,144
Printing ...................................... 169,153 9,953 9,502
Registration .................................. 60,722 52,267 34,683
Insurance ..................................... 4,169 375 439
Miscellaneous ................................. 58,632 7,504 5,997
----------- ---------- ----------
Total expenses .................................. 5,960,112 543,500 577,714
Less - waiver of fee by investment adviser or
distributor ................................... -- (12,059) (192,978)
----------- ---------- ----------
Net investment income ........................... 31,512,764 2,456,839 2,150,924
REALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on Investments - net ....... (1,820) 90 5,035
----------- ---------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........ $31,510,944 $2,456,929 $2,155,959
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
-----------------------------------------------------------------------------------------------
MONEY MARKET SERIES U. S. GOVERNMENT SERIES
------------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1997 1996 1997
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ...... $ 32,127,993 $ 31,512,764 $ 2,750,073 $ 2,456,839
Net realized gain (loss) on
investments .............. 118,639 (1,820) 60,941 90
------------- ------------- ------------ ------------
Increase in net assets from
operations ............... 32,246,632 31,510,944 2,811,014 2,456,929
------------- ------------- ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (a) .. (32,127,993) (31,392,304) (2,750,073) (2,395,989)
Net realized gain on
investments .............. (3,574) (118,639) -- (60,941)
------------- ------------- ------------ ------------
(32,131,567) (31,510,943) (2,750,073) (2,456,930)
------------- ------------- ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of
shares ................... 1,049,919,978 1,265,900,028 96,446,537 95,618,455
Net asset value of shares
issued in connection with
the reinvestment of
dividends from net
investment income and
distributions from net
realized gains ........... 31,392,637 30,704,669 2,691,938 2,405,190
Cost of shares redeemed .... (1,067,615,550) (1,261,566,359) (106,394,965) (101,434,636)
------------- ------------- ------------ ------------
Total increase (decrease) in
net assets derived from
capital share transactions 13,697,065 35,038,338 (7,256,490) (3,410,991)
------------- ------------- ------------ ------------
Total increase (decrease) in
net assets ............... 13,812,130 35,038,339 (7,195,549) (3,410,992)
NET ASSETS
Beginning of the year ...... 649,808,456 663,620,586 59,742,493 52,546,944
------------- ------------- ------------ ------------
End of the year (b) ........ $ 663,620,586 $ 698,658,925 $ 52,546,944 $ 49,135,952
============= ============= ============ ============
(a) Amounts distributed include a net realized gain/(loss) of ($1,820) and $90 for the Money Market Series and U.S. Government
Series, respectively, for the year ended June 30, 1997.
(b) Including undistributed net investment income of $118,640 and $60,940 for the Money Market Series and U.S. Government Series,
respectively.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS -- continued
- -------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<CAPTION>
TAX EXEMPT MONEY
MARKET TRUST
------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1996 1997
----------------- ----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................... $ 2,186,497 $ 2,150,924
Net realized gain (loss) on investments ............. (44) 5,035
------------- -------------
Increase in net assets from operations .............. 2,186,453 2,155,959
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................... (2,186,453) (2,155,959)(a)
------------- -------------
(2,186,453) (2,155,959)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of shares .................... 96,882,833 91,844,146
Net asset value of shares issued in connection with
the reinvestment of dividends from net investment
income ............................................ 2,152,160 2,121,276
Cost of shares redeemed ............................. (101,935,023) (91,126,563)
------------- -------------
Total increase (decrease) in net assets derived from
capital share transactions ........................ (2,900,030) 2,838,859
------------- -------------
Total increase (decrease) in net assets ............. (2,900,030) 2,838,859
NET ASSETS
Beginning of the year ............................... 67,797,313 64,897,283
------------- -------------
End of the year ..................................... $ 64,897,283 $ 67,736,142
============= =============
(a) Amount distributed includes net realized gain of $5,035 for the year ended June 30, 1997.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM INVESTMENT OPERATIONS
--------------------------------------------------
NET NET
ASSET REALIZED AND
VALUE AT NET UNREALIZED TOTAL FROM
BEGINNING INVESTMENT GAIN ON INVESTMENT
OF YEAR INCOME INVESTMENTS OPERATIONS
------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
Year Ended June 30,
1993 ................................. $1.00 $0.0275 -- $0.0275
1994 ................................. 1.00 0.0264 -- 0.0264
1995 ................................. 1.00 0.0469 -- 0.0469
1996 ................................. 1.00 0.0482 $0.0002 0.0484
1997 ................................. 1.00 0.0467 -- 0.0467
CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
Year Ended June 30,
1993 ................................. 1.00 0.0271 -- 0.0271
1994 ................................. 1.00 0.0257 -- 0.0257
1995 ................................. 1.00 0.0454 -- 0.0454
1996 ................................. 1.00 0.0465 0.0010 0.0475
1997 ................................. 1.00 0.0441 -- 0.0441
TAX EXEMPT MONEY MARKET TRUST
Year Ended June 30,
1993 ................................. 1.00 0.0214 -- 0.0214
1994 ................................. 1.00 0.0208 -- 0.0208
1995 ................................. 1.00 0.0314 -- 0.0314
1996 ................................. 1.00 0.0327 -- 0.0327
1997 ................................. 1.00 0.0314 0.0001 0.0315
(a) Including net realized gain on investments.
(b) The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitation and voluntary
fee waiver described in Note 3 to the financial statements would have been 0.96% and 0.99% for the U.S. Government Series for
the years ended June 30, 1996 and 1997, respectively, and 0.83%, 0.89%, 0.85%, 0.90% and 0.85% for the years ended June 30,
1993, 1994, 1995, 1996, and 1997 for Tax Exempt Money Market Trust.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS
- --------------------------------------
RATIO OF RATIO OF
DISTRIBUTIONS NET OPERATING NET
DIVIDENDS FROM NET ASSETS EXPENSES TO INCOME TO
FROM NET REALIZED NET ASSET END OF AVERAGE AVERAGE
INVESTMENT CAPITAL TOTAL VALUE AT TOTAL YEAR NET ASSETS NET ASSETS
INCOME GAINS DISTRIBUTIONS END OF YEAR RETURN % (000) (%)(b) (%)
- --------------------- --------------- --------------- ----------- ---------------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.0275) -- $(0.0275) $1.00 2.84 $775,914 0.79 2.78
(0.0264) -- (0.0264) 1.00 2.68 699,369 0.84 2.65
(0.0469) -- (0.0469) 1.00 4.79 649,808 0.88 4.67
(0.0484)(a) -- (0.0484) 1.00 4.95 663,621 0.90 4.85
(0.0465) $(0.0002) (0.0467) 1.00 4.77 698,659 0.88 4.66
(0.0271) -- (0.0271) 1.00 2.80 64,595 0.78 2.73
(0.0257) -- (0.0257) 1.00 2.60 58,963 0.84 2.54
(0.0454) -- (0.0454) 1.00 4.64 59,742 0.92 4.53
(0.0475) -- (0.0475) 1.00 4.86 52,547 0.93 4.80
(0.0431) (0.0010) (0.0441) 1.00 4.50 49,136 0.95 4.46
(0.0214) -- (0.0214) 1.00 2.20 56,555 0.56 2.14
(0.0208) -- (0.0208) 1.00 2.10 66,620 0.56 2.08
(0.0314) -- (0.0314) 1.00 3.18 67,797 0.56 3.15
(0.0327) -- (0.0327) 1.00 3.32 64,897 0.56 3.29
(0.0315)(a) -- (0.0315) 1.00 3.20 67,736 0.56 3.17
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
June 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES. New England Cash Management Trust and New
England Tax Exempt Money Market Trust (the "Trusts") are registered under the
Investment Company Act of 1940, as amended, as diversified, open-end investment
companies.
NEW ENGLAND CASH MANAGEMENT TRUST -- The Trust's Agreement and Declaration of
Trust permits the issuance of an unlimited number of shares of beneficial
interest, no par value, in separate Series, with shares of each Series
representing interests in a separate portfolio of assets. Effective September
13, 1993, each Series began offering two classes of shares, Class A and Class
B, in order to enable investors in either class of the New England Stock or
Bond Funds to invest in money market shares. Class A and B shares are
identical except that Class B shares may be subject to a contingent deferred
sales charge upon redemption if the shares were acquired by exchange of Class
B shares of a stock or bond fund. Each Series is separately managed and has
its own objectives and policies. The Trust is comprised of the Money Market
Series and the U.S. Government Series.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- The Trust's Agreement and
Declaration of Trust permits the issuance of an unlimited number of shares of
beneficial interest, no par value. Effective September 13, 1993, the Trust began
offering two classes of shares, Class A and Class B, in order to enable
investors in either class of the New England Stock or Bond Funds to invest in
money market shares. Class A and B shares are identical except that Class B
shares may be subject to a contingent deferred sales charge upon redemption if
the shares were acquired by exchange of Class B shares of a stock or bond fund.
The following is a summary of significant accounting policies followed by the
Trusts in the preparation of the 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 Trusts employ the amortized cost method of security
valuation as set forth in Rule 2a-7 under the Investment Company Act of 1940
which, in the opinion of the trustees of each Trust, represents the fair value
of the particular security. The amortized cost of a security is determined by
valuing it at original cost and thereafter accreting any discount or amortizing
any premium on a straight-line basis.
B. REPURCHASE AGREEMENTS. The Trusts, through their custodian, receive delivery
of the underlying securities collateralizing repurchase agreements. It is the
Trusts' policy that the market value of the collateral be at least equal to 100%
of the repurchase price. Back Bay Advisors, L.P. ("Back Bay Advisors") is
responsible for determining that the value of the collateral is at all times at
least equal to the repurchase price. In connection with transactions in
repurchase agreements, if the seller defaults and the value of the collateral
declines or if the seller enters an insolvency proceeding, realization of the
collateral by the Trusts may be delayed or limited.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (date the order to buy or sell is executed)
and interest income is recorded on the accrual basis. In determining the net
gain or loss on securities sold, the cost of securities is determined on the
identified cost basis.
D. WHEN-ISSUED SECURITIES. Delivery and payment for securities purchased on a
when-issued or delayed delivery basis can take place one month or more after the
date of the transaction. The securities so purchased are subject to market
fluctuation during this period. At June 30, 1997, the cost of delayed delivery
purchase commitments for the Tax Exempt Money Market Trust amounted to
$2,012,480.
E. FEDERAL INCOME TAXES. Each Series of the Cash Management Trust and the Tax
Exempt Money Market Trust intends to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies, and to distribute to
its shareholders all of its taxable and tax exempt income. Accordingly, no
provision for federal income tax has been made.
The Tax Exempt Money Market Trust has designated 100% of dividends paid from net
investment income during the fiscal year as tax exempt for federal income tax
purposes.
The Money Market Series and the U.S. Government Series designated distributions
to shareholders of $118,639 and $60,941 respectively as long term capital gain
dividends. The Form 1099 you receive in January 1998 will show the tax status of
all distributions paid to your account in calendar year 1997.
F. DIVIDENDS TO SHAREHOLDERS. Dividends are declared daily to shareholders of
record at the time and are paid monthly. Long term gain distributions, if any,
will be made annually.
G. OTHER. Each of the Trusts invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within the two
highest ratings categories of a nationally recognized rating agency or, if not
rated, are believed to be of comparable quality. The ability of the issuers of
the securities held by the Trusts to meet their obligations may be affected by
foreign economic, political and legal developments in the case of foreign banks
or foreign branches or subsidiaries of U.S. banks, or domestic economic
developments in a specific industry, state or region.
2. INVESTMENT TRANSACTIONS.
For the year ended June 30, 1997:
NEW ENGLAND CASH MANAGEMENT TRUST -- Purchase and sales or maturities of
short-term obligations, including securities purchased subject to repurchase
agreements, aggregated $5,227,880,222 and $5,224,057,238 respectively, for the
Money Market Series. Purchases and sales or maturities of United States
government obligations, including securities purchased subject to repurchase
agreements, aggregated $7,709,852,663 and $7,714,277,752, respectively, for the
U.S. Government Series.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- Purchases and sales or maturities
of short-term obligations aggregated $210,781,263 and $200,740,035 respectively.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
During the year ended June 30, 1997, the Trusts incurred management fees payable
to the Trusts' investment adviser, New England Funds Management L.P. ("NEFM")
and subadviser, Back Bay Advisors ("BBA"). Certain officers and directors of
NEFM are also officers and trustees of the Trusts. NEFM and BBA are wholly-owned
subsidiaries of New England Investment Companies, L.P. ("NEIC") which is a
subsidiary of Metropolitan Life Insurance Company ("MetLife").
NEW ENGLAND CASH MANAGEMENT TRUST
Under the management agreements, each series pays to its investment adviser,
NEFM, a monthly fee based on the annual percentage rates of that series,
corresponding average daily net asset values set forth below.
Under the same management agreements, NEFM pays to its investment subadviser,
BBA, a monthly fee based on the annual percentage rates of that series'
corresponding average daily net asset values set forth below:
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE RATE OF
ADVISORY FEES PAID BY NEFM
TO THE SUBADVISER, BBA
ANNUAL PERCENTAGE RATE OF ----------------------------------------------------
ADVISORY FEES PAID BY CASH MANAGEMENT TRUST CASH MANAGEMENT TRUST
THE SERIES TO NEFM MONEY MARKET SERIES U.S. GOVERNMENT SERIES
----------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
the first $500 million .4250% .2050% .2125%
the next $500 million .4000% .1800% .2000%
the next $500 million .3500% .1600% .1750%
the next $500 million .3000% .1400% .1500%
amounts in excess of $2 billion .2500% .1200% .1250%
</TABLE>
FEES EARNED FROM MONEY MARKET SERIES
$1,485,266 New England Funds Management, L.P.
$1,340,219 Back Bay Advisors, L.P.
FEES EARNED FROM U.S. GOVERNMENT SERIES
$118,450 New England Funds Management, L.P.
$118,450 Back Bay Advisors, L.P.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
The Trust pays management fees to its investment adviser, NEFM, at the annual
rate of 0.40% of the first $100 million of the Trust's average daily net assets
and 0.30% of such assets in excess of $100 million. NEFM pays the Trust's
investment subadviser, BBA, at the rate of 0.20% of the first $100 million of
the Trust's average daily net assets and 0.15% of such assets in excess of $100
million. Fees earned by NEFM and Back Bay Advisors under the management
agreements in effect during the year ended June 30, 1997 are as follows:
FEES EARNED
$136,794 New England Funds Management, L.P.
$136,794 Back Bay Advisors, L.P.
NEFM and BBA have voluntarily agreed, until further notice, to reduce the
management fee and, if necessary, to assume Trust expenses in order to limit the
expenses to 0.5625 of 1% of average net assets per year. As a result of
exceeding the expense limitation, management fees for the year ended June 30,
1997 were reduced by $96,489 and $96,489, respectively.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England
Funds"), the Trusts' distributor, is a wholly owned subsidiary of NEIC and
performs certain accounting and administrative services for the Trusts. Each
Trust reimburses New England Funds for all or part of New England Funds'
expenses of providing these services which include the following (i) expenses
for personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the Trusts,
(ii) expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and notices, proxy
solicitation material furnished to shareholders of the Trusts or regulatory
authorities and reports and questionnaires for SEC compliance, and (iii)
registration, filing and other fees in connection with requirements of
regulatory authorities. For the year ended June 30, 1997, these expenses
amounted to $137,144 for the Cash Management Trust Money Market Series and
$14,230 for the Tax Exempt Money Market Trust.
New England Funds has voluntarily agreed to waive accounting and administrative
fees for the Cash Management Trust U.S. Government Series until further notice.
As a result of this voluntary waiver, New England Funds waived its entire fee of
$12,059 for the year ended June 30, 1997.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent for the Trusts. For the year ended June 30, 1997, the New
England Cash Management Trust Money Market Series, U.S. Government Series and
Tax Exempt Money Market Trust paid $1,743,823, $83,709 and $75,898,
respectively, to New England Funds as compensation for its services in that
capacity.
4. TRUSTEES FEES AND EXPENSES. The Trusts do not pay any compensation to
officers or trustees who are directors, officers, or employees of NEFM, NEIC,
New England Funds or their affiliates, other than registered investment
companies. Each disinterested trustee is compensated by each series of the Cash
Management Trust and by the Tax Exempt Money Market Trust as follows:
MONEY MARKET U.S. GOV'T TAX EXEMPT MONEY
SERIES SERIES MARKET TRUST
------------ ------------ ----------------
Annual Retainer $2,062 $1,421 $1,420
Meeting Fee $114/meeting $114/meeting $114/meeting
Committee Meeting Fee $68/meeting $68/meeting $68/meeting
Committee Chairman Annual
Retainer $282 $26 $30
A deferred compensation plan is available to members of the boards of trustees.
A trustee's participation in the plan is voluntary. Each participating trustee
will receive an amount equal to the value that such deferred compensation would
have been, had it been invested in the relevant series or Trust on the normal
payment date.
5. CONCENTRATION OF CREDIT. The Tax Exempt Money Market Trust had the following
industry concentrations in excess of 10% on June 30, 1997 as a percentage of the
Trust's total net assets: Government (23.0%), Hospitals (23.0%), and Housing
(19.3%), Industrial (16.7%). The Trust also had more than 10% of its total net
assets invested in California (15.3%), Florida (13.6%), Illinois (21.4%) and had
more than 10% of its net assets backed by letters of credit with Sumitomo Bank
(16.7%).
<PAGE>
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of New England Cash Management Trust
and New England Tax Exempt Money Market Trust
In our opinion, the accompanying statements of assets & liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the two series of the New
England Cash Management Trust and New England Tax Exempt Money Market Trust
(hereafter referred to as "the Trusts") at June 30, 1997, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trusts' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 8, 1997
<PAGE>
GLOSSARY FOR MUTUAL FUND INVESTORS
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TOTAL RETURN - The change in value of a mutual fund investment over a specific
time period, assuming all earnings are reinvested in additional shares of the
fund. Expressed as a percentage.
INCOME DISTRIBUTIONS - payments to shareholders resulting from the net interest
or dividend income earned by a fund's portfolio.
CAPITAL GAINS DISTRIBUTIONS - Payments to shareholders of profits earned from
selling securities in a fund's portfolio. Capital gains distributions are
usually paid once a year.
YIELD - The rate at which a fund pays income. Yield calculations for 30-day
periods are standardized among mutual funds, based on a formula developed by the
Securities and Exchange Commission.
MATURITY - Refers to the period of time before principal repayment on a bond is
due. A bond fund's "average maturity" refers to the weighted average of the
maturities of all the individual bonds in the portfolio.
DURATION - A measure, stated in years, of a bond's sensitivity to interest
rates. Duration is a means to directly compare the volatility of different
instruments. As a general rule, for every 1% move in interest rates, a bond is
expected to fluctuate in value as indicated by its duration. For example, if
interest rates fall by 1%, a bond with a duration of 4 years should rise in
value 4%. Conversely, the bond should decline 4% if interest rates rise 1%.
TREASURIES - Negotiable debt obligations of the U.S. government, secured by its
full faith and credit. the income from treasury securities is exempt from state
and local income taxes, but not from federal income taxes. There are three types
of Treasuries: Bills (maturity of 3-12 months), Notes (maturity of 1-10 years)
and Bonds (maturity of 10-30 years).
MUNICIPAL BOND - A debt security issued by a state or municipality to finance
public expenditures. interest payments are exempt from federal taxes and, in
most cases, from state and local income taxes. The two main types are general
obligation (GO) bonds, which are backed the full faith and credit and taxing
powers of the municipality; and revenue bonds, supported by the revenues from a
municipal enterprise, such as airports and toll bridges.
<PAGE>
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REGULAR INVESTING PAYS
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FIVE GOOD REASONS TO INVEST REGULARLY
1. It's an easy way to build assets.
2. It's convenient and effortless.
3. It requires a low minimum to get started.
4. It can help you reach important long-term goals like financing retirement or
college funding.
5. It can help you benefit from the ups and downs of the market. With
Investment Builder, New England Fund's automatic investment program, you can
invest as little as $100 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.
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THE POWER OF MONTHLY INVESTING
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[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 $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 Funds
account. To open an Investment Builder account today, call your financial
representative or New England Funds at 1-800-225-5478.
<PAGE>
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SAVING FOR RETIREMENT
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AN EARLY START CAN MAKE A BIG DIFFERENCE
With today's lengthening life spans, you may be retired for 20 years or more
after you complete your working career. Living these retirement years the way
you've dreamed of will require considerable financial resources. while it's
never too late to start a retirement savings program, it's certainly never too
early: The sooner you begin, the longer the time your money has to grow.
The chart below illustrates this point dramatically. One investor starts at age
30, saves for just 10 years, then leaves the investment to grow. The second
investor starts 10 years later but saves much longer -- for 25 years, in fact.
Can you guess which investor accumulates the greater retirement nest egg? For
the answer, look at the chart.
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AN EARLY START CAN MAKE A BIG DIFFERENCE
- --------------------------------------------------------------------------------
[A chart in the form of a line graph appears here, comparing the growth of
investments made for 10 years by an investor who begins investing at age 30 to
the growth of investments made for twenty-five years by an investor who begins
investing at age 40. A hypothetical appreciation of 10% is assumed. The data
points from the graph are as follows:]
Investor A - Begins at age 30 for 10 years:
Age Growth of Investments
30 $2,000
35 $15,431
40 $35,062
45 $90,943
55 $146,464
60 $235,882
65 $379,890
Investor B - Begins investing at age 40 for 25 years:
Age Growth of Investments
40 $2,000
45 $15,431
50 $37,062
55 $71,899
60 $128,005
65 $216,364
Assumes 10% hypothetical appreciation. For illustrative purposes only and not
indicative of future performance of any New England Fund.
Investor A invested $20,000, less than half of Investor B's commitment -- and
for less than half the time. Yet Investor A wound up with a much greater
retirement nest egg. The reason? It's all thanks to an early start.
New England Funds has prepared a number of informative retirement planning
guides. Call your financial representative or New England Funds today, and ask
for the guide that best fits your personal needs.
<PAGE>
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NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
STOCK FUNDS
Star Small Cap Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Growth Opportunities Fund
Value Fund
Balanced Fund
INTERNATIONAL STOCK FUNDS
International Equity Fund
Star Worldwide Fund
BOND FUNDS
High Income Fund
Strategic Income Fund
Bond Income Fund
Government Securities 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.
VISIT OUR WORLD WIDE WEB SITE AT WWW.MUTUALFUNDS.COM
New England Funds, L.P., Distributor
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 Fund's 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>
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Where The Best Minds Meet(R) U.S. POSTAGE
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BROCKTON, MA
PERMIT NO. 770
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Boston, Massachusetts
02116
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