<PAGE>
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ANNUAL REPORT AND PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
[logo]
New England
Municipal Income Fund
- --------------------------------------------------------------------------------
New England
Municipal Income fund
- -------------------
December 31, 1996
- -------------------
<PAGE>
February 1997
- --------------------------------------------------------------------------------
[Photo of Henry L.P. Schmelzer]
Dear New England Funds Shareholder,
Taken together, 1995 and 1996 constituted the sixth strongest back-to-back years
for the U.S. stock market since 1915, as measured by percentage gain in the Dow
Jones Industrial Average (according to Bloomberg Business News).
Most New England Funds portfolio managers believe that the forces behind this
rally -- low inflation, relatively stable interest rates and strong corporate
profits -- will persist, at least for a time. Nevertheless, bull markets can
suddenly turn quiet; they can decline modestly; or they can reverse course
sharply. No one can predict what is ahead, nor can anyone guarantee whether the
market's strength will extend even further in 1997 and beyond.
Maintain a Long-Term Perspective
Whatever the market's direction, you should be prepared to consider any
short-term trends in the broader context of your long-term personal goals,
including the accumulation of financial assets. One way to manage this important
process is by diversifying your investments. While U.S. stocks have historically
been the strongest performers, you may, depending on your financial goals and
needs, also benefit from investing in various types of bond funds, and by
participating in growing overseas markets.
Remember that each investment has its own unique risks. What's more, no strategy
can assure a profit or protect against a loss. However, one time-tested approach
is to invest regularly and stay invested -- in good times and bad -- to avoid
the pitfall of guessing what the market might do in the short run.
Our Multiple-Adviser Approach Sets Us Apart
Many financial representatives recommend New England Funds to their clients
because of our distinctive multiple-adviser approach. For each fund, we
hand-pick a specific subadviser or subadvisers with significant experience and
demonstrated skill in selecting investments that are in tune with that fund's
stated objective. We call it matching the talent to the task.
Finally, it may interest you to learn that you are part of a major national
trend. In 1996, nearly 37 million U.S. households owned mutual funds, according
to the Investment Company Institute, an industry trade organization. Mutual
funds are now a cornerstone of retirement, college and other investment plans
for millions of Americans.
New England Funds has grown with the industry and is now over $6 billion in
size. We thank you for helping us reach this important milestone, and look
forward to serving your investment needs well into the future.
Sincerely,
/s/ Henry L.P. Schmelzer
- ------------------------
Henry L.P. Schmelzer, President
For more information, including a prospectus for any New England Fund, please
contact your financial representative or call the Investor Services and
Marketing Group at 800-225-5478. Please read the prospectus carefully, including
the information on charges and expenses, before you invest.
<PAGE>
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NEW ENGLAND ADJUSTABLE RATE U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
AWARD WINNING SERVICE -- TWO YEARS RUNNING
- --------------------------------------------------------------------------------
- --------------------- For two years running we're proud to announce that
[Logo] DALBAR, an independent evaluator of mutual fund
QUALITY service, has awarded New England Funds its Quality
TESTED SERVICE Tested Service Seal for "providing the highest
1996 tier of service excellence in the mutual fund
- --------------------- industry." New England Funds is one of just three
DALBAR mutual fund companies to earn this distinction in
HONORS COMMITMENT TO: each of the last two years -- another reason why
INVESTORS we are becoming known as the mutual fund company
- --------------------- Where The Best Minds Meet(TM).
INVESTMENT RESULTS THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities index
measures the performance of a theoretical portfolio. Unlike a fund, the index is
unmanaged; there are no expenses that affect the results. In addition, few
investors could purchase all of the securities necessary to match the index.
And, if they could, they would incur transaction costs and other expenses.
<PAGE>
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NEW ENGLAND MUNICIPAL INCOME FUND
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A $10,000 Investment in Class A Shares
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Compared to Lehman Municipal Index(4) and the Cost of Living(5)
Cost of
DATE RANGE NAV POP Lehman* Living
- -------------------------------------------------
1996 $19,348 $18,478 $21,185 $14,363
1995 $18,492 $17,660 $20,284 $13,902
1994 $15,774 $15,064 $17,269 $13,548
1993 $17,157 $16,385 $18,211 $13,194
1992 $15,231 $14,545 $16,219 $12,841
1991 $13,981 $13,352 $14,906 $12,479
1990 $12,529 $11,965 $13,292 $12,109
1989 $11,874 $11,340 $12,389 $11,412
1988 $10,819 $10,333 $11,192 $10,905
1987 $ 9,707 $9,270 $10,151 $10,443
12/31/86 $10,000 $ 9,550 $10,000 $10,000
This illustration represents past performance of Class A shares and cannot
predict future results. Investment return and principal value may vary,
resulting in a gain or loss on the sale of shares. Class B share performance
will be greater or less than that shown based on differences in inception date,
fees and sales charges. All Index and Fund performance assumes reinvested
distributions.
- --------------------------------------------------------------------------------
CREDIT QUALITY COMPOSITION -- 12/31/96
- --------------------------------------------------------------------------------
A 9.53%
AA 6.33%
AAA 17.19%
BBB 54.73%
Other 12.22%
AVERAGE PORTFOLIO QUALITY = A- AVERAGE PORTFOLIO MATURITY = 21.5 YEARS
Quality ratings provided by Standard & Poor's Corporation.
<PAGE>
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NEW ENGLAND MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96*
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CLASS A 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 4.63% 6.71% 6.82%
With Max. Sales Charge(2) -0.10 5.75 6.34
Lipper General Muni. Average(6) 3.30 6.79 7.19
CLASS B (INCEPTION 9/13/93) 1 YEAR 3 YEARS SINCE INCEPTION
Net Asset Value(1) 3.85% 3.33% 3.33%
With CDSC(3) -0.15 2.42 2.80
Lehman Municipal Index(4) 4.44 5.18 5.22
Lipper General Muni. Average(6) 3.30 4.14 n/a
YIELDS AS OF 12/31/96*
- --------------------------------------------------------------------------------
CLASS A CLASS B
SEC Yield(7) 5.17% 4.66%
Taxable Equivalent Yield** 8.56 7.72
* These returns represent past performance. Investment return and principal
value will fluctuate so that shares, upon redemption, may be worth more or
less than original cost.
**Taxable equivalent yield is based on the maximum federal income tax bracket of
39.6%. The alternative minimum tax may apply. Some federal and state taxes may
apply.
NOTES TO CHARTS AND PERFORMANCE UPDATE
(1) Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
(2) With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 4.50% at the time of
purchase of Class A shares.
(3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum
4% sales charge is applied to a redemption of Class B shares. The sales
charge will decrease over time, declining to zero five years after the
purchase of shares.
(4) Lehman Municipal Index is an unmanaged index of bonds issued by states,
municipalities and other governmental entities having maturities of more
than one year. The Index performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments.
(5) Cost of Living is based on the Consumer Price Index, a widely recognized
measure of the cost of goods and services in the United States, calculated
by the U.S. Bureau of Labor Statistics.
(6) Lipper Average is an average of the total return performance (calculated on
the basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund ranking
service.
(7) SEC Yield is based on the Fund's net investment income over a 30-day period
and is calculated in accordance with Securities and Exchange Commission
guidelines.
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NEW ENGLAND MUNICIPAL INCOME FUND
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QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
Q. How did New England Municipal Income Fund perform in 1996?
[Photo of Nathan Wentworth Back Bay Advisors, L.P.]
The Fund's performance was very strong despite widely fluctuating interest
rates during the year. For the 12-month period, the Fund had a total return
of 4.63% for Class A shares, based on net asset value. This performance is
better than the average return of 3.30% for the 225 municipal bond funds
tracked by Lipper. As of December 31, 1996, the Fund's 30-day SEC yields7
were 5.17% and 4.66% for Class A and Class B shares, respectively, which
translate into taxable equivalent yields of 8.56% and 7.72% for taxable
investments for investors in the maximum federal tax bracket of 39.6%.*
Q. How did you manage the Fund during the year?
We began the year with the Fund positioned defensively, with a focus on
market sectors that are less sensitive to changes in interest rates, such as
higher yielding securities. This emphasis reflected our belief that weakening
demand and a potentially volatile interest rate environment would depress
municipal bond values and erase much of 1995's gain. We reduced the Fund's
duration to about six years, thereby lowering its sensitivity to interest
rate changes. Duration measures a portfolio's sensitivity to changes in
interest rates; a lower duration results in smaller price declines when
interest rates rise. Because bond prices and interest rates move in opposite
directions, this restructuring succeeded when the market declined early in
the period.
We also underweighted insured municipal bonds, which tend to underperform in
volatile markets due to their high liquidity and low coupon characteristics;
these bonds are often sold off first when rates increase, depressing their
value. As the year wore on, there was no significant increase in inflation
and the economy seemed to be slowing down of its own accord to a more
sustainable growth rate. These conditions led us to gradually shift the
portfolio by increasing the Fund's duration to a range of 7.25 to 7.75 years.
This move better positioned us to take advantage of the decline in interest
rates that occurred during October and November.
Some of our BBB and lower rated investments posted very strong performance
during the year as a result of their lower interest rate sensitivity and
their more credit intensive nature. Our credit research team added value to
the portfolio by identifying several sectors that benefited from the strong
economy, such as the airline sector.
Avoiding poorly performing sectors also played a positive role in the Fund's
return for the year. Our investments in the health care sector remained
small, at less than 2% of the Fund's assets, as the uncertainty introduced
three years ago by Clinton's health care reform initiative continued. We also
continued to underweight and invest very selectively in electric utility
bonds, which represented less than 7% of the Fund's assets at year-end. This
sector also contended with uncertainty regarding potential competitive and
regulatory changes.
Q. What is your investment outlook for the months ahead?
We do not anticipate any economic events that would cause us to fundamentally
change our investment strategy. We believe that the economy will continue to
be fairly robust, although growing at a slower, more sustainable rate. We
expect interest rates to be fairly stable in the first quarter as the market
digests 1996's fourth quarter results, and we will be watching the retail
sales and employment reports closely for any indication of a stronger than
expected economy, which would be negative for bond prices. We don't expect
any meaningful changes in supply and demand dynamics in the municipal market
over the next year, so the challenge of selecting bonds with appealing price
and yield characteristics will continue.
*The alternative minimum tax and some federal or state taxes
may apply.
<PAGE>
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PORTFOLIO COMPOSITION
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Investments as of December 31, 1996
TAX EXEMPT OBLIGATIONS--98.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
RATINGS (C)
(UNAUDITED)
----------------------------------
FACE STANDARD
AMOUNT ISSUER MOODY'S & POOR'S VALUE (A)
- --------------------------------------------------------------------------------------------------------------------
ALABAMA--0.8%
<S> <C> <C> <C> <C>
$1,500,000 Mobile Solid Waste Disposal, 6.950%,
1/01/20 ............................. Baa3 BBB- $ 1,581,660
------------
ALASKA--0.8%
1,430,000 Alaska State Housing Finance Corp.,
6.500%, 6/01/34 ..................... Aaa AAA 1,463,333
------------
ARIZONA--2.5%
2,500,000 Navajo County Pollution Control,
5.875%, 8/15/28 ...................... Baa1 BB+ 2,500,650
2,300,000 University of Arizona Revenue Bond,
6.350%, 6/01/14 ..................... A1 AA 2,419,462
------------
4,920,112
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CALIFORNIA--8.4%
1,500,000 California Housing Finance Agency
Revenue Bond, 8.100%, 8/01/07 ....... Aa AA- 1,545,930
465,000 California Housing Finance Agency
Revenue Bond, 8.125%, 8/01/19 ...... Aa AA- 482,893
4,300,000 Foothill/Eastern Transportation
Corridor, 6.500%, 1/01/32 ........... Baa BBB- 4,495,822
2,000,000 Los Angeles Convention & Exhibition,
9.000%, 12/01/20 .................... Aaa AAA 2,602,620
2,000,000 Los Angeles Regional Airport Lease,
6.350%, 11/01/25 ..................... Baa3 BB+ 2,033,680
2,000,000 Sacramento California, 6.500%,
7/01/21 .............................. NR BBB- 2,075,380
3,000,000 Sacramento Power Authority, 6.000%,
7/01/22 ............................. NR BBB- 2,976,720
------------
16,213,045
------------
COLORADO--5.8%
1,500,000 Denver City & County Airport Revenue ... Baa AAA 1,744,020
1,500,000 Denver City & County Airport Revenue ... Baa AAA 1,744,020
2,000,000 Denver City & County Airport Revenue ... Baa BBB 2,229,380
5,000,000 Denver City & County Airport Revenue ... Baa BBB 5,554,750
------------
11,272,170
------------
FLORIDA--7.4%
3,000,000 Escambia County Pollution Control,
6.900%, 8/01/22 ..................... Baa1 BBB 3,176,310
1,430,000 Florida State, 6.400%, 7/01/22 ........ Aa AA 1,538,766
1,000,000 Martin County Industrial Development
Authority, 7.875%, 12/15/25 ......... Baa3 BBB- 1,142,520
2,500,000 Palm Beach County, 6.950%, 1/01/22 NR NR 2,353,775
2,000,000 Palm Beach County Solid Waste,
6.850%, 1/01/14 ..................... NR NR 1,881,720
1,500,000 Palm Beach County Solid Waste
Revenue Bond, 8.750%, 7/01/10 ....... A A 1,582,605
2,500,000 Pasco County Pollution Control
Revenue Bond, 6.350%, 2/01/22 ....... Aaa AAA 2,652,200
------------
14,327,896
------------
GEORGIA--1.4%
2,500,000 Atlanta Special Purpose Facilities
Revenue Bond, 7.900%, 12/01/18 ....... Ba2 BB+ 2,688,200
------------
GUAM--1.4%
3,000,000 Guam Government, 5.400%, 11/15/18 ..... NR BBB 2,771,850
------------
ILLINOIS--6.1%
6,000,000 Illinois Development Finance
Authority Pollution,
7.250%, 6/01/11 ..................... Baa2 BBB 6,431,460
2,500,000 Illinois Development Finance
Authority Pollution,
7.375%, 7/01/21 ..................... Baa1 BBB 2,817,150
2,250,000 O'Hare International Airport,
8.200%, 12/01/24 ..................... Baa2 BB+ 2,646,765
------------
11,895,375
------------
INDIANA--3.8%
3,500,000 Indiana Development Finance
Authority Pollution,
6.850%, 12/01/12 .................. Ba3 BB- 3,615,325
3,500,000 Indianapolis International Airport
Authority Revenue Bond,
7.100%, 1/15/17 ................... Baa2 BBB 3,792,915
------------
7,408,240
------------
KANSAS--1.1%
2,000,000 Kansas City Utility Systems Revenue .. Aaa AAA 2,159,080
------------
KENTUCKY--1.9%
1,500,000 Kenton County Airport Board Revenue
Bond, 6.125%, 2/01/22 .............. Baa3 BB+ 1,468,890
2,000,000 Kenton County Airport Board Revenue
Bond, 7.500%, 2/01/12 .............. Baa3 BB+ 2,170,860
------------
3,639,750
------------
MASSACHUSETTS--4.7%
3,000,000 Massachusetts Bay Transportation
Authority, 6.100%, 3/01/23 ......... A1 A+ 3,112,170
2,500,000 Massachusetts State Housing Finance
Agency, 6.300%, 10/01/13 ........... A1 A+ 2,544,625
3,315,000 Massachusetts State Housing Finance
Agency, 6.375%, 4/01/21 ............ A1 A+ 3,357,963
-------------
9,014,758
------------
MICHIGAN--0.9%
1,765,000 Dickinson County Economic
Development, 5.850%, 10/01/18 ..... Baa1 BBB 1,734,977
------------
NEW YORK--20.7%
4,860,000 New York City, 7.000%, 10/01/13 ...... Baa1 BBB+ 5,149,073
1,000,000 New York City, 7.10%, 2/01/10 ........ Baa1 BBB+ 1,075,770
2,450,000 New York City, 7.500%, 2/01/05 ....... Baa1 BBB+ 2,689,708
2,040,000 New York State Dormitory Authority
Revenue Bond, 5.375%, 5/15/16 ...... Baa1 BBB+ 1,886,204
4,000,000 New York State Dormitory Authority
Revenue Bond, 5.500%, 5/15/13 ...... Baa1 BBB+ 3,882,200
5,000,000 New York State Dormitory Authority
Revenue Bond, 5.500%, 5/15/23 ...... Baa1 BBB+ 4,608,650
1,350,000 New York State Dormitory Authority
Revenue Bond, 5.625%, 5/15/13 ...... Baa1 BBB+ 1,298,943
2,740,000 New York State Dormitory Authority
Revenue Bond, 5.750%, 7/01/13 ..... Baa1 BBB 2,731,287
1,880,000 New York State Dormitory Authority
Revenue Bond, 7.500%, 5/15/13 .... Baa1 BB+ 2,212,346
4,150,000 New York State Medical Care
Facilities Finance, 5.250%, 8/15/14 Baa1 BBB+ 3,826,840
2,500,000 New York State Medical Care
Facilities Finance, 5.375%, 2/15/14 Baa1 BBB+ 2,341,725
1,955,000 New York State Medical Care
Facilities Finance, 6.500%, 8/15/12 Aaa AAA 2,080,061
575,000 New York State Medical Care
Facilities Finance, 7.300%, 8/15/11 Baa1 BBB+ 635,191
1,500,000 New York State Urban Development
Corp. Revenue Bond, 5.000%, 1/01/17 Aaa AAA 1,395,960
3,430,000 New York State Urban Development
Corp. Revenue Bond, 5.500%, 1/01/18 Baa1 BBB 3,230,683
1,000,000 Port Authority New York and New
Jersey, 7.000%, 10/01/07 ......... NR NR 1,078,180
------------
40,122,821
------------
NORTH CAROLINA--1.4%
3,000,000 North Carolina Medical Care Health,
5.250%, 5/01/26 ................. Aa3 AA 2,796,390
------------
OHIO--3.2%
3,000,000 Cleveland Public Power Systems
Revenue Bond, 7.000%, 11/15/24 .. Aaa AAA 3,490,410
2,500,000 Ohio Water Development Pollution
Control, 6.150%, 8/01/23 ........ Aaa AAA 2,606,300
------------
6,096,710
------------
OREGON--0.5%
1,000,000 Western Generation Agency,
7.400%, 1/01/16 ................. NR NR 1,047,110
------------
PENNSYLVANIA--10.6%
3,000,000 Delaware County Pollution Control,
7.375%, 4/01/21 .................. Baa1 BBB+ 3,260,850
2,725,000 Pennsylvania Convention Center
Revenue Bond, 6.700%, 9/01/14 ... Baa BBB- 2,889,590
2,000,000 Pennsylvania Convention Center
Revenue Bond, 6.750%, 9/01/19 ... Baa BBB- 2,120,520
3,000,000 Pennsylvania Economic Development
Financing, 6.600%, 1/01/19 ...... NR NR 2,969,070
4,000,000 Pennslyvania Economic Development
Financing, 7.150%, 12/01/18 ..... NR BBB- 4,193,280
1,500,000 Pennsylvania Economic Development
Financing, 7.600%, 12/01/20 ..... Baa2 BBB- 1,693,500
3,000,000 Pennsylvania Economic Development
Financing, 7.600%, 12/01/24 ..... Baa1 BBB 3,368,250
------------
20,495,060
------------
PUERTO RICO--3.6%
2,845,000 Puerto Rico Commonwealth Highway
Transportation, 6.625%, 7/01/18 . Aaa AAA 3,176,784
3,750,000 Puerto Rico Electric Power Authority,
6.000%, 7/01/14 .................. Baa1 BBB+ 3,842,550
------------
7,019,334
------------
SOUTH DAKOTA--0.6%
1,000,000 South Dakota Student Loan Revenue
Bond, 7.700%, 8/01/07 ........... NR A+ 1,065,320
------------
TENNESSEE--1.4%
2,500,000 Maury County Industrial Development
Board, 6.500%, 9/01/24 ......... A3 A- 2,637,175
------------
TEXAS--2.6%
2,000,000 Alliance Airport Authority Special
Facilities, 6.375%, 4/01/21 ..... Baa2 BBB 2,008,500
2,825,000 Fort Worth International Airport,
7.250%, 11/01/30 ................. Baa2 BB+ 3,015,885
------------
5,024,385
------------
U. S. VIRGIN ISLANDS--2.5%
4,500,000 Virgin Islands Public Finance
Authority, 7.250%, 10/01/18 ..... NR NR 4,808,205
------------
UTAH--1.1%
$2,000,000 Intermountain Power Agency,
8.625%, 7/01/21 .................. Aa A+ 2,088,280
------------
WASHINGTON--3.0%
1,000,000 Washington State Public Power
Supply, 6.800%, 7/01/07 ......... Aa AA 1,081,670
1,270,000 Washington State Public Power
Supply, 7.000%, 7/01/11 ......... Aaa AA- 1,399,629
3,000,000 Washington State Public Power
Supply, 7.000%, 7/01/12 ......... Aaa AA- 3,306,210
------------
5,787,509
------------
Total Tax Exempt Obligations
(Identified Cost $177,162,446) ............................................ 190,078,745
------------
SHORT-TERM INVESTMENT--0.1%
- --------------------------------------------------------------------------------------------------------------------
247,000 Household Finance Corp., 6.250%, 1/02/97 .................................... 246,957
------------
Total Short Term Investment
(Identified Cost $246,957) ................................................ 246,957
------------
Total Investments -- 98.3%
(Identified Cost $177,409,403) (b) ........................................ 190,325,702
Other assets less liabilities ............................................... 3,225,079
------------
Total Net Assets -- 100% .................................................... $193,550,781
============
(a) See Note 1a.
(b) Federal Tax Information: At December 31, 1996 the net unrealized
appreciation on investments based on cost of $177,499,183 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost. ......................................................... $ 13,065,637
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value. ......................................................... (239,118)
------------
Net unrealized appreciation. ................................................................... $ 12,826,519
============
At December 31, 1996 the Fund had a capital loss carryover of approximately $5,300,042 which expires December 31, 2002.
This may be available to offset future realized capital gains, if any, to the extent provided by regulations.
(c) The ratings shown are believed to be the most recent ratings available at December 31, 1996.
Securities are generally rated at the time of issuance. The rating agencies may revise their
rating from time to time. As a result, there can be no assurance that the same ratings would
be assigned if the securities were rated at December 31, 1996. The Fund's subadvisor
independently evaluates the Fund's portfolio securities and in making investment decisions
does not rely solely on the ratings of agencies.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1996
ASSETS
Investments at value ............................ $190,325,702
Cash ............................................ 66,090
Receivable for:
Fund shares sold .............................. 24,847
Accrued interest .............................. 3,580,864
Prepaid registration expense .................... 4,000
------------
194,001,503
LIABILITIES
Payable for:
Fund shares redeemed .......................... $ 49,851
Dividends declared ............................ 224,162
Accrued expenses:
Management fees ............................... 72,234
Deferred trustees' fees ....................... 47,795
Accounting and administrative ................. 3,143
Other expenses ................................ 53,537
---------
450,722
------------
NET ASSETS ........................................ $193,550,781
============
Net Assets consist of:
Capital paid in ............................... $188,034,651
Undistributed net investment income ........... 214,097
Accumulated net realized losses ............... (7,614,266)
Unrealized appreciation on investments ........ 12,916,299
------------
NET ASSETS ........................................ $193,550,781
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A
shares ($180,983,023 divided by 24,020,946 shares of
beneficial interest) ............................ $7.53
=====
Offering price per share (100/95.50 of $7.53) ..... $7.88*
=====
Net asset value and offering price of Class B shares
($12,567,758 divided by 1,668,123 shares of
beneficial interest) ........................... $7.53**
=====
Identified cost of investments .................... $177,409,403
============
* Based upon single purchases of less than $100,000. Reduced sales charges apply
for purchases in excess of this amount.
**Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 1996
INVESTMENT INCOME
Interest ...................................... $12,562,749
Expenses
Management fees ............................. $ 862,741
Service fees - Class A ...................... 460,994
Service and distribution fees - Class B ..... 123,404
Trustees' fees and expenses ................. 22,534
Accounting and administrative ............... 40,947
Custodian ................................... 88,883
Transfer agent .............................. 174,020
Audit and tax services ...................... 44,800
Legal ....................................... 25,462
Printing .................................... 31,559
Registration ................................ 22,919
Miscellaneous ............................... 9,815
------------
Total expenses ................................ 1,908,078
-----------
Net investment income ......................... 10,654,671
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS
AND FUTURES CONTRACTS
Realized gain (loss) on:
Investments - net ........................... 1,088,355
Options - net ............................... (245,975)
Futures contracts - net ..................... (99,412)
------------
Net realized gain on investments, options and
futures contracts ......................... 742,968
------------
Unrealized appreciation (depreciation) on:
Investments - net ........................... (3,290,138)
Options - net ............................... 251,100
Futures contracts - net ..................... 258,713
------------
Net unrealized depreciation on investments,
options and futures contracts ............. (2,780,325)
------------
Net loss on investment transactions ........... (2,037,357)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...... $ 8,617,314
===========
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
FROM OPERATIONS
Net investment income ....................... $ 11,178,967 $ 10,654,671
Net realized gain (loss) on investment
transactions .............................. (1,398,807) 742,968
Unrealized appreciation (depreciation) on
investment transactions ................... 22,279,474 (2,780,325)
------------ ------------
Increase in net assets from operations ...... 32,059,634 8,617,314
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A ................................... (10,706,960) (10,078,993)
Class B ................................... (506,948) (581,566)
------------ ------------
(11,213,908) (10,660,559)
------------ ------------
Decrease in net assets derived from capital
share transactions ........................ (5,674,559) (11,775,820)
------------ ------------
Total increase (decrease) in net assets ..... 15,171,167 (13,819,065)
NET ASSETS
Beginning of the year ....................... 192,198,679 207,369,846
------------ ------------
End of the year ............................. $207,369,846 $193,550,781
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year ....................... $ 46,584 $ 214,756
============ ============
End of the year ............................. $ 214,756 $ 214,097
============ ============
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year .................... $ 7.53 $ 7.54 $ 7.87 $ 6.85 $ 7.60
------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ................................. 0.44 0.40 0.39 0.42 0.41
Net Realized and Unrealized Gain
(Loss) on Investments ............................... 0.21 0.53 (1.01) 0.74 (0.07)
------ ------ ------ ------ ------
Total From Investment Operations ...................... 0.65 0.93 (0.62) 1.16 0.34
------ ------ ------ ------ ------
Less Distributions
Dividends From Net Investment Income .................. (0.46) (0.42) (0.40) (0.41) (0.41)
Distributions From Net Realized Capital Gains ......... (0.18) (0.18) 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions ................................... (0.64) (0.60) (0.40) (0.41) (0.41)
Net Asset Value, End of Year .......................... $ 7.54 $ 7.87 $ 6.85 $ 7.60 $ 7.53
Total Return(%) (a) 8.9 12.7 (8.0) 17.2 4.6
Ratio of Operating Expenses to Average Net Assets (%) . 0.95 0.91 0.92 0.93 0.92
Ratio of Net Investment Income to Average
Net Assets (%) ...................................... 5.80 5.27 5.44 5.52 5.46
Portfolio Turnover Rate (%) ........................... 85 86 88 93 24
Net Assets, End of Year (000) ......................... $183,276 $226,881 $184,202 $195,301 $180,983
</TABLE>
(a) A sales charge is not reflected in total return calculations.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
SEPTEMBER 13(a)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------------
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 8.03 $ 7.86 $ 6.85 $ 7.60
------ ------ ------ ------
Income From Investment Operations
Net Investment Income ................................. 0.07 0.34 0.36 0.35
Net Realized and Unrealized Gain
(Loss) on Investments ............................... 0.01 (0.01) 0.74 (0.07)
------ ------ ------ ------
Total From Investment Operations ...................... 0.08 (0.67) 1.10 0.28
------ ------ ------ ------
Less Distributions
Dividends From Net Investment Income .................. (0.07) (0.34) (0.35) (0.35)
Distributions From Net Realized Capital Gains ......... (0.18) 0.00 0.00 0.00
------ ------ ------ ------
Total Distributions ................................... (0.25) (0.34) (0.35) (0.35)
Net Asset Value, End of Period ........................ $ 7.86 $ 6.85 $ 7.60 $ 7.53
====== ====== ====== ======
Total Return(%) (c) ................................... 1.0 (8.6) 16.3 3.9
Ratio of Operating Expenses to Average Net Assets (%) . 1.65(b) 1.67 1.68 1.67
Ratio of Net Investment Income to Average
Net Assets (%) ...................................... 3.91(b) 4.69 4.77 4.71
Portfolio Turnover Rate (%) ........................... 86 88 93 24
Net Assets, End of Period (000) ....................... $ 3,395 $ 7,997 $ 12,069 $ 12,568
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A contingent deferred sales charge is not reflected in total return
calculations. Periods less than one year are not computed on an
annualized basis.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1996
1. The Fund is a series of The New England Funds Trust I, a Massachusetts
business trust (the "Trust"), and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (each such series of shares a
"Fund").
The Fund offers both Class A and Class B shares. The Fund commenced its public
offering of Class B shares on September 13, 1993. Class A shares are sold with a
maximum front end sales charge of 4.50%. Class B shares do not pay a front end
sales charge, but pay a higher ongoing distribution fee than Class A shares for
eight years (at which point they automatically convert to Class A shares), and
are subject to a contingent deferred sales charge if those shares are redeemed
within five years of purchase. Expenses of the Fund are borne pro-rata by the
holders of both classes of shares, except that each class bears expenses unique
to that class (including the Rule 12b-1 service and distribution fees applicable
to such class), and votes as a class only with respect to its own Rule 12b-1
Plan. Shares of each class would receive their pro-rata share of the net assets
of the Fund, if the Fund were liquidated. In addition, the Trustees approve
separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION. The Fund's investment subadviser, Back Bay Advisors, L.P.
("Back Bay Advisors"), under the supervision of the Fund's trustees, determines
the value of the Fund's portfolio of securities, using valuations provided by a
pricing service selected by Back Bay Advisors and other information with respect
to transactions in securities, including quotations from securities dealers.
Valuations of securities and other assets owned by the Fund for which market
quotations are readily available are based on those quotations. Short-term
obligations that will mature in 60 days or less are stated at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value as determined in good faith by Back Bay Advisors under the
supervision of the Fund's trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Interest income is recorded on the accrual basis. Interest income for the Fund
is increased by the accretion of original issue discount. Interest income is
reduced by the amortization of premium. In determining net gain or loss on
securities sold, the cost of securities has been determined on the identified
cost basis.
C. 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, 1996 the Fund held no such
securities.
D. OPTIONS AND FUTURES. CALLS AND PUTS.
The Fund may write (sell) call and put options on securities to manage its
exposure to interest rates and the bond market. Buying futures, writing puts,
and buying calls tend to increase the fund's exposure to the underlying
instrument. Selling futures, buying puts, and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
When a Fund writes a call or put option, an amount equal to the premium received
by the Fund is included in the Fund's statement of assets and liabilities as an
asset and as an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option
written. The current value of a written option is the closing price on the
principal exchange on which such option is traded. If an option which the Fund
has written either expires on its stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or loss if
the cost of a closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a call option which the Fund has written is exercised, the Fund realizes a
capital gain or loss from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received. If a put option
which the Fund has written is exercised, the amount of the premium originally
received will reduce the cost of the security which the Fund purchases upon
exercise of the option.
The premium paid by the Fund for the purchase of a call or a put option is
included in the asset section of the Fund's statement of assets and liabilities
as an investment and subsequently adjusted to the current market value of the
option. The current value of a purchased option is the closing price on the
principal exchange on which such option is traded. If an option which the Fund
has purchased expires on the stipulated expiration date, the Fund will realize a
loss in the amount of the cost of the option. If the Fund enters into a closing
sale transaction, the Fund will realize a gain or loss, depending on whether the
sales proceeds from the closing sale transaction are greater or less than the
cost of the option. If the Fund exercises a purchased put option, it will
realize a gain or loss from the sale of the underlying security and the proceeds
from such sale will be decreased by the premium originally paid. If the Fund
exercises a purchased call option, the cost of the security which the Fund
purchases upon exercise will be increased by the premium originally paid.
The risk in writing a call option is that the Fund relinquishes the opportunity
to profit if the market price of the underlying security increases and the
option is exercised. In writing a put option, the Fund assumes the risk of
incurring a loss if the market price decreases and the option is exercised. In
addition, there is the risk the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
E. INTEREST RATE FUTURES CONTRACTS
The Fund may enter into interest rate futures contracts to hedge against changes
in the values of securities the Fund owns or expects to purchase. An interest
rate futures contract is an agreement between two parties to buy and sell a
security for a set price (or to deliver an amount of cash) on a future date.
Upon entering into such a contract, the purchasing Fund is required to pledge to
the broker an amount of cash, U.S. Government securities or other high quality
debt securities equal to the minimum "initial margin" requirements of the
exchange, currently up to $3,000 per contract. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as "variation margin," and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Risks of entering into futures
contracts include the possibility that there may be an illiquid market and that
changes in the value of the contract may not correlate with changes in the value
of the underlying securities.
F. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains at least annually. Accordingly, no provision for federal income tax has
been made.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily to
shareholders of record at the time and are paid monthly. The timing and
characterization of certain income and capital gains distributions are
determined in accordance with federal tax regulations, which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences will result in reclassification to the capital accounts.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the year ended December 31, 1996 were $45,662,872 and $54,716,726
respectively.
Transactions in written options and futures contracts for the Fund for the year
ended December 31, 1996 are summarized as follows:
SALES OF FUTURES CONTRACTS
----------------------------
AGGREGATE
NUMBER OF FACE VALUE
CONTRACTS OF CONTRACTS
--------- ------------
Open at December 31, 1995 ...................... 100 $ 11,844,413
Contracts opened ............................... 100 12,102,475
Contracts closed ............................... (200) (23,946,888)
--- --------------
Open at December 31, 1996 ...................... 0 $ 0
=== ==============
WRITTEN OPTIONS
----------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
Open at December 31,1995 ....................... 200 $ 258,275
Contracts opened ............................... 600 393,750
Contracts closed ............................... (800) (652,025)
--- --------------
Open at December 31, 1996 ...................... 0 $ 0
=== ==============
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
The Fund pays management fees to its investment adviser, New England Funds
Management, L.P. ("NEFM") at the annual rate of 0.50% of the first $100 million
of the Fund's average daily net assets and 0.375% of such assets in excess of
$100 million. NEFM pays the Fund's investment subadviser, Back Bay Advisors, at
the rate of 0.25% of the first $100 million of the Fund's average daily net
assets and 0.1875% of such assets in excess of $100 million. Certain officers
and directors of NEFM are also officers or trustees of the Fund. NEFM and Back
Bay Advisors, are wholly owned subsidiaries of New England Investment Companies,
L.P., ("NEIC") which is a subsidiary of Metropolitan Life Insurance Company
("Met Life"). Fees earned by NEFM and Back Bay Advisors under the management
agreement in effect during the year ended December 31, 1996 are as follows:
FEES EARNED
-----------
$431,371 New England Funds Management, L.P.
$431,370 Back Bay Advisors, L.P.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds L.P. ("New England
Funds"), the Fund's distributor, is a subsidiary of NEIC and performs certain
accounting and administrative services for the Fund. The Fund 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
related clerical functions relating to the Fund, (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 Fund 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
December 31, 1996 these expenses amounted to $40,947 and are shown separately in
the financial statements as accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent to the Fund. For the year ended December 31, 1996, the Fund
paid New England Funds $123,489 as compensation for its services in that
capacity.
D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the
Trust has adopted a Service Plan relating to the Fund's Class A shares (the
"Class A Plan") and a Service and Distribution Plan relating to the Fund's Class
B shares (the "Class B Plan").
Under the Class A Plan, the Fund pays New England Funds a monthly service fee at
the annual rate of up to 0.25% of the average daily net assets attributable to
the Fund's Class A shares, as reimbursement for expenses (including certain
payments to securities dealers who may be affiliated with New England Funds)
incurred by New England Funds in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts. For the year
ended December 31, 1996, the Fund paid New England Funds $460,994 in fees under
the Class A Plan. If the expenses of New England Funds that are otherwise
reimbursable under the Class A Plan incurred in any year exceed the amounts
payable by the Fund under the Class A Plan, the unreimbursed amount (together
with unreimbursed amounts from prior years) may be carried forward for
reimbursement in future years in which the Class A Plan remains in effect. The
amount of unreimbursed expenses carried forward into 1997 is $1,700,600.
Under the Class B Plan, the Fund pays New England Funds a monthly service fee at
the annual rate of up to 0.25% of the average daily net assets attributable to
the Fund's Class B shares, as compensation for services provided and expenses
(including certain payments to securities dealers, who may be affiliated with
New England Funds) incurred by New England Funds in providing personal services
to investors in Class B shares and/or the maintenance of shareholder accounts.
For the year ended December 31, 1996, the Fund paid New England Funds $30,851 in
service fees under the Class B Plan.
Also under the Class B Plan, the Fund pays New England Funds a monthly
distribution fee at the annual rate of up to 0.75% of the average daily net
assets attributable to the Fund's Class B shares, as compensation for services
provided and expenses (including certain payments to securities dealers, who may
be affiliated with New England Funds) incurred by New England Funds in
connection with the marketing or sale of Class B shares. For the year ended
December 31, 1996, the Fund paid New England Funds $92,553 in distribution fees
under the Class B Plan.
Commissions (including contingent deferred sales charges) on Fund shares paid to
New England Funds by investors of shares of the Fund during the year ended
December 31, 1996 amounted to $282,532.
E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation
directly to its officers or trustees who are directors, officers or employees
of NEFM, New England Funds, NEIC or their affiliates, other than registered
investment companies. Each other trustee is compensated by the Fund as
follows:
Annual Retainer $2,227
Meeting Fee $114/meeting
Committee Meeting Fee $68/meeting
Committee Chairman Retainer $98/year
A deferred compensation plan is available to the trustees on a voluntary basis.
Each participating trustee will receive an amount equal to the value that such
deferred compensation would have been, had it been invested in the Fund on the
normal payment date.
4. CONCENTRATION OF CREDIT. The Fund had the following industry concentrations
in excess of 10% at December 31, 1996 as a percentage of the Fund's total net
assets: Airports 12.0%. The Fund also had more than 10% of its total net assets
invested in: Pennsylvania 10.6% and New York 20.7% at December 31, 1996. Certain
risks arise from concentrating investments in any state. Certain revenue or tax
related events in a state may impair the ability of issuers of municipal
securities to pay principal and interest on their obligations.
5. CAPITAL SHARES. At December 31, 1996 there was an unlimited number of
shares of beneficial interest authorized, divided into two classes, Class A
and Class B capital stock. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold ........................................... 1,603,141 $11,755,869 1,410,921 $ 10,592,663
Shares issued in connection with the reinvestment of:
Dividends from net investment income ................ 1,035,922 7,650,069 950,863 7,098,871
--------- ----------- --------- ------------
2,639,063 19,405,938 2,361,784 17,691,534
Shares repurchased ................................... (3,825,037) (28,129,585) (4,031,484) (30,057,711)
---------- ----------- --------- ------------
Net decrease ......................................... (1,185,974) ($ 8,723,647) (1,669,700) ($ 12,366,177)
---------- ----------- --------- ------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------------------- -----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ------------ ------------- ------------ --------------
Shares sold ........................................... 594,737 $4,335,541 406,256 $ 3,019,066
Shares issued in connection with the reinvestment of:
Dividends from net investment income ................ 46,353 342,707 49,361 368,387
-------- ----------- ---------- ------------
641,090 4,678,248 455,617 3,387,453
Shares repurchased ................................... (220,882) (1,629,160) (375,103) (2,797,096)
-------- ----------- ---------- ------------
Net decrease ......................................... 420,208 $3,049,088 80,514 $ 590,357
-------- ----------- ---------- ------------
Decrease derived from capital shares transactions .... (765,766) ($5,674,559) (1,589,186) ($ 11,775,820)
======== =========== ========== ============
</TABLE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of NEW ENGLAND MUNICIPAL INCOME FUND
In our opinion, the accompanying statement of assets & liabilities, including
the portfolio composition, 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 New England Municipal Income Fund
("the Fund") at December 31, 1996, the results of its operations for the year
then ended, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these 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 owned at
December 31, 1996 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1997
<PAGE>
--------------
(Logo) BULK RATE
NEW ENGLAND FUNDS U.S. POSTAGE
Where The Best Minds Meet(TM) PAID
BROCKTON, MA
PERMIT NO. 770
--------------
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
- --------------------- ---------------------
[Logo] [Logo]
QUALITY QUALITY
TESTED SERVICE TESTED SERVICE
1995 1996
- --------------------- ---------------------
DALBAR DALBAR
HONORS COMMITMENT TO: HONORS COMMITMENT TO:
INVESTORS INVESTORS
- --------------------- ---------------------
MU56-1296
[recycle symbol] Printed On Recycled Paper
