<PAGE>
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[Logo](R)
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
New England
Money Market Funds
[Graphic Omitted]
December 31, 1997
<PAGE>
February 1998
- --------------------------------------------------------------------------------
[Photo of Henry L.P. Schmelzer]
DEAR SHAREHOLDER:
In 1997, many investors once again had reason to be pleased with the performance
of their mutual fund holdings. However, in times such as these, expectations
tend to grow along with prices. It pays to remind ourselves that no trend is
permanent, and we should keep our goals realistic and long-term needs in focus.
"EVEN IN 1997 . . . INVESTORS SAW SOME SHARP, SHORT-TERM DROPS, WHETHER THEY
WERE INVESTED IN THE UNITED STATES OR OVERSEAS, IN BONDS OR STOCKS."
In the third straight year of outstanding returns, the Dow Jones Industrial
Average and the Standard & Poor's 500 Stock Index -- two widely followed
indicators of the performance of large-company stocks -- gained 24.9% and 33.3%
respectively. At the same time, smaller-company stocks, as measured by the
Russell 2000 Index, were up 22.4%. Meanwhile, bond investors also were rewarded
as declining interest rates and rising prices meant solid gains. The Lehman Long
Treasury Index, for example, posted a 15.1% return for the year. Results were
less favorable for international investors, especially those exposed to emerging
markets or the financial turmoil in Asia.
Gratifying though it has been, the markets' surge of the past few years obscures
the historic norm: Downturns and volatility also are regular features of
investing. Even in 1997, notwithstanding the impressive overall results,
investors saw some sharp, short-term drops, whether they were invested in the
United States or overseas, in bonds or stocks. Market fluctuations remind us of
some valuable lessons.
First, volatility is inevitable, and should not disrupt long-term programs
without sufficient evaluation. Those who sold in response to downturns --
October 1987 is an obvious example -- may have missed out on the subsequent
uptrend. Second, sound diversification can reduce risk. A useful exercise is to
review your asset allocation regularly with your financial representative.
Starting in 1998, you have one more reason to consult with your representative:
Newly expanded retirement options, including the new Roth IRA, could play an
important role in your retirement and tax planning for years to come. With this
in mind, New England Funds has introduced programs specially designed to help
you make the most of the newest retirement vehicles.
[Dalbar Logo]
1995 o 1996 o 1997
In addition to offering quality mutual fund choices and tax-advantaged plans, we
focus on providing the highest quality customer service. This is why I am
pleased to report that we have received DALBAR's Mutual Fund Service Award for
"providing the highest tier of service excellence in the mutual fund industry."
New England Funds is one of just three mutual fund companies to receive this
award for the third consecutive year from DALBAR, an independent evaluator of
mutual fund services. We are continuing to work to provide even more effective
services. Two examples are: the Personal Access Line(TM) -- our enhanced
automated telephone account service (800-346-5984) -- and the account
information section of the New England Funds website (www.mutualfunds.com). Each
provides convenient, 24-hour access to current information about your New
England Funds accounts.
All of us at New England Funds thank you for your continued support and look
forward to serving you in the years ahead.
Sincerely,
/s/ Henry L.P. Schmelzer
Henry L.P. Schmelzer
President
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
ANNUALIZED SEVEN-DAY YIELDS -- 12/31/97
- --------------------------------------------------------------------------------
CLASS A & B
NEW ENGLAND CASH MANAGEMENT TRUST -- 4.93%
MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST -- 4.62
U.S. GOVERNMENT SERIES*
NEW ENGLAND TAX EXEMPT 3.64
MONEY MARKET TRUST
Yields will fluctuate with changes in market conditions.
The seven-day money market yield reflects the Funds' current earnings more
closely than total return.
AVERAGE ANNUAL TOTAL RETURNS -- 12/31/97
- --------------------------------------------------------------------------------
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
(CLASS A&B) (CLASS A&B) (CLASS A) (CLASS A)
NEW ENGLAND CASH MANAGEMENT TRUST-- 2.47% 4.90% 4.19% 5.41%
MONEY MARKET SERIES
NEW ENGLAND CASH MANAGEMENT TRUST-- 2.32 4.61 4.04 5.19
U.S. GOVERNMENT SERIES
NEW ENGLAND TAX EXEMPT 1.67 3.30 2.89 3.73
MONEY MARKET TRUST
Investment results in this table represent annual returns including reinvestment
of distributions. Figures quoted above represent past performance and are not a
guarantee of future results.
*Note to Shareholders:
Following the end of New England Cash Management Trust's fiscal period, the
Board of Trustees approved a proposal to close the U.S. Government Series,
effective February 27, 1998. We notified shareholders of this event in early
February.
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
Q. How did New England Cash Management Trust perform over the last six months?
[Photo of Scott Nicholson]
Scott Nicholson]
Back Bay Advisors, L.P.
Although long-term interest rates declined during the period, the short-term
rates that drive the performance of money market instruments remained
relatively stable, as the Federal Reserve Board kept the federal funds rate
at 5 1/4%. The federal funds rate is the rate at which banks lend to each
other overnight and is the benchmark for short-term interest rates.
In this environment, New England Cash Management Trust provided competitive
money market yields while maintaining a constant $1.00* share price. For the
six months ending December 31, 1997, the Money Market Series provided a total
return of 2.47%, which included the reinvestment of $0.024 per share in
income distributions. The Fund's seven-day yield at year-end was 4.93%.
For the same six-month period, the U.S. Government Series provided a total
return of 2.32%, which included the reinvestment of $0.023 per share in
income distributions. The Fund's seven-day yield at year-end was 4.62%.
*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.
Q. What strategies did you use in managing the portfolios during that time?
In a period when short-term interest rates remained in a fairly narrow range,
we worked to maximize returns by managing the average maturity of the Money
Market Series. We purchased securities with longer maturities when their
yields rose in comparison to those of securities with shorter maturities, and
invested in instruments with shorter maturities when they provided similar
yields to those with longer maturities. This strategy helped us to lock in
rates while they hovered near the top of their range during the period. As in
the past, we concentrated on commercial paper, supplemented by the
certificates of deposit of both domestic and foreign banks. During the
period, we held obligations of Japanese banks, which had matured by year-end.
In the U.S. Government Series, we took steps to help boost the portfolio's
income as short-term interest rates fell during the period. Specifically, we
shortened the average maturity of the portfolio throughout the period,
investing the proceeds from maturing U.S. Treasury bills in overnight
repurchase agreements that are collateralized by obligations of the U.S.
government. These overnight issues offered higher yields than U.S. Treasury
bills. The reduced supply of Treasury bills, due to the decline in the
federal budget deficit and a "flight to quality" prompted by financial
difficulties in Asia, pushed down the yields of most U.S. Treasury bills.
Q. What is your outlook for money market vehicles over the next six months?
With the economy continuing to grow at a rate in excess of 3% and
unemployment at historically low levels, we normally would anticipate the
Federal Reserve Board to raise interest rates. However, the events in Asia
during the fourth quarter have clouded the economic outlook for 1998 and the
direction of interest rates. The Federal Reserve will likely monitor the
lingering effects of the Asian financial turmoil on the U.S. economy before
adjusting monetary policy. Investors' attempts to anticipate the next Fed
policy move may create some volatility in interest rates.
Q. How did New England Tax Exempt Money Market Trust perform over the last
six months?
New England Tax Exempt Money Market Trust generated strong results,
maintaining a constant share price of $1.00*. For the six months ending
December 31, 1997, the Fund provided a total return of 1.67%, which included
the reinvestment of $0.016 in dividend distributions. At the end of the
period, the Fund's tax exempt seven-day yield was 3.64%, which translates
into a taxable equivalent yield of 6.03% for an investor in the maximum
federal income tax bracket of 39.6%.
[Photo of John Maloney]
John Maloney
Back Bay Advisors, L.P.
Q. What was the investment environment like during that time?
The environment was favorable for money market investments. The economy grew
at a steady pace, corporate profits rose, hourly wages increased and
unemployment fell to historically low levels. Despite this economic strength,
inflation -- which ran at about a 2% rate -- remained very low. We attribute
this positive climate to large gains in productivity, global competition,
technological advances and a shrinking U.S. budget deficit.
*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.
Within this setting, seasonal factors were the key influence driving tax
exempt money market yields. Yields tended to rise in late June and early
July, the time of the year when supply typically is heaviest.
Q. What strategies did you put to work during the six months?
We took advantage of the seasonal factors, extending maturity when yields
rose and shortening it in anticipation of lower yields. We extended the
Fund's average maturity from 15 days in June to 66 days in July, enabling the
Fund to lock in higher yields for a longer period of time. As we approached
year-end, we increased the Fund's investments in variable-rate products to
70% of the portfolio to take advantage of their higher yields.
Q. What is your outlook over the next six months?
It's somewhat cautious. Despite improvements in productivity and technology,
we think that continued strength in the economy could eventually lead to
higher inflation. In our view, however, the Federal Reserve Board will sit
tight in the near future as it monitors economic activity and the effect that
a slowdown in Asia could have on U.S. economic growth.
<PAGE>
GLOSSARY FOR MUTUAL FUND INVESTORS
- --------------------------------------------------------------------------------
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 by 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>
CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(unaudited)
INVESTMENTS--100.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
- ----------------------------------------------------------------------------------------------
BANKERS ACCEPTANCE--1.0%
<S> <C> <C>
$ 6,750,000 Bank of Nova Scotia, 5.620%, 6/09/98 ..................... $ 6,582,454
--------------
Total Bankers Acceptance (Cost $6,582,454) ............... 6,582,454
--------------
BANK NOTE--1.5%
10,000,000 Morgan Guaranty Trust New York, 5.615%, 1/01/98 (b) ...... 9,999,286
--------------
Total Bank Note (Cost $9,999,286) ........................ 9,999,286
--------------
CERTIFICATES OF DEPOSIT--15.5%
5,000,000 Societe Generale New York, 5.750%, 1/05/98 ............... 4,999,881
3,000,000 Societe Generale New York, 5.730%, 1/07/98 ............... 2,999,989
8,000,000 Svenska Handelsbanken, Inc., 5.780%, 1/07/98 ............. 8,000,119
5,000,000 ABN Amro Bank, 5.830%, 1/09/98 ........................... 4,999,923
6,000,000 Deutsche Bank AG New York, 5.640%, 1/12/98 ............... 6,000,018
5,000,000 Swiss Bank New York, 5.770%, 1/30/98 ..................... 4,999,594
4,140,000 Banque Nationale de Paris, 5.780%, 2/04/98 ............... 4,139,774
6,000,000 Canadian Imperial, 5.800%, 3/02/98 ....................... 5,999,798
5,000,000 Commerzbank AG New York, 5.820%, 3/03/98 ................. 4,999,384
5,000,000 National Westminster Bank New York, 5.770%, 3/03/98 ...... 4,998,830
7,000,000 Banque Nationale de Paris New York, 5.800%, 3/04/98 ...... 6,999,513
4,000,000 Royal Bank of Canada, 5.800%, 3/04/98 .................... 3,998,202
5,000,000 Societe Generale New York, 6.340%, 4/16/98 ............... 5,006,110
5,000,000 Societe Generale New York, 6.190%, 5/11/98 ............... 5,004,026
5,000,000 Royal Bank of Canada New York, 6.120%, 5/20/98 ........... 5,005,255
7,000,000 Swiss Bank New York, 6.050%, 5/22/98 ..................... 7,001,573
5,000,000 Royal Bank of Canada New York, 5.910%, 6/17/98 ........... 5,001,544
10,000,000 Swiss Bank New York, 5.870%, 8/19/98 ..................... 9,993,813
5,000,000 Deutsche Bank AG New York, 5.940%, 9/15/98 ............... 4,999,420
--------------
Total Certificates of Deposit (Cost $105,146,766) ........ 105,146,766
--------------
CERTIFICATES OF DEPOSIT (EURODOLLARS)--10.9%
8,000,000 Barclays Bank PLC, 5.645%, 1/05/98 ....................... 7,999,955
10,000,000 ABN Amro, 5.645%, 1/07/98 ................................ 9,999,990
10,000,000 Rabobank Nederland, 6.000%, 3/20/98 ...................... 10,002,389
5,000,000 Swiss Bank Corp., 5.980%, 3/20/98 ........................ 4,999,218
5,000,000 Commerzbank, 6.225%, 4/14/98 ............................. 5,004,827
8,000,000 Lloyds Bank PLC, 6.260%, 4/16/98 ......................... 8,005,693
7,000,000 Lloyds Bank PLC, 6.140%, 5/08/98 ......................... 7,006,923
10,000,000 National Westminster Bank PLC, 6.070%, 6/10/98 ........... 10,008,791
11,000,000 Svenska Handelsbanken, Inc., 5.900%, 6/10/98 ............. 11,000,904
--------------
Total Certificates of Deposit (Eurodollars) (Cost
$74,028,690) ........................................... 74,028,690
--------------
COMMERCIAL PAPER--71.2%
ASSET BACKED--1.9%
6,000,000 Clipper Receivables Corp., 5.600%, 1/22/98 ............... 5,980,400
7,000,000 Clipper Receivables Corp., 5.620%, 2/05/98 ............... 6,961,753
--------------
12,942,153
--------------
AUTOMOTIVE--6.5%
7,000,000 Ford Motor Credit Co., 5.600%, 1/09/98 ................... 6,991,289
2,000,000 General Motors Acceptance Corp., 5.590%, 1/12/98 ......... 1,996,584
6,000,000 General Motors Acceptance Corp., 5.560%, 1/15/98 ......... 5,987,027
6,000,000 General Motors Acceptance Corp., 5.570%, 1/16/98 ......... 5,986,075
6,000,000 General Motors Acceptance Corp., 5.540%, 1/20/98 ......... 5,982,457
5,000,000 Ford Motor Credit Co., 5.590%, 2/03/98 ................... 4,974,379
5,000,000 General Motors Acceptance Corp., 5.740%, 2/10/98 ......... 4,968,111
7,000,000 General Motors Acceptance Corp., 5.600%, 4/20/98 ......... 6,881,311
--------------
43,767,233
--------------
BANKS--15.4%
8,000,000 National Westminster Bank New York, 5.600%, 1/02/98 ...... 7,998,755
6,000,000 Toronto Dominion Holdings USA, Inc., 5.530%, 1/02/98 ..... 5,999,078
10,000,000 National Westminster Bank New York, 5.560%, 1/08/98 ...... 9,989,189
7,000,000 Bankers Trust New York Corp., 5.560%, 1/12/98 ............ 6,988,108
7,000,000 Bankers Trust New York Corp., 5.560%, 1/13/98 ............ 6,987,027
5,000,000 Bankers Trust New York Corp., 5.540%, 1/20/98 ............ 4,985,380
5,000,000 Toronto Dominion Holdings USA, Inc., 5.530%, 1/20/98 ..... 4,985,407
4,000,000 BNP Canada, 5.600%, 2/13/98 .............................. 3,973,244
6,000,000 Svenska Handelsbanken, 5.730%, 2/17/98 ................... 5,955,115
6,000,000 Svenska Handelsbanken, 5.740%, 2/17/98 ................... 5,955,037
5,000,000 Bank of Nova Scotia, 5.720%, 3/03/98 ..................... 4,951,539
10,000,000 Societe Generale Canada, 5.520%, 3/09/98 ................. 9,897,267
5,000,000 Societe Generale Canada, 5.720%, 3/16/98 ................. 4,941,211
3,200,000 BNP Canada, 5.550%, 3/26/98 .............................. 3,158,560
4,000,000 Bankers Trust New York Corp., 5.570%, 4/08/98 ............ 3,939,968
5,000,000 Royal Bank of Canada, 5.600%, 5/08/98 .................... 4,901,222
5,000,000 Bankers Trust New York Co., 5.700%, 6/09/98 .............. 4,874,125
4,000,000 BNP Canada, 5.670%, 6/15/98 .............................. 3,896,050
--------------
104,376,282
--------------
FINANCE--22.4%
4,000,000 General Electric Capital Corp., 5.650%, 1/06/98 .......... 3,996,861
6,000,000 Heller Financial, Inc., 5.650%, 1/06/98 .................. 5,995,292
7,000,000 Heller Financial, Inc., 5.670%, 1/09/98 .................. 6,991,180
6,000,000 General Electric Capital Corp., 5.640%, 1/20/98 .......... 5,982,140
10,000,000 Household Finance Corp., 5.540%, 1/21/98 ................. 9,969,222
10,000,000 Beneficial Corp., 5.580%, 1/23/98 ........................ 9,965,900
4,000,000 American Home Products Corp., 5.760%, 1/27/98 ............ 3,983,360
5,000,000 Avco Financial Services, Inc., 5.610%, 1/27/98 ........... 4,979,742
7,000,000 CIT Group Holdings, Inc., 5.590%, 1/29/98 ................ 6,969,565
6,000,000 Household Finance Corp., 5.510%, 1/29/98 ................. 5,974,287
6,000,000 Transamerica Financial Group, 5.740%, 1/30/98 ............ 5,972,257
4,500,000 Associates Corp. of North America, 5.620%, 2/06/98 ....... 4,474,710
5,000,000 General Electric Capital Corp., 5.600%, 2/09/98 .......... 4,969,667
5,000,000 Associates Corp. of North America, 5.650%, 2/10/98 ....... 4,968,611
5,000,000 Associates Corp. of North America, 5.690%, 2/11/98 ....... 4,967,599
5,000,000 Avco Financial Services, Inc., 5.750%, 2/13/98 ........... 4,965,660
5,000,000 Associates Corp. of North America, 5.690%, 2/20/98 ....... 4,960,486
10,000,000 CIT Group Holdings, Inc., 5.600%, 2/23/98 ................ 9,917,555
5,000,000 General Electric Capital Corp., 5.600%, 2/25/98 .......... 4,957,222
7,000,000 Beneficial Corp., 5.730%, 2/26/98 ........................ 6,937,607
5,000,000 Household Finance Corp., 5.720%, 3/02/98 ................. 4,952,333
7,000,000 Household Finance Corp., 5.730%, 3/02/98 ................. 6,933,150
4,600,000 General Electric Capital Corp., 5.540%, 3/04/98 .......... 4,556,111
4,400,000 American Express Credit Corp., 5.570%, 4/21/98 ........... 4,325,114
10,000,000 American Express Credit Corp., 5.550%, 9/21/98 ........... 9,594,542
--------------
152,260,173
--------------
INSURANCE--5.1%
5,000,000 Prudential Funding Corp., 5.620%, 1/20/98 ................ 4,985,169
5,000,000 Metlife Funding, Inc., 5.750%, 1/22/98 ................... 4,983,229
6,000,000 Prudential Funding Corp., 5.540%, 1/22/98 ................ 5,980,610
7,000,000 Prudential Funding Corp., 5.510%, 1/28/98 ................ 6,971,073
5,000,000 Metlife Funding, Inc., 5.740%, 1/29/98 ................... 4,977,678
7,000,000 Prudential Funding Corp., 5.620%, 2/06/98 ................ 6,960,660
--------------
34,858,419
--------------
RETAIL--4.6%
7,000,000 Sears Roebuck Acceptance Corporation, 5.560%, 2/02/98 .... 6,965,404
4,500,000 Sears Roebuck Acceptance Corporation, 5.600%, 2/25/98 .... 4,461,500
6,000,000 Sears Roebuck Acceptance Corporation, 5.520%, 2/27/98 .... 5,947,560
4,000,000 Sears Roebuck Acceptance Corporation, 5.620%, 2/27/98 .... 3,964,407
10,000,000 Sears Roebuck Acceptance Corporation, 5.700%, 3/11/98 .... 9,890,750
--------------
31,229,621
--------------
SECURITIES--15.3%
5,000,000 Merrill Lynch & Co., 5.570%, 1/05/98 ..................... 4,996,906
3,000,000 Merrill Lynch & Co., 5.580%, 1/12/98 ..................... 2,994,885
5,000,000 Goldman Sachs Group, 5.800%, 1/13/98 ..................... 4,990,333
2,000,000 Merrill Lynch & Co., 5.570%, 1/23/98 ..................... 1,993,192
10,000,000 Lehman Brothers Holdings, Inc., 5.780%, 1/28/98 .......... 9,956,650
5,000,000 Lehman Brothers Holdings, Inc., 5.900%, 1/30/98 .......... 4,976,236
7,000,000 Merrill Lynch & Co., 5.570%, 2/05/98 ..................... 6,962,093
5,300,000 Merrill Lynch & Co., 5.560%, 2/09/98 ..................... 5,268,076
5,000,000 Morgan Stanley Group, Inc., 5.760%, 2/18/98 .............. 4,961,600
8,000,000 Lehman Brothers Holdings, Inc., 5.730%, 2/26/98 .......... 7,928,693
6,000,000 Lehman Brothers Holdings, Inc., 5.750%, 4/01/98 .......... 5,913,750
5,000,000 Goldman Sachs Group, 5.680%, 4/17/98 ..................... 4,916,378
5,000,000 Goldman Sachs Group, 5.650%, 4/22/98 ..................... 4,912,896
5,000,000 Merrill Lynch & Co., 5.590%, 4/22/98 ..................... 4,913,821
5,000,000 Goldman Sachs Group, 5.700%, 5/11/98 ..................... 4,897,083
6,000,000 Goldman Sachs Group, 5.700%, 5/12/98 ..................... 5,875,550
6,000,000 Goldman Sachs Group, 5.650%, 6/04/98 ..................... 5,854,984
7,000,000 J.P. Morgan & Company, Inc., 5.640%, 6/19/98 ............. 6,814,663
5,000,000 Merrill Lynch & Co., 5.620%, 9/08/98 ..................... 4,804,861
--------------
103,932,650
--------------
Total Commercial Paper (Cost $483,366,531) ............... 483,366,531
--------------
Total Investments--100.1% (Cost $679,123,727) (c) ........ 679,123,727
Other assets less liabilities ............................ (509,763)
--------------
Total Net Assets--100% ................................... $ 678,613,964
==============
(a) See note 1a to the financial statements.
(b) Variable rate interest certificates are instruments whose interest rates vary with changes
in a designated base rate on a specific date. 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 $679,123,727.
Percentage of Net Assets invested in obligations of foreign banks or foreign branches of U.S. banks
at December 31, 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.
</TABLE>
<PAGE>
CASH MANAGEMENT TRUST -- U.S. GOVERNMENT SERIES
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(unaudited)
INVESTMENTS--100.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
- ----------------------------------------------------------------------------------------------
U.S. GOVERNMENT--23.5%
<S> <C> <C>
$ 3,000,000 United States Treasury Bill, 5.220%, 2/05/98 .............. $ 2,984,775
4,000,000 United States Treasury Bill, 5.465%, 4/02/98 .............. 3,944,743
3,000,000 United States Treasury Bill, 5.345%, 6/25/98 .............. 2,922,052
-------------
9,851,570
-------------
REPURCHASE AGREEMENT--77.3%
32,400,000 Repurchase agreement with Merrill Lynch dated 12/31/97 at
6.500% to be repurchased at $32,411,700 on 1/02/98
collateralized by $32,285,000 U.S. Treasury Note, 5.875%
due 8/15/98, with a value of $33,051,769 ................ 32,400,000
-------------
Total Investments--100.8% (Cost $42,251,570) (b) .......... 42,251,570
Other assets less liabilities ............................. (349,339)
-------------
Total Net Assets--100% .................................... $ 41,902,231
=============
(a) See Note 1a to the financial statements.
(b) The aggregate cost for federal income tax purposes was $42,251,570.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX EXEMPT MONEY MARKET TRUST
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(unaudited)
TAX EXEMPT OBLIGATIONS--99.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT ISSUER VALUE (a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALABAMA--3.6%
$ 2,300,000 Athens Industrial Development Board Revenue, 4.650%, (b) ... $ 2,300,000
-----------
ARIZONA--3.2%
1,000,000 Arizona State Transportation Board Excise Tax, 6.800%,
7/01/98 .................................................. 1,014,197
1,000,000 Arizona State Certificates of Participation, 5.400%, 9/01/98
.......................................................... 1,010,013
-----------
2,024,210
-----------
CALIFORNIA--7.8%
2,000,000 Los Angeles County, 4.500%, 6/30/98 ........................ 2,006,171
3,000,000 Riverside County, 4.500%, 6/30/98 .......................... 3,007,818
-----------
5,013,989
-----------
DISTRICT OF COLUMBIA--5.0%
3,200,000 District of Columbia, 5.000%, (b) .......................... 3,200,000
-----------
FLORIDA--9.2%
600,000 Alachua County Health Facilities Authority, 3.850%, 2/11/98 600,000
3,100,000 Broward County Multi Family Housing, 3.850%, (b) ........... 3,100,000
2,200,000 Dade County Special Obligation, 4.200%, (b) ................ 2,200,000
-----------
5,900,000
-----------
HAWAII--8.6%
2,310,000 Hawaii State Department of Budget & Finance, 4.200%, (b) ... 2,310,000
3,200,000 Hawaii State Housing Finance & Development Corp., 4.300%, (b) 3,200,000
-----------
5,510,000
-----------
IDAHO--1.6%
1,000,000 Idaho State, 5.625%, 6/30/98 ............................... 1,003,536
-----------
ILLINOIS--20.1%
1,000,000 Chicago, 3.650%, 2/05/98 ................................... 1,000,000
500,000 Northwest Suburban Municipal Water Agency, 3.850%, 5/01/98 . 500,000
2,655,000 Elmhurst Revenue, 4.300%, (b) .............................. 2,655,000
3,200,000 Illinois Health Facilities Authority Revenue, 4.200%, (b) .. 3,200,000
2,500,000 Jackson/Union Counties, 3.750%, (b) ........................ 2,500,000
3,000,000 St. Charles Industrial Development Revenue, 3.750%, (b) .... 3,000,000
-----------
12,855,000
-----------
INDIANA--2.0%
1,300,000 Indiana Bond Bank, 4.000%, 1/21/98 ......................... 1,300,104
-----------
KANSAS--1.1%
700,000 Burlington Pollution Control Revenue, 3.700%, 2/02/98 ...... 700,000
-----------
KENTUCKY--5.3%
1,200,000 Pendleton County Revenue, 3.950%, 7/01/98 .................. 1,200,000
2,200,000 Mayfield Multi City Lease, 3.900%, (b) ..................... 2,200,000
-----------
3,400,000
-----------
LOUISIANA--4.8%
3,100,000 Louisiana Public Facilities Hospital Authority, 4.200%, (b) 3,100,000
-----------
MICHIGAN--3.1%
2,000,000 Detroit School District, 4.500%, 5/01/98 ................... 2,003,821
-----------
MINNESOTA--5.0%
1,870,000 Mendota Heights, 4.500%, (b) ............................... 1,870,000
1,330,000 Mendota Heights Housing Mortgage Revenue, 4.500%, (b) ...... 1,330,000
-----------
3,200,000
-----------
NORTH CAROLINA--0.9%
580,000 Iredell County Memorial Hospital Revenue, 3.900%, 10/01/98 . 580,000
-----------
OREGON--0.3%
200,000 Portland Pollution Control, 5.000%, (b) .................... 200,000
-----------
SOUTH CAROLINA--5.0%
3,200,000 Florence County Hospital Revenue, 4.550%, (b) .............. 3,200,000
-----------
TEXAS--7.7%
1,000,000 North Central Texas Health Facility Development,
3.750%, 1/09/98 .......................................... 1,000,000
2,000,000 Texas State, 4.750%, 8/31/98 ............................... 2,011,813
600,000 Grapevine Industrial Development Corporation Revenue,
5.000%, (b) .............................................. 600,000
1,325,000 Nueces County Health Facilities, 3.850%, (b) ............... 1,325,000
-----------
4,936,813
-----------
UTAH--2.8%
1,800,000 Provo City Housing Authority, 4.650%, (b) .................. 1,800,000
-----------
WYOMING--2.3%
1,500,000 Sweetwater County 1988A Yr 1&2, 3.850%, 2/19/98 ............ 1,500,000
-----------
Total Investments--99.4% (Cost $63,727,473)(c) ............. 63,727,473
Other assets less liabilities .............................. 387,042
-----------
Total Net Assets--100% ..................................... $64,114,515
===========
(a) See Note 1a to the financial statements.
(b) This is a floating rate note which is an instrument whose interest rate varies 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). This instrument is payable on demand and is secured
by letters of credit or other credit support agreements from major banks.
(c) The aggregate cost for federal income tax purposes was $63,727,473.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1997
(unaudited)
<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 ................................. $679,123,727 $ 9,851,570 $63,727,473
Repurchase agreements ...................... -- 32,400,000 --
------------ ----------- -----------
Total Investments ............................ 679,123,727 42,251,570 63,727,473
Cash ......................................... 125,117 4,962 34,196
Receivable for:
Shares of the Trust sold ................... 2,981,584 52,301 220,392
Interest ................................... 5,834,345 5,850 531,114
Prepaid registration ......................... 2,000 2,000 7,000
------------ ----------- -----------
688,066,773 42,316,683 64,520,175
LIABILITIES
Payable for:
Shares of the Trust redeemed ............... 8,122,039 302,081 273,456
Dividends declared ......................... 445,145 24,858 30,846
Accrued expenses:
Management fees ............................ 243,933 15,728 30,539
Deferred trustees' fees .................... 36,878 33,407 37,953
Accounting and administrative .............. 8,053 -- 1,900
Other ...................................... 596,761 38,378 30,966
------------ ----------- -----------
9,452,809 414,452 405,660
------------ ----------- -----------
NET ASSETS ..................................... $678,613,964 $41,902,231 $64,114,515
============ =========== ===========
Net assets consist of:
Capital paid in Class A shares ............. $667,704,470 $41,010,448 $63,961,387
Capital paid in Class B shares ............. 10,794,408 830,841 153,128
Undistributed net investment income ........ 118,639 60,942 --
Accumulated net realized losses ............ (3,553) -- --
------------ ----------- -----------
NET ASSETS ..................................... $678,613,964 $41,902,231 $64,114,515
============ =========== ===========
Shares of beneficial interest outstanding,
no par value
Class A shares ............................. 667,704,470 41,010,948 63,961,387
Class B shares ............................. 10,794,408 830,341 153,128
------------ ----------- -----------
Shares of beneficial interest outstanding ..... 678,498,878 41,841,289 64,114,515
=========== ========== ==========
Net asset value per share Class A and Class
B
shares* .................................. $1.00 $1.00 $1.00
===== ===== =====
COST OF INVESTMENTS ............................ $679,123,727 $42,251,570 $63,727,473
============ =========== ===========
* 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
- --------------------------------------------------------------------------------
Six Months Ended December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
--------------------------- TAX EXEMPT
MONEY U. S. MONEY
MARKET GOVERNMENT MARKET
SERIES SERIES TRUST
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest .................................. $20,132,448 $ 1,275,680 $ 1,325,305
----------- ----------- -----------
Expenses
Management fees ......................... 1,468,113 98,104 137,713
Trustees' fees .......................... 11,044 8,548 8,417
Accounting and administrative ........... 45,004 24,118 11,149
Custodian ............................... 70,032 15,837 21,034
Transfer agent .......................... 1,340,207 55,312 67,275
Audit and tax services .................. 12,605 12,600 12,600
Legal ................................... 3,123 3,123 3,123
Printing ................................ 76,691 6,204 6,496
Registration ............................ 51,387 22,282 24,519
Insurance ............................... 17,322 375 110
Miscellaneous ........................... 35,900 2,190 2,336
----------- ----------- -----------
Total expenses ............................ 3,131,428 248,693 294,772
Less - waiver of fee by investment adviser,
subadviser and distributor .............. -- (24,118) (101,113)
----------- ----------- -----------
Net investment income ..................... 17,001,020 1,051,105 1,131,646
REALIZED LOSS ON INVESTMENTS - NET .......... (1,709) -- --
----------- ----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS .. $16,999,311 $ 1,051,105 $ 1,131,646
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CASH MANAGEMENT TRUST
---------------------------------------------------------------------------
MONEY MARKET SERIES U. S. GOVERNMENT SERIES
------------------------------------- ---------------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1997 1997 1997 1997
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ........... $ 31,512,764 $ 17,001,020 $ 2,456,840 $ 1,051,105
Net realized gain (loss) on
investments ................... (1,820) (1,709) 90 --
--------------- --------------- --------------- -------------
Increase in net assets from
operations .................... 31,510,944 16,999,311 2,456,930 1,051,105
--------------- --------------- --------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (a) ....... (31,392,304) (16,999,311) (2,395,989) (1,051,105)
Net realized gain on investments (118,639) -- (60,941) --
--------------- --------------- --------------- -------------
(31,510,943) (16,999,311) (2,456,930) (1,051,105)
--------------- --------------- --------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of shares 1,265,900,028 784,367,883 95,618,455 36,279,325
Net asset value of shares issued
in connection with the
reinvestment of dividends from
net investment income and
distributions from net
realized gains ................ 30,704,669 16,038,637 2,405,190 1,001,344
Cost of shares redeemed ......... (1,261,566,359) (820,451,481) (101,434,636) (44,514,391)
--------------- --------------- --------------- -------------
Total increase (decrease) in
net assets derived from
capital share transactions .... 35,038,338 (20,044,961) (3,410,991) (7,233,722)
--------------- --------------- --------------- -------------
Total increase (decrease) in
net assets .................... 35,038,339 (20,044,961) (3,410,991) (7,233,722)
NET ASSETS
Beginning of the period ......... 663,620,586 698,658,925 52,546,944 49,135,953
--------------- --------------- --------------- -------------
End of the period (b) .......... $ 698,658,925 $ 678,613,964 $ 49,135,953 $ 41,902,231
=============== =============== =============== =============
(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 $60,942 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
- ------------------------------------------------------------------------------
(uanudited)
TAX EXEMPT MONEY
MARKET TRUST
----------------------------
SIX MONTHS
YEAR ENDED ENDED
JUNE 30, DECEMBER 31,
1997 1997
----------- -----------
FROM OPERATIONS
Net investment income ....................... $ 2,150,924 $ 1,131,646
Net realized gain on investments ............ 5,035 --
----------- -----------
Increase in net assets from operations ...... 2,155,959 1,131,646
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (a) ................... (2,155,959) (1,131,646)
----------- -----------
(2,155,959) (1,131,646)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of shares ............ 91,844,146 39,154,466
Net asset value of shares issued in
connection with the reinvestment of
dividends from net investment
income and distributions from net
realized gain ............................. 2,121,276 1,081,165
Cost of shares redeemed ..................... (91,126,563) (43,857,258)
----------- -----------
Total increase (decrease) in net assets
derived from capital share transactions ... 2,838,859 (3,621,627)
----------- -----------
Total increase (decrease) in net assets ..... 2,838,859 (3,621,627)
NET ASSETS
Beginning of the period ..................... 64,897,283 67,736,142
----------- -----------
End of the period ........................... $67,736,142 $64,114,515
=========== ===========
(a) Amount distributed includes net realized gain of $5,035 for the year ended
June 30, 1997.
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(unaudited0
<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>
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
Six Months Ended December 31, 1997 ... 1.00 0.0244 -- 0.0244
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
Six Months Ended December 31, 1997 ... 1.00 0.0230 -- 0.0230
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
Six Months Ended December 31, 1997 ... 1.00 0.0166 -- 0.0166
(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 0.83%, 0.89%, 0.85%, 0.90% and 0.85% for the years ended June 30, 1993, 1994,
1995, 1996, 1997 and 0.86% for six months ended December 31, 1997 for Tax Exempt Money Market
Trust. 0.96% and 0.99% for the U.S. Government Series for the years ended June 30, 1996 and
1997, respectively and 1.08% for the six months ended December 31, 1997.
(c) Computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS -- continued
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS
- -------------------------------------
RATIO OF RATIO OF
NET OPERATING NET
DIVIDENDS DIVIDENDS ASSETS EXPENSES TO INCOME TO
FROM NET FROM 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
(0.0244) -- (0.0244) 1.00 4.90(c) 678,614 0.89(c) 4.86(c)
(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
(0.0023) -- (0.0230) 1.00 4.61(c) 41,902 0.97(c) 4.55(c)
(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
(0.0166) -- (0.0166) 1.00 3.30(c) 64,115 0.56(c) 3.28(c)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1997
(unudited)
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. The Subadviser 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 portfolio's ability to dispose of the underlying
security.
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 December 31, 1997, there were no when
issued securities.
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.
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 six months ended December 31, 1997:
NEW ENGLAND CASH MANAGEMENT TRUST -- Purchase and sales or maturities of
short-term obligations, including securities purchased subject to repurchase
agreements, aggregated $2,658,081,869 and $2,687,501,612 respectively, for the
Money Market Series. Purchases and sales or maturities of United States
government obligations, including securities purchased subject to repurchase
agreements, aggregated $3,906,247,932 and $3,913,050,000 respectively, for the
U.S. Government Series.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- Purchases and sales or maturities
of short-term obligations aggregated $68,942,983 and $82,000,000 respectively.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
During the six months ended December 31, 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 the 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 the 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
$772,998 New England Funds Management
$695,115 Back Bay Advisors
FEES EARNED FROM U.S. GOVERNMENT SERIES
$49,052 New England Funds Management
$49,052 Back Bay Advisors
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 six months ended December 31, 1997
are as follows:
FEES EARNED(a)
--------------
$68,857 New England Funds Management
$68,856 Back Bay Advisors
(a) Before reduction pursuant to voluntary expense limitations.
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 six months ended
December 31, 1997 were reduced by $50,556 and $50,557, respectively. Effective
January 1, 1998 the voluntary limitation changed to 0.65 of 1.00% of average
net assets.
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, and financial reporting
functions and clerical functions relating to the Trusts, and (ii) expenses for
services required in connection with the preparation of registration
statements and prospectuses, registration of shares in various states,
shareholder reports and notices, proxy solicitation material furnished to
shareholders of the Trusts or regulatory authorities and reports and
questionnaires for SEC compliance. For the six months ended December 31, 1997,
these expenses amounted to $45,004 for the Cash Management Trust Money Market
Series and $11,149 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 $24,118 for the six months ended December 31, 1997.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent for the Trusts. For the six months ended December 31, 1997,
the New England Cash Management Trust Money Market Series, U.S. Government
Series and Tax Exempt Money Market Trust paid $780,189, $34,305 and $35,269,
respectively, to New England Funds as compensation for its services in that
capacity. For the six months ended December 31, 1997, the Cash Management
Trust Money Market Series, U.S. Government Series and Tax Exempt Money Market
Series received $5,970, $392 and $588, respectively, in transfer agent
credits. The transfer agent expense in the Statement of Operations is net of
these credits.
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:
TAX EXEMPT
MONEY MARKET U.S. GOV'T MONEY
SERIES SERIES MARKET TRUST
------------ ---------- ------------
Annual Retainer $1,982 $1,413 $1,412
Meeting Fee $109/meeting $109/meeting $109/meeting
Committee Meeting Fee $65/meeting $65/meeting $65/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 December 31, 1997 as a
percentage of the Trust's total net assets: Government (23.7%), Hospitals
(27.2%), Housing (17.7%), and Industrial (16.4%). The Trust also had more than
10% of its total net assets invested in Illinois (20.1%) and had more than 10%
of its net assets backed by letters of credit with Sumitomo Bank (14.5%).
6. SUBSEQUENT EVENT. The Board of Trustees on behalf of the New England Cash
Management Trust voted to liquidate the U.S. Government Series effective
February 27, 1998.
Fund shareholders are encouraged to sell their shares and reinvest their
proceeds into the Money Market Series or a longer-term New England Fund. In
the event a shareholder does nothing, on February 27, 1998, New England Funds
will automatically liquidate their shares and reinvest the proceeds into the
Money Market Series.
<PAGE>
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
Supplement dated March 1, 1998 to the New England Money Market Fund Prospectus
for Class A and B shares dated September 1, 1997 (as supplemented November 17,
1997 and January 1, 1998).
Effective February 27, 1998, the U.S. Government Series of New England Cash
Management Trust was liquidated, and is therefore no longer available for
purchase or exchange.
Effective March 1, 1998, the Money Market Series of New England Cash
Management Trust offers Class C shares in addition to Class A, Class B and
Class Y shares.
The cover page of the Prospectus is revised to reflect that while Class A, B,
and C shares are offered at net asset value, under conditions described in the
Prospectus, a contingent deferred sales charge (a "CDSC") is imposed upon
redemption of Fund shares originally acquired by exchange of shares from any
of the New England Stock or Bond Funds (the "Stock or Bond Funds").
THE SHAREHOLDER TRANSACTIONS EXPENSES CHART IN THE "SCHEDULE OF FEES" SECTION
IS REVISED TO READ AS FOLLOWS:
<TABLE>
<CAPTION>
NEW ENGLAND CASH NEW ENGLAND TAX
MANAGEMENT TRUST -- EXEMPT MONEY
MONEY MARKET SERIES MARKET TRUST
---------------------------------------- --------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed on
a Purchase .................................... None None None None None
Maximum Contingent Deferred Sales
Change ........................................ None* None* None* None* None*
</TABLE>
* Shares of each class are sold without any sales charge. However, Class A,
Class B and Class C shares may be subject to a contingent deferred sales
charge if the shares were purchased by exchange from a Stock or Bond Fund.
See "Selling Fund Shares-Contingent Deferred Sales Charges."
THE FIRST PARAGRAPH OF THE SECTION ENTITLED "BUYING FUND SHARES--6 WAYS TO BUY
FUND SHARES" IS REVISED TO READ AS FOLLOWS:
The Money Market Fund offers three classes of shares, Class A, Class B and
Class C, and the Tax Exempt Fund offers two classes of shares, Class A and
Class B, in order to enable investors in these classes of the Stock or Bond
Funds to invest in money market shares. The Stock Funds are: New England
Growth Fund, New England International Equity Fund, New England Star Advisers
Fund, New England Star Worldwide Fund, New England Star Small Cap Fund, New
England Capital Growth Fund, New England Value Fund, New England Growth
Opportunities Fund, New England Balanced Fund, New England Equity Income Fund
and, effective 3/31/98, New England Bullseye Fund. The Bond Funds are: New
England High Income Fund, New England Strategic Income Fund, New England
Government Securities Fund, New England Bond Income Fund, New England Limited
Term U.S. Government Fund, New England Adjustable Rate U.S. Government Fund,
New England Municipal Income Fund, New England Massachusetts
Tax Free Income Fund, New England Intermediate Term Tax Free Fund of
California and New England Intermediate Term Tax Free Fund of New York.
THE FIRST TWO PARAGRAPHS UNDER THE SECTION ENTITLED "OWNING FUND SHARES--
EXCHANGING AMONG NEW ENGLAND FUNDS--CLASS A SHARES" ARE REVISED TO READ AS
FOLLOWS:
You or your investment dealer can exchange some or all of your Class A shares
of a Fund for Class A shares of any other Fund described in this prospectus
with no sales charge, or exchange some or all of your Class A shares of a Fund
which have not previously been subject to a sales charge for Class B shares of
either Fund described in this prospectus or for Class C shares of the Money
Market Fund with no sales charge. Class A, Class B or Class C shares of a Fund
acquired by exchange from either another Fund or a Stock or Bond Fund will be
subject to a CDSC if, and to the same extent as, the shares exchanged were
subject to a CDSC.
Class A Fund shares on which no sales charge was previously paid may be
exchanged (i) for Class A shares of any of the Stock or Bond Funds on the
basis of relative net asset value plus the sales charge applicable to initial
purchases of Class A shares of the Stock or Bond Fund into which you are
exchanging, or (ii) for Class B or Class C shares of any of the Stock or Bond
Funds on the basis of relative net asset value, subject to the CDSC schedule
of the Stock or Bond Fund into which you are exchanging.
THE FOLLOWING PARAGRAPH IS ADDED IMMEDIATELY FOLLOWING THE FIRST PARAGRAPH IN
THE SECTION ENTITLED "OWNING FUNDS SHARE--EXCHANGING AMONG NEW ENGLAND FUNDS--
CLASS B SHARES":
CLASS C SHARES
Class C shares of the Money Market Fund may be exchanged for Class C shares of
any of the Stock or Bond Funds which offer Class C shares on the basis of
relative net asset value, subject to the CDSC schedule of the Stock or Bond
Fund acquired. For purposes of computing the CDSC payable upon redemption of
shares acquired by such exchange, the holding period of any Class C Stock or
Bond Fund shares that were exchanged for Class C shares of the Money Market
Fund is included, but the holding period of the Class C shares of the Money
Market Fund is not included. See "Selling Fund Shares--Contingent Deferred
Sales Charges."
THE FOLLOWING TEXT IS ADDED TO THE END OF THE FIRST PARAGRAPH IN THE SECTION
ENTITLED "SELLING FUND SHARES--CONTINGENT DEFERRED SALES CHARGES":
CLASS C -- Class C shares of the Money Market Fund will be subject to a CDSC
upon redemption if the shares were acquired by exchange of Class C shares of a
Stock or Bond Fund which were subject to a CDSC at the time of exchange. If
such shares are exchanged for Class C shares of a Stock or Bond Fund rather
than redeemed, then the Class C Stock or Bond Fund shares will continue to be
subject to a CDSC during the applicable period. The time that Class C shares
of the Money Market Fund are held is not included in the holding period used
to determine the CDSC. For Class C Stock or Bond Fund shares purchased on or
after March 1, 1998, a 1% CDSC applies to redemptions made within the first 12
months following the purchase date.
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
STOCK FUNDS
Star Small Cap Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Growth Opportunities Fund
Value Fund
Equity Income 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
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>
---------------
Bulk Rate
U.S. Postage
Paid
Brockton, MA
Permit No. 770
---------------
[LOGO]
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet (R)
- ----------------------
399 Boylston Street
Boston, Massachusetts
02116
- ----------------------
- ---------------------
[Logo]
MUTUAL FUND
SERVICE AWARD
- ---------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
- ---------------------
1995 o 1996 o 1997
MM56-1297
[Recycle Logo] Printed On Recycled Paper
