<PAGE>
To Our Contract Owners: August 24, 1995
I am pleased to provide you with your Semi-Annual Report for New England
Variable Annuity Fund I. This report reviews the performance of the fund
through the first six months of 1995 and lists the holdings in the portfolio as
of June 30, 1995. It also contains the complete investment history of this
twenty-four year old fund on both a year by year and cumulative basis.
The proven long-term investment record of this fund is most impressive. For
example, over the ten year period ended June 30, 1995, the value of an
accumulation unit rose from 4.355736 to 15.158337--a total return of 248.0%.
In addition to the performance of the fund, there are a number of other
benefits to owning your variable annuity. It is ideally suited for retirement
planning since you are provided with a hedge against inflation, a guaranteed
minimum death benefit and variable and fixed payout options, including options
that provide payments for your lifetime. Your annuity contract will also
provide for immediate payment of death proceeds to your named beneficiary
without incurring the long delays of probate.
If you are looking for an opportunity to diversify your investments, you may
want to consider the Zenith Accumulator variable annuity. This product offers
greater diversification through a choice of seventeen funds, ranging from very
aggressive stock funds to conservative bond funds. The Zenith Accumulator has
no front-end sales load and accepts transfers from your present contract at no
charge.
If you would like more information about this investment opportunity, please
contact your New England representative.
Sincerely,
/s/ Bruce C. Long
Bruce C. Long President New England
Annuities
NOTE: Investment performance results contained in this report are not a
prediction of future returns and, except for the average annual total returns,
do not reflect the deduction of the maximum 6% load, the maximum 3%
administrative charge or 2% premium tax, if applicable. If included, these
charges would reduce performance figures. The investment return on and
principal value of your investment will fluctuate, so that your contract may be
worth more or less than you invested.
For more complete information about the Zenith Accumulator, including charges
and expenses, send for a prospectus from New England Annuities, Marketing, 501
Boylston Street, Boston, MA 02116. Read it carefully before you invest or send
money.
1
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENT RECORD
PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
New England
Variable Annuity
Fund I
<S> <C>
24 years ended June 30, 1995............................. +1,199.0%
15 years ended June 30, 1995............................. + 964.8%
10 years ended June 30, 1995............................. + 248.0%
5 years ended June 30, 1995............................. + 66.9%
1 year ended June 30, 1995.............................. + 25.4%
6 months ended June 30, 1995............................ + 27.4%
</TABLE>
* The percentage figures for the Fund are based upon beginning accumulation
unit values for the periods shown of $1.166948, $1.423583, $4.355736,
$9.079903, $12.090508 and $11.899473, respectively.
The periods selected cover the preceding twenty-four years, fifteen years, ten
years, five years, the past year and the past six months. The results should
be considered in light of the Fund's investment objective and policies, the
characteristics and quality of its portfolio securities, and the periods
selected. Inasmuch as the Fund does not distribute investment income, the
investment record reflects reinvestment of such income. The investment record
for the Fund also reflects charges, at an effective annual rate of
approximately 1.26%, made for investment management and mortality and expense
risks.
-------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE TABLE
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
<S> <C> <C>
March 25, 1971........ $1.157298 --
December 31, 1971..... 1.180085 + 2.0
December 31, 1972..... 1.324345 +12.2
December 31, 1973..... 1.144645 -13.6
December 31, 1974..... 0.786512 -31.3
December 31, 1975..... 0.981727 +24.8
December 31, 1976..... 1.147484 +16.9
December 31, 1977..... 1.077867 - 6.1
December 31, 1978..... 1.180390 + 9.5
December 31, 1979..... 1.356685 +14.9
December 31, 1980..... 1.907809 +40.6
December 31, 1981..... 2.046992 + 7.3
December 31, 1982..... 3.254033 +59.0
</TABLE>
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
<S> <C> <C>
December 31, 1983..... $3.943886 +21.2
December 31, 1984..... 3.572709 - 9.4
December 31, 1985..... 4.823900 +35.0
December 31, 1986..... 6.156190 +27.6
December 31, 1987..... 7.017161 +14.0
December 31, 1988..... 6.745649 - 3.9
December 31, 1989..... 7.984578 +18.4
December 31, 1990..... 8.383448 + 5.0
December 31, 1991..... 11.835525 +41.2
December 31, 1992..... 11.576959 - 2.2
December 31, 1993..... 12.850577 +11.0
December 31, 1994..... 11.899473 - 7.4
June 30, 1995......... 15.158337 +27.4
</TABLE>
The above table indicates the accumulation unit value of the Fund on March 25,
1971, the date of the first sale, and on the last valuation date of each
twelve month period from December 31, 1971 through December 31, 1994, and on
June 30, 1995, together with the percentage change in accumulation unit values
during each such period.
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
The average annual total return of the Fund on a single purchase payment of
$1,000 for the 1, 5 and 10 year periods ending June 30, 1995 was 13.0%, 8.5%
and 12.1%, respectively, assuming deduction of the 2% maximum premium tax.
Assuming no premium tax deduction, the average annual total return on a $1,000
purchase payment for the same periods was 15.3%, 9.0% and 12.3%, respectively.
These performance results represent past performance. These results reflect
the deduction of the maximum sales and administrative load of 9% of the first
$46 and 8% of the balance of the purchase payment (after premium tax, if any).
-------------------------------------------------------------------------------
2
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
PORTFOLIO CHANGES
Six Months ended June 30, 1995
<TABLE>
<CAPTION>
NEW SECURITIES ADDED
Shares
------
<S> <C>
AMR Corp................... 39,500
BankAmerica Corp........... 20,000
Deere & Co................. 32,900
Delta Airlines, Inc........ 42,500
Eastman Kodak Co........... 39,700
General Motors Corp........ 32,000
Intel Corp................. 59,200
Merrill Lynch & Co., Inc... 24,000
Microsoft Corp............. 32,000
Micron Technology, Inc..... 48,000
Nokia Corp................. 31,000
Texas Instruments, Inc..... 9,000
United Technologies Corp... 20,000
</TABLE>
<TABLE>
<CAPTION>
SECURITIES ELIMINATED
Shares
------
<S> <C>
American General Corp........... 30,000
Bethlehem Steel Corp............ 105,000
Dow Chemical Co................. 39,000
Fifth Third Bancorp............. 46,500
Gillette Co..................... 8,000
Inland Steel Industries, Inc.... 56,000
International Business Machine
Corp........................... 33,000
Johnson & Johnson............... 29,000
Medtronic, Inc.................. 46,200
Nike, Inc....................... 32,000
Phelps Dodge Corp............... 50,000
USX US Steel Corp............... 61,000
Xerox Corp...................... 26,500
</TABLE>
3
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENTS AS OF JUNE 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS--97.5% OF TOTAL NET ASSETS
Value
Shares (Note 1)
------ ----------
<C> <S> <C>
AEROSPACE--4.4%
42,000 Boeing Co.................................................. $2,630,250
----------
AIRLINES--10.2%
39,500 AMR Corp.*................................................. 2,947,688
42,500 Delta Airlines, Inc........................................ 3,134,375
----------
6,082,063
----------
ALUMINUM--5.2%
62,000 Aluminum Co. of America.................................... 3,107,750
----------
AUTO & RELATED--2.3%
32,000 General Motors Corp........................................ 1,392,000
----------
BANKS--MONEY CENTER--14.8%
20,000 BankAmerica Corp........................................... 1,052,500
76,000 Chemical Banking Corp...................................... 3,591,000
72,000 Citicorp................................................... 4,167,000
----------
8,810,500
----------
BANKS--REGIONAL--4.6%
67,000 Bank of New York, Inc...................................... 2,705,125
----------
BROKERS/INVESTMENT SERVICES--2.1%
24,000 Merrill Lynch & Co., Inc................................... 1,260,000
----------
COMPUTER SOFTWARE & SERVICES--4.9%
32,000 Microsoft Corp.*........................................... 2,892,000
----------
ELECTRONIC & COMMUNICATIONS EQUIPMENT--3.1%
31,000 Nokia Corp................................................. 1,848,375
----------
ELECTRONIC COMPONENTS--12.8%
59,200 Intel Corp................................................. 3,748,100
48,000 Micron Technology, Inc..................................... 2,634,000
9,000 Texas Instruments, Inc..................................... 1,204,875
----------
7,586,975
----------
FOOD--RETAILERS/WHOLESALERS--4.8%
38,000 Philip Morris Companies, Inc............................... 2,826,250
----------
INSURANCE--4.8%
24,800 American International Group, Inc.......................... 2,827,200
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENTS -- Continued (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS -- CONTINUED
Value
Shares (Note 1)
------ -----------
<C> <S> <C>
LEISURE--4.1%
39,700 Eastman Kodak Co....................................... $ 2,406,813
-----------
MACHINERY--4.7%
32,900 Deere & Co............................................. 2,817,062
-----------
MICROCOMPUTERS--6.7%
53,200 Hewlett-Packard Co..................................... 3,963,400
-----------
MISCELLANEOUS--2.6%
20,000 United Technologies Corp............................... 1,562,500
-----------
PAPER PRODUCTS/CONSUMER--5.4%
62,000 Champion International Corp............................ 3,231,750
-----------
TOTAL COMMON STOCKS
(average cost $45,792,683)............................. 57,950,013
-----------
<CAPTION>
Face
Amount
-------- CORPORATE SHORT-TERM NOTES--0.9% OF TOTAL NET ASSETS
<C> <S> <C>
$515,000 Chevron Oil Finance Co., 5.90% due 7/3/95.............. 515,000
-----------
TOTAL CORPORATE SHORT-TERM NOTES
(average cost $515,000)................................ 515,000
-----------
TOTAL INVESTMENTS--98.4%
(average cost $46,307,683)............................. 58,465,013
-----------
Cash................................................... 8,409
Receivable for investments sold........................ 3,223,136
Dividends and interest receivable...................... 83,579
Receivable from contractholders........................ 78,397
Liabilities............................................ (2,448,406)
-----------
TOTAL NET ASSETS--100%................................. $59,410,128
===========
* Non-income producing security.
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in common stocks at market (average cost $45,792,683)
(Note 1)......................................................... $57,950,013
Corporate short-term notes (at cost which approximates market).... 515,000
-----------
Total investments.............................................. 58,465,013
-----------
Cash.............................................................. 8,409
Receivable for investments sold................................... 3,223,136
Dividends and interest receivable................................. 83,579
Receivable from contractholders................................... 78,397
-----------
Total assets................................................... 61,858,534
-----------
LIABILITIES
Payable for investments purchased................................. 2,379,795
Payable for investment advisory fees (Note 3)..................... 14,600
Payable for mortality and expense risks (Note 4).................. 50,509
Payable to contractholders........................................ 183
Other liabilities................................................. 3,319
-----------
Total liabilities.............................................. 2,448,406
-----------
NET ASSETS......................................................... $59,410,128
===========
Net assets attributable to variable annuity contractholders
3,645,396 accumulation units at $15.16 per unit................... $55,258,145
Annuity reserves (Note 1)......................................... 4,151,983
-----------
$59,410,128
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
STATEMENT OF
OPERATIONS
For the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1)
INCOME
Dividends........................................................ $ 440,983
Interest......................................................... 13,680
-----------
Total income................................................... 454,663
-----------
EXPENSES
Mortality and expense risks (Notes 1 and 4)...................... 280,475
Investment advisory fee
(Note 3)........................................................ 81,068
-----------
Total expenses................................................. 361,543
-----------
INVESTMENT INCOME-NET............................................. 93,120
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 2)
Realized net gain from investments sold.......................... 2,166,752
Change in unrealized appreciation of investments................. 10,852,783
-----------
Net gain on investments........................................ 13,019,535
-----------
Net increase in net assets resulting from operations............... $13,112,655
===========
</TABLE>
6
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30, 1995
1994 (Unaudited)
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income--net............................. $ 605,310 $ 93,120
Realized net gain from investments sold............ 3,522,339 2,166,752
Change in unrealized appreciation or depreciation
of investments.................................... (8,335,515) 10,852,783
----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. (4,207,866) 13,112,655
----------- -----------
CHANGES FROM PRINCIPAL TRANSACTIONS
Purchase payments, less sales and administrative
expenses and applicable premium taxes (Note 3).... 533,058 177,985
Contract terminations.............................. (5,037,786) (4,780,022)
Annuity payments................................... (431,578) (249,567)
Adjustments to annuity reserves (Note 1)........... 79,368 (106,713)
----------- -----------
Decrease in net assets derived from principal
transactions..................................... (4,856,938) (4,958,317)
----------- -----------
Total increase (decrease)....................... (9,064,804) 8,154,338
NET ASSETS
Beginning of period................................ 60,320,594 51,255,790
----------- -----------
End of period...................................... $51,255,790 $59,410,128
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
SUPPLEMENTARY INFORMATION --
Selected Per Unit Data and Ratios
Selected data for an accumulation unit outstanding throughout each year, and
for the six months ended June 30, 1995, and ratios are as follows:
<TABLE>
<CAPTION>
Six months
Year Ended December 31, ended
-------------------------------------------------- June 30, 1995
1990 1991 1992 1993 1994 (Unaudited)
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period.... $7.98 $ 8.38 $11.84 $11.58 $12.85 $11.90
--------- --------- --------- --------- --------- ---------
Per unit data
Investment income...... .16 .24 .25 .16 .29 .11
Expenses............... .10 .13 .14 .15 .16 .08
--------- --------- --------- --------- --------- ---------
Investment income-net.. .06 .11 .11 .01 .13 .03
Net realized and
unrealized gain (loss)
on investments........ .34 3.35 (.37) 1.26 (1.08) 3.23
--------- --------- --------- --------- --------- ---------
Net increase (decrease)
in net asset value.... .40 3.46 (.26) 1.27 (.95) 3.26
--------- --------- --------- --------- --------- ---------
Net Asset Value, end of
period................ $8.38 $11.84 $11.58 $12.85 $11.90 $15.16
========= ========= ========= ========= ========= =========
Total Return (%)........ 5.0 41.2 (2.2) 11.0 (7.4) 27.4
Ratios
Ratio of operating
expenses to average
net assets (%)........ 1.26 1.26 1.25 1.26 1.26 1.25*
Ratio of investment
income-net to average
net assets (%)........ .69 1.11 .98 .11 1.06 .46*
Portfolio turnover (%).. 136.52 157.43 171.55 154.15 139.43 178.04*
Number of accumulation
units outstanding at
end of period.......... 5,961,169 5,499,204 5,103,553 4,410,741 4,038,331 3,645,396
</TABLE>
* Computed on an annualized basis.
8
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1.Significant Accounting Policies
New England Variable Annuity Fund I (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund is sold for use with various retirement
plans that are qualified under the Internal Revenue Code, for individual use,
and for use with plans and trusts that are not qualified under the Internal
Revenue Code. The operations of the Fund are part of New England Mutual Life
Insurance Company (the "Insurance Company"). The following is a summary of
significant accounting policies consistently followed by the Fund.
A. Security valuation. Investments in common stocks traded on a national
securities exchange or on the NASDAQ national market system are valued at
their last reported sales prices on the principal exchange, on June 30,
1995, or if there was no reported sale during the day and for over-the-
counter securities not so listed, at the last reported bid prices on that
date. Corporate short-term notes are stated at cost, which approximates fair
market value.
B. Security transactions and related investment income. Security transactions
are accounted for on the trade date (the date the order to buy or sell is
executed), and dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Net investment income and net
realized and unrealized gain (loss) on investments are allocated to the
contracts on each valuation date based on each contract's pro rata share of
the net assets of the Fund as of the beginning of the valuation period.
C. Federal income taxes. The Fund is not taxed separately because the
operations of the Fund are part of the total operations of the Insurance
Company. The Insurance Company is taxed as a life insurance company under
the Internal Revenue Code. The Fund will not be taxed as a regulated
investment company under subchapter M of the Code. Under existing federal
income tax law, no taxes are payable on the investment income or on the
capital gains of the Fund.
D. Annuity reserves. Annuity reserves are computed for currently payable
contracts according to the Progressive Annuity Mortality Table. The assumed
interest rate is 3.5% unless the annuitant elects otherwise, in which case
the rate may vary from 0-5%, as regulated by the laws of the respective
states. Charges to annuity reserves for mortality and expense risks
experience are reimbursed to the Insurance Company if the reserves required
are less than originally estimated. If additional reserves are required, the
Insurance Company reimburses the variable annuity account.
2.Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments (other
than short-term securities) for the six months ended June 30, 1995 were
$46,492,112 and $51,643,835, respectively. Gains and losses from sales of
investments are computed on the basis of average cost.
3. Advisory and Service Fees With Affiliates
During the six months ended June 30, 1995, the Fund incurred investment
management fees of $81,068, payable to the Fund's investment adviser, Capital
Growth Management Limited Partnership, an affiliate of the Insurance Company.
The advisory agreement provides for a fee at the annual rate of 0.3066% of the
average net assets of the Fund. Deductions from purchase payments for sales and
administrative expenses, which for the six months ended June 30, 1995, amounted
to $12,173 and $4,575, respectively, were retained by the Insurance Company.
9
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
NOTES TO FINANCIAL STATEMENTS -- Continued
(Unaudited)
4.Mortality and Expense Risks and Deductions
Although variable annuity payments differ according to the investment
performance of the Fund, they are not affected by mortality or expense
experience because the Insurance Company assumes the expense risk and the
mortality risk under the contracts. The Insurance Company charges the Fund
assets for assuming those risks. For the six months ended June 30, 1995, the
mortality and expense risk charges totaled $280,475.
The expense risk assumed by the Insurance Company is the risk that the
deductions for sales and administrative expenses and for investment advisory
services provided for in the variable annuity contract may prove insufficient
to cover the cost of those items.
The mortality risk assumed by the Insurance Company has two elements: a life
annuity mortality risk and, for deferred annuity contracts, a minimum death
refund risk.
The life annuity mortality risk results from a provision in the contract in
which the Insurance Company agrees to make annuity payments regardless of how
long a particular annuitant or other payee lives and how long all annuitants or
other payees as a class live if payment options involving life contingencies
are chosen. Those annuity payments are determined in accordance with annuity
purchase rate provisions established at the time the contracts are issued.
Under deferred annuity contracts, the Insurance Company also assumes a minimum
death refund risk by providing that there will be payable, on the death of the
annuitant during the accumulation period, an amount equal to the greater of (1)
the aggregate purchase payments made, without interest, reduced by any partial
surrender, and (2) the value of the contract as of the death valuation date.
If those deductions are insufficient to cover the cost of the expense and
mortality risks assumed by the Insurance Company, the Insurance Company absorbs
the resulting losses and makes sufficient transfers to the Fund from its
general assets. Conversely, if those deductions are more than sufficient after
the establishment of any contingency reserves deemed prudent or required by
law, the excess is transferred to the Insurance Company.
5.Related Parties
One of the members of the Board of Managers of the Fund is an executive officer
of the principal underwriter.
6.Increase (Decrease) in Accumulation Units
<TABLE>
<CAPTION>
Six months ended
Year ended June 30, 1995
December 31, 1994 (Unaudited)
----------------- ----------------
<S> <C> <C>
Units purchased............................. 42,915 14,654
Units redeemed.............................. (415,325) (407,589)
--------- ---------
Net decrease............................... (372,410) (392,935)
Units at beginning of period................. 4,410,741 4,038,331
--------- ---------
Units at end of period....................... 4,038,331 3,645,396
========= =========
</TABLE>
10
<PAGE>
New England Variable Annuity Fund I
is sponsored by
NEW ENGLAND MUTUAL LIFE INSURANCE CO.
501 Boylston Street
Boston, Massachusetts 02116
Board of Managers
Anne M. Goggin
Nancy Hawthorne
Joseph M. Hinchey
Richard S. Humphrey, Jr.
Robert B. Kittredge
Laurens MacLure
Dale Rogers Marshall
Joseph F. Turley
Frederick K. Zimmermann
Investment Adviser
Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Distributor
New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
Legal Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Auditor
Coopers & Lybrand L.L.P.
One International Place
Boston, Massachusetts 02110
This report has been prepared for the contract owners of the Fund and is
authorized for distribution to prospective investors in the Fund when it is
accompanied or preceded by a current prospectus.
501 Boylston Street
Boston, Massachusetts 02116
617-578-2000
--------------------------------------------------------------------------------
EQUAL OPPORTUNITY EMPLOYER M/F
(C)1995 New England Mutual Life Insurance Company
[LOGO]
--------------------------------------------------------------------------------
NEW ENGLAND
VARIABLE ANNUITY
FUND I
Semi-Annual Report
June 30, 1995
