<PAGE>
================================================================================
[LOGO APPEARS HERE]
New England Funds
Where The Best Minds Meet
--------------------------------------------------------------------------------
Semiannual Report and Performance Update
--------------------------------------------------------------------------------
New England
Capital Growth [ARTWORK APPEARS HERE]
Fund
-------------
June 30, 1995
-------------
<PAGE>
================================================================================
--------------------------------------------------------------------------------
July 20, 1995
Dear Shareholder:
We have good news to present in this Semiannual Report for New England
Capital Growth Fund, which includes your Portfolio Manager's commentary and
complete financial information.
Market Overview
Investors who stayed the course in 1995 were amply rewarded. Major U.S.
stock market indices soared to record highs and the bond market staged a
spectacular comeback from its 1994 lows. Fueling the rally was clear evidence
that the economy had begun to slow down as a result of the interest rate hikes
engineered by the Federal Reserve Board to keep inflation in check. Indeed, with
declining housing starts and rising unemployment numbers reported in the first
half of 1995, expectations grew that the Fed's next move would be downward, to
prevent the slowing economy from slipping into recession.
The bond market surged at the prospect of lower rates, and the stock market
followed suit, with the Standard & Poor's 500/(R)/ Index gaining 20.14% during
the first half of the year. The large, blue-chip companies led the way, in part
because a weak U.S. dollar gave them a competitive advantage overseas and
contributed to surprisingly healthy earnings reports. Finally, on July 6, just
after this reporting period ended, the Fed lowered a key short-term rate by
0.25%, a relatively modest move, but a significant psychological change in
direction.
Your Financial Adviser -- A Trusted Ally
As a shareholder in New England Funds, you have a valuable ally you can
turn to at all times -- your financial adviser. This experienced
--------------------------------------------------------------------------------
<PAGE>
================================================================================
--------------------------------------------------------------------------------
professional can help you design an asset allocation program suitable to your
goals and risk tolerance. Most important, during times of market volatility or
uncertainty, your adviser can help you avoid making costly mistakes, such as
trying to "time" the market. Investors who go it alone can overreact to short-
term market events, buying and selling on the basis of this week's headlines, or
chasing the latest "hot" investment. Such behavior can derail an otherwise
prudent investment program. But investors who work with a financial adviser
receive guidance throughout the market's ups and downs. Your adviser will help
you place short-term market swings in their proper perspective and keep you
focused on your long-term investment program.
Your adviser is just one of the experts whose talents we have tapped in our
effort to bring the best minds in the business to the task of managing your
money. These experts are a vital part of the investment process at New England
Funds, and we encourage you to take advantage of their skills to the fullest.
We invite you to read the accompanying management commentary and financial
highlights. If you have any questions or comments, please contact your financial
adviser or New England Funds directly at 800-225-5478. Once again, we appreciate
your continued confidence and investment in New England Funds.
Sincerely,
/s/ Peter S. Voss /s/ Henry L.P. Schmelzer
Peter S. Voss Henry L.P. Schmelzer
Chairman President
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
INVESTMENT RESULTS THROUGH JUNE 30, 1995
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.
--------------------------------------------------------------------------------
A $10,000 Investment in Class A Shares
--------------------------------------------------------------------------------
Compared to Standard & Poor's 500 Index
A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Standard & Poor's 500 Index/4/.
The data points from the graph are as follows:
New England Capital Growth Fund - Net Asset Value/1/
<TABLE>
<CAPTION>
Year Amount
<S> <C>
8/3/92 $10,000
6/93 $11,838
6/94 $11,221
6/95 $14,696
</TABLE>
New England Capital Growth Fund - With Maximum Sales Charge/2/
<TABLE>
<CAPTION>
Year Amount
<S> <C>
8/3/92 $ 9,425
6/93 $11,157
6/94 $10,576
6/95 $13,851
</TABLE>
S&P 500/4/
<TABLE>
<CAPTION>
Year Amount
<S> <C>
8/3/92 $10,000
6/93 $10,918
6/94 $11,112
6/95 $14,000
</TABLE>
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 and Class C 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.
1
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Average Annual Total Returns 6/30/95
--------------------------------------------------------------------------------
Class A (Inception 8/3/92) Year to Date 1 Year Since Inception
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value/1/ 20.51% 30.97% 14.14%
With Max. Sales Charge/2/ 13.55 23.47 11.85
Lipper Growth Average/5/ 17.47 22.26 11.76
<CAPTION>
--------------------------------------------------------------------------------
Class B (Inception 9/13/93) Year to Date 1 Year Since Inception
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value/1/ 20.01% 29.96% 11.42%
With CDSC/3/ 16.01 25.96 9.88
Standard & Poor's 500/4/ 20.14 25.99 12.80
Lipper Growth Average/5/ 17.47 22.26 n/a
<CAPTION>
--------------------------------------------------------------------------------
Class C (Inception 12/30/94) Year to Date
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value/1/ 20.08%
Standard & Poor's 500/4/ 20.14
Lipper Growth Average/5/ 17.47
--------------------------------------------------------------------------------
</TABLE>
These returns represent past performance. Investment return and principal
value will fluctuate so that shares, upon redemption, may be worth more or
less than original cost.
Notes to Charts and Performance Update
/1/ Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
/2/ With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% 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/ Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing the
performance of 500 major companies, most of which are listed on the New York
Stock Exchange. The S&P 500 performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments.
/5/ 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.
2
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
NEW ENGLAND CAPITAL GROWTH FUND
Portfolio Managers: Scott Pape (left),
Richard Hurckes (right); Loomis, Sayles & Co.
Equity markets in general, and growth stocks in particular, delivered
very strong results in the first six months of 1995. The economy has
been expanding rapidly, though this growth is beginning to moderate
somewhat. Various factors including declining long-term interest rates,
improving productivity and low inflation have been responsible for the
strong profits that American corporations have enjoyed year to date. In
quite a few cases, corporations are even outperforming their own
expectations.
The decline of the U.S. dollar gave American companies doing business
abroad a competitive advantage. Corporations such as Coca-Cola and
Gillette, who do a large portion of their business outside of the U.S.,
have posted record profits thus far in 1995.
How Your Fund Performed
The market's focus on growth stocks during the first six months of 1995
enabled us to generate strong returns for your Fund. New England Capital
Growth Fund achieved a total return of 20.51% for Class A shares, net
asset value as of 6/30/95. This strong performance put your Fund in the
top quartile relative to its peer group, ranking 115 out of 583 funds in
Lipper's Growth Fund Average, which returned 17.47% as of 6/30/95. The
Fund also outperformed the Standard & Poor's 500/(R)/ Index, which
returned 20.14% year-to-date.*
*Past performance does not guarantee future results.
3
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
How We Managed Your Fund
We continue to pursue our investment approach of building a portfolio of
America's premier companies -- industry leaders with prospects for
better-than-average earnings growth. We also seek to identify companies
that have strong balance sheets and proven management teams.
Examples of our approach that have been very successful are McDonald's
and Coca-Cola. Both are market leaders, enjoy a significant
international presence and consistently deliver strong earnings. In
healthcare, Medtronic is the leading worldwide manufacturer of
pacemakers and implantable defibrillators. Intel and Microsoft are
dominant in their industries and consistently on the cutting edge of
technological innovations. All these Fund holdings reported better than
expected earnings growth in the first half of 1995.
Because the market favored large-capitalization growth companies, the
Fund's portfolio now holds a majority of its assets in this sector. We
also have a sizeable portion of the portfolio invested in emerging or
mid-sized companies where we anticipate strong growth potential later
this year and into 1996. In anticipation of a slowing economy we reduced
our exposure to stocks that are cyclical in nature, selling or reducing
positions in the energy, retail and auto industries.
4
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
Outlook for Our Shareholders
Over the next six months we may continue to over-weight the sectors
that have contributed to the Fund's strong year-to-date performance,
because we believe they will continue to grow.
[ ] Technology Both hardware and software companies did extremely well
because of the expanding economy and the increased momentum toward
networking for the private and business sectors.
[ ] Financial Services The expanding economy and declining interest
rates benefited banks and other financial institutions. There was an
increase in the number of credit cards issued, and lower interest
rates led to increased numbers of loan applications.
[ ] Healthcare The healthcare debate in 1994 succeeded in bringing down
the stock prices of many well-established, solid companies. However,
with the failure to pass reforms and the realization that changes
will take time, we've seen several of these companies return to
favor this year.
[ ] Consumer Non-Durables The decline of the dollar was good news for
American companies that supply consumable products such as food and
beverages to foreign countries.
5
<PAGE>
================================================================================
We also believe that over the next six months the economy may continue
to grow, but at a slower pace. Leading companies with proprietary
products and dominant market positions may continue to generate strong
earnings growth. While during the first six months of 1995 the Fund
concentrated on large, blue-chip companies, we believe that more growth
opportunities in the second half of 1995 may be found in emerging and
mid-sized companies.
As always, we are committed to building a portfolio of leading American
companies that are positioned to do well over the long term.
6
<PAGE>
--------------------------------------------------------------------------------
New England Capital Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Your Fund's Five Largest Investments 6/30/95
--------------------------------------------------------------------------------
Company Percentage
of Assets
--------------------------------------------------------------------------------
<S> <C>
1. Oracle Systems 2.8%
Database management software manufacturer
--------------------------------------------------------------------------------
2. Microsoft Corp. 2.7%
A major software manufacturer
--------------------------------------------------------------------------------
3. MGIC Investment Corp. 2.7%
Private mortgage insurance
--------------------------------------------------------------------------------
4. American International Group,Inc. 2.6%
A major international insurance holding company
--------------------------------------------------------------------------------
5. Micron Technology 2.5%
Microcomputer parts manufacturer
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Your Fund's Ten Largest Industry Positions 6/30/95
--------------------------------------------------------------------------------
Industry Percentage
of Assets
------------------------------------------------------------
<S> <C>
Drugs/Healthcare 11.5%
------------------------------------------------------------
Computer Software & Services 9.8%
------------------------------------------------------------
Electronics & Components 9.1%
------------------------------------------------------------
Business Services 7.3%
------------------------------------------------------------
Food & Beverages 6.2%
------------------------------------------------------------
Retail 5.8%
------------------------------------------------------------
Oil & Gas 5.8%
------------------------------------------------------------
Insurance 5.3%
------------------------------------------------------------
Hotels & Restaurants 5.3%
------------------------------------------------------------
Office Equipment 5.2%
------------------------------------------------------------
Portfolio holdings subject to change.
</TABLE>
7
<PAGE>
[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
NEW ENGLAND FUNDS
Where The Best Minds Meet
Portfolio Composition, Financial Statements and Highlights
NEW ENGLAND CAPITAL GROWTH FUND
June 30, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--98.9% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
AUTOMOBILE & RELATED--1.0%
21,000 Bandag, Inc. ........................................... $ 1,312,500
------------
BANKS--SAVINGS AND LOAN--1.9%
60,000 First Bank System, Inc. ................................ 2,460,000
------------
BEVERAGES--3.5%
51,000 Coca Cola Co. .......................................... 3,251,250
30,000 Pepsico, Inc. .......................................... 1,368,750
------------
4,620,000
------------
BUSINESS SERVICES--7.3%
54,600 Cintas Corp. ........................................... 1,938,300
44,000 First Data Corp. ....................................... 2,502,500
89,250 Fiserv, Inc. (c)........................................ 2,510,156
50,000 Medaphis Corp. (c) ..................................... 1,087,500
43,500 Paychex, Inc. .......................................... 1,576,875
------------
9,615,331
------------
CHEMICALS MAJOR--2.0%
46,000 Air Products & Chemicals, Inc. ......................... 2,564,500
------------
COMPUTER SOFTWARE & SERVICES--9.8%
38,000 Autodesk, Inc. ......................................... 1,634,000
80,000 Informix Corp. (c) ..................................... 2,030,000
40,000 Microsoft Corp. (c) .................................... 3,615,000
95,000 Oracle Systems Corp. (c) ............................... 3,669,375
39,500 Parametric Technology Corp. (c) ........................ 1,965,125
------------
12,913,500
------------
ELECTRONIC COMPONENTS--9.1%
26,000 Intel Corp. ............................................ 1,646,125
60,000 Micron Technology....................................... 3,292,500
46,000 Motorola, Inc. ......................................... 3,087,750
64,600 Premier Industrial Corp. ............................... 1,526,175
40,000 Solectron Corp. (c)..................................... 1,365,000
8,500 Texas Instruments....................................... 1,137,938
------------
12,055,488
------------
ELECTRICAL EQUIPMENT--1.6%
37,500 General Electric Co. ................................... 2,114,063
------------
FINANCIAL SERVICES--MISCELLANEOUS--1.9%
75,000 MBNA Corp. ............................................. 2,531,250
------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
FOOD--PACKAGED & MISCELLANEOUS--2.7%
40,000 Dreyers Grand Ice Cream, Inc. .......................... $ 1,465,000
57,000 Starbucks, Corp. (c).................................... 2,030,625
------------
3,495,625
------------
HEALTH CARE--DRUGS--4.3%
28,000 Amgen, Inc. (c)......................................... 2,252,250
21,000 Johnson & Johnson....................................... 1,420,125
160,000 Oncor, Inc. (c)......................................... 970,000
75,000 Somatogen, Inc. (c)..................................... 1,012,500
------------
5,654,875
------------
HEALTH CARE MED TECH--3.4%
72,300 Biomet, Inc. (c)........................................ 1,120,650
25,500 Medtronic, Inc. ........................................ 1,966,687
84,000 Ventritex, Inc. (c)..................................... 1,417,500
------------
4,504,837
------------
HEALTH CARE SERVICES--3.8%
60,000 Columbia HCA Healthcare Corp. .......................... 2,595,000
55,600 Healthsouth Corp. (c)................................... 966,050
30,000 Steris Corp. (c)........................................ 1,455,000
------------
5,016,050
------------
HOME PRODUCTS--4.5%
45,000 Duracell International, Inc. ........................... 1,946,250
62,000 Gillette Co. ........................................... 2,766,750
17,000 Procter & Gamble........................................ 1,221,875
------------
5,934,875
------------
HOTELS & RESTAURANTS--5.3%
75,000 Circus Circus Enterprises (c)........................... 2,643,750
75,000 McDonalds Corp. ........................................ 2,934,375
56,000 Primadonna Resorts, Inc. (c)............................ 1,344,000
------------
6,922,125
------------
HOUSING & BUILDING MATERIALS--2.2%
70,000 Home Depot, Inc. ....................................... 2,843,750
------------
INSURANCE--5.3%
30,000 American International Group, Inc. ..................... 3,420,000
77,000 MGIC Investment Corp. .................................. 3,609,375
------------
7,029,375
------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
MACHINERY--1.3%
27,000 Caterpillar............................................. $ 1,734,750
------------
MEDIA AND ENTERTAINMENT--3.1%
20,000 Broderbund Software, Inc. (c) .......................... 1,275,000
61,000 Viacom, Inc. Class "B' (c).............................. 2,828,875
------------
4,103,875
------------
METALS--0.6%
16,000 Nucor Corp. ............................................ 856,000
------------
NATURAL GAS--PIPELINES--1.9%
72,000 Enron Corp. ............................................ 2,529,000
------------
OFFICE EQUIPMMENT--5.2%
44,000 Cisco Systems, Inc. (c)................................. 2,224,750
85,000 EMC Corp. (c)........................................... 2,061,250
63,000 Silicon Graphics, Inc. (c).............................. 2,512,125
------------
6,798,125
------------
OIL--INDEPENDENT PRODUCERS--2.3%
70,000 Anadarko Petroleum Corp. ............................... 3,018,750
------------
OIL--MAJOR INTEGRATED--1.6%
65,000 Phillips Petroleum Co. ................................. 2,169,375
------------
RETAIL--GENERAL MERCHANDISE--1.3%
42,000 Nordstrom, Inc. ........................................ 1,737,750
------------
RETAIL--5.8%
48,000 CUC International (c)................................... 2,016,000
50,000 Gymboree Corp. (c)...................................... 1,453,125
77,000 Office Depot (c)........................................ 2,165,625
69,500 PetsMart, Inc. (c)...................................... 1,998,125
------------
7,632,875
------------
TELECOMMUNICATIONS--3.9%
85,000 General Instrument Corp. (c) ........................... 3,261,875
55,000 Qualcomm, Inc. (c) ..................................... 1,900,937
------------
5,162,812
------------
TOBACCO--2.3%
41,000 Philip Morris Companies, Inc. .......................... 3,049,375
------------
Total Common Stocks (Identified Cost $104,211,643)...... 130,380,831
------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
-------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM INVESTMENTS--1.1%
$1,465,830 Associates Corp. of North America 6.000%, 7/03/95.. $ 1,465,830
------------
Total Short-Term Investments (Identified Cost
$1,465,830)....................................... 1,465,830
------------
Total Investments--100.0% (Identified Cost
$105,677,473) (b)................................. 131,846,661
Receivables........................................ 842,429
Liabilities........................................ (923,615)
------------
Total Net Assets--100%............................. $131,765,475
============
(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1995 the net
unrealized appreciation on investments based on cost of
$105,677,473 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.......... $ 27,280,515
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value.......... (1,111,327)
------------
Net unrealized appreciation................................. $ 26,169,188
============
At December 31, 1994, the Fund had a capital loss carryover
of approximately $544,000 which expires December 31, 2002.
This may be available to offset future realized capital
gains, if any, to the extent provided by regulations.
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $131,846,661
Receivable for:
Fund shares sold...................................... 220,663
Securities sold....................................... 457,539
Dividends and Interest................................ 117,818
Unamortized organization expenses..................... 46,409
------------
132,689,090
LIABILITIES
Payable for:
Securities purchased.................................. $519,669
Fund shares redeemed.................................. 264,532
Accrued expenses:
Management fees....................................... 78,952
Deferred trustees' fees............................... 2,666
Accounting and administrative......................... 3,905
Other expenses........................................ 53,891
--------
923,615
------------
$131,765,475
============
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $102,847,843
Net investment loss................................... (1,031,311)
Accumulated net realized gains........................ 3,779,755
Unrealized appreciation on investments................ 26,169,188
------------
NET ASSETS............................................. $131,765,475
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($111,024,810 divided by 6,133,236 shares of
beneficial interest) ................................. $18.10
============
Offering price per share (100/94.25 of $18.10)......... $19.20*
============
Net asset value and offering price of Class B shares
($20,622,107 divided by 1,154,221 shares of beneficial
interest) ............................................ $17.87**
============
Net asset value and offering price of Class C shares
($118,558 divided by 6,632 shares of beneficial
interest) ............................................ $17.88
============
Identified cost of investments......................... $105,677,473
============
</TABLE>
* Based upon single purchases of less than $50,000. Reduced sales charges apply
for purchases in excess of these amounts.
**Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See accompanying notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 508,179
Interest................................................ 83,584
-----------
591,763
Expenses
Management fees......................................... $440,247
Service fees--Class A................................... 125,077
Service and distribution fees--Class B.................. 86,453
Service and distribution fees--Class C.................. 206
Trustees' fees and expenses............................. 12,155
Accounting and administrative........................... 24,426
Custodian............................................... 41,325
Transfer agent.......................................... 216,733
Audit and tax services.................................. 20,000
Legal................................................... 12,993
Printing................................................ 26,437
Registration............................................ 25,736
Amortization of organization expenses................... 8,038
Miscellaneous........................................... 4,284
--------
Total expenses.......................................... 1,044,110
-----------
Net investment (loss)................................... (452,347)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net....................... 4,332,843
Unrealized appreciation on Investments--net............. 18,468,349
-----------
Net gain on investment transactions..................... 22,801,192
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............... $22,348,845
===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1994 JUNE 30, 1995
------------ -------------
<S> <C> <C>
FROM OPERATIONS
Net investment (loss)............................. $ (587,279) $ (452,347)
Net realized gain (loss) on investments........... (544,430) 4,332,843
Unrealized appreciation (depreciation) on
investments...................................... (853,950) 18,468,349
------------ ------------
Increase (decrease) in net assets from operations. (1,985,659) 22,348,845
------------ ------------
Increase (decrease) in net assets
derived from capital share transactions.......... 7,695,257 (1,776,198)
------------ ------------
Total increase in net assets...................... 5,709,598 20,572,647
NET ASSETS
Beginning of the period........................... 105,483,230 111,192,828
------------ ------------
End of the period................................. $111,192,828 $131,765,475
============ ============
UNDISTRIBUTED NET INVESTMENT (LOSS)
Beginning of the period........................... $ 0 $ (578,964)
============ ============
End of the period................................. $ (578,964) $ (1,031,311)
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
(unaudited)
<TABLE>
<CAPTION>
CLASS A
------------------------------------------
AUGUST 3(*) YEAR ENDED SIX MONTHS
THROUGH DECEMBER 31, ENDED JUNE
DECEMBER 31, ---------------- 30,
1992 1993 1994 1995
------------ ------- ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 12.50 $ 14.23 $ 15.27 $ 15.02
------- ------- ------- --------
Income From Investment Operations
Net Investment Income (loss)......... 0.02 0.00 (0.08) (0.06)
Net Realized and Unrealized Gain
(Loss) on Investments............... 1.84 1.12 (0.17) 3.14
------- ------- ------- --------
Total From Investment Operations..... 1.86 1.12 (0.25) 3.08
------- ------- ------- --------
Less Distributions
Dividends From Net Investment
Income.............................. (0.02) 0.00 0.00 0.00
Distributions From Net Realized
Capital Gains....................... (0.11) (0.08) 0.00 0.00
------- ------- ------- --------
Total Distributions.................. (0.13) (0.08) 0.00 0.00
------- ------- ------- --------
Net Asset Value, End of Period....... $ 14.23 $ 15.27 $ 15.02 $ 18.10
======= ======= ======= ========
Total Return (%)..................... 14.9*** 7.9 (1.6) 20.5***
Ratio of Operating Expenses to
Average Net Assets (%)+............. 1.00** 1.23 1.63 1.67**
Ratio of Net Investment Income
(loss) to
Average Net Assets (%).............. 0.74** (0.03) (0.45) (0.66)**
Portfolio Turnover Rate (%).......... 15 77 82 65**
Net Assets, End of Period (000)...... $34,772 $98,735 $95,803 $111,025
+The ratio of operating expenses
to average net assets without
giving effect to the voluntary
expense limitations described in
Note 4 to the Financial
Statements would have been (%s)... 2.20** 1.58 -- --
*Commencement of Operations.
**Computed on an annualized
basis.
***Not computed on an annualized
basis.
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
(unaudited)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------- ----------
SEPTEMBER 13(*) YEAR SIX MONTHS
THROUGH ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, ENDED JUNE JUNE 30,
1993 1994 30, 1995 1995
--------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $14.79 $ 15.24 $ 14.89 $14.89
------ ------- ------- ------
Income From Investment
Operations
Net Investment Income
(loss).................... 0.00 (0.08) (0.09) (0.04)
Net Realized and
Unrealized Gain (Loss) on
Investments............... 0.53 (0.27) 3.07 3.03
------ ------- ------- ------
Total From Investment
Operations................ 0.53 (0.35) 2.98 2.99
------ ------- ------- ------
Less Distributions
Dividends From Net
Investment Income......... 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains.... (0.08) 0.00 0.00 0.00
------ ------- ------- ------
Total Distributions........ (0.08) 0.00 0.00 0.00
------ ------- ------- ------
Net Asset Value, End of
Period.................... $15.24 $ 14.89 $ 17.87 $17.88
====== ======= ======= ======
Total Return (%)........... 3.6*** (2.3) 20.0*** 20.1***
Ratio of Operating
Expenses to
Average Net Assets (%)+... 2.29** 2.38 2.42** 2.42**
Ratio of Net Investment
Income (loss) to
Average Net Assets (%).... (1.15)** (1.20) (1.41)** (1.41)**
Portfolio Turnover Rate
(%)....................... 77 82 65** 65**
Net Assets, End of Period
(000)..................... $6,748 $15,390 $20,622 $ 119
+The ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense limitations
described in Note 4 to
the Financial Statements
would have been (%)..... 2.29** -- -- --
*Commencement of
Operations.
**Computed on an
annualized basis.
***Not computed on an
annualized basis.
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
1. The Fund is a Series of 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 Class A, Class B and Class C shares. The Fund commenced its
public offering of Class B shares on September 13, 1993 and of Class C shares
on December 30, 1994. Class A shares are sold with a maximum front end sales
charge of 5.75%. Class B shares do not pay a front end sales charge, but pay a
higher ongoing distribution fee than Class A shares, and are subject to a
contingent deferred sales charge if those shares are redeemed within five years
of purchase. Class C shares do not pay front end or contingent deferred sales
charges and do not convert to any class of shares, but they do pay a higher
ongoing distribution fee than Class A shares. Expenses of the Fund are borne
pro-rata by the holders of each class 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 attributable to their class, if the Fund were
liquidated. In addition, the Trustees declare 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.
A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price. Short-term obligations with a remaining
maturity of less than sixty days are stated at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Interest income for the Funds is increased by
the accretion of discount. In determining net gain or loss on securities sold,
the cost of securities has been determined on the identified cost basis.
C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. 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 relating to shareholder
distributions will result in reclassification to the capital accounts.
E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price. The Fund's adviser 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
securities.
F. ORGANIZATION EXPENSE. Costs incurred in fiscal 1992 in connection with the
Fund's organization and registration, amounting to approximately $75,980 in the
aggregate, were paid by the Fund and are being amortized by the Fund based on
projected annual average net assets over 60 months.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the six months ended June 30, 1995 were $39,980,403 and $37,795,131,
respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. During the six
months ended June 30, 1995, the Fund incurred management fees payable to its
investment adviser, Loomis, Sayles & Company, L.P. ("Loomis, Sayles"). Certain
officers and directors of the adviser and its affiliated companies are also
officers or trustees of the Fund. Loomis, Sayles is a wholly owned subsidiary
of New England Investment Companies, L.P. ("NEIC"), which is a majority owned
subsidiary of New England Mutual Life Insurance Company. The management
agreement for the Fund in effect during the six months ended June 30, 1995
provided for fees as set forth below:
<TABLE>
<CAPTION>
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
----------- ---------------------- -----------------------------
<S> <C> <C>
$440,247 0.750% the first $200 million
0.700% the next $300 million
0.650% the excess over $500 million
</TABLE>
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England
Funds"), the Fund's distributor, is a wholly owned 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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
auditing and financial reporting functions and 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 six months ended June 30, 1995 these
expenses amounted to $24,426 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 for the Fund. For the six months ended June 30, 1995, the Fund
paid New England Funds $164,959 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 Service and Distribution Plans relating to the Fund's Class
B and Class C shares (the "Class B and Class C Plans").
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 the New England Funds in providing personal services to investors
in Class A shares and/or the maintenance of shareholder accounts. For the six
months ended June 30, 1995, the Fund paid New England Funds $125,077 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 at June 30, 1995 is $563,284.
Under the Class B and Class C 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 and Class C 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 and Class C shares
and/or the maintenance of shareholder accounts. For the six months ended June
30, 1995, the Fund paid New England Funds $21,613 and $52 in service fees under
the Class B and Class C plans, respectively.
Also under the Class B and Class C Plans, the Fund pays New England Funds
monthly distribution fees at the annual rate of up to 0.75% of the average
daily net
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
assets attributable to the Fund's Class B and Class C 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 and Class C shares.
For the six months ended June 30, 1995, the Fund paid New England Funds
$64,840 and $154 in distribution fees under the Class B and Class C plans,
respectively.
Commissions (including contingent deferred sales charges) on Fund shares paid
to New England Funds by investors in shares of the Fund during the six months
ended June 30, 1995 amounted to $201,539.
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
Loomis, Sayles, New England Funds, NEIC or their affiliates, other than
registered investment companies. Each other trustee is compensated by the Fund
as follows:
<TABLE>
<S> <C>
Annual Retainer $2,400
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Retainer $125/year
</TABLE>
A deferred compensation plan is available to the trustees on a voluntary
basis. Each participating trustee will receive an amount equal to the value
that such deferred compensation would have had, had it been invested in the
Fund on the normal payment date.
4. EXPENSE LIMITATIONS. Commencing August 3, 1992 and through July 31, 1993,
Loomis Sayles and the Fund's distributor had voluntarily agreed to reduce
their fees and, if necessary, to assume expenses of the Fund in order to limit
the Fund's expenses to an annual rate of 1.00% for the period January 1
through July 31 of the Fund's average daily net assets. The limitation was
increased to 1.25% of the Fund's average daily net assets for the months of
August and September, 1993 and eliminated at the end of September.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
5. CAPITAL SHARES. At June 30, 1995 there was an unlimited number of shares of
beneficial interest authorized, divided into three classes, Class A, Class B
and Class C capital stock. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
----------------------- ---------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold.................... 1,854,656 $27,571,569 704,527 $11,562,848
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income....................... 0 0 0 0
Distributions from net
realized gain................ 0 0 0 0
---------- ----------- -------- -----------
1,854,656 27,571,569 704,527 11,562,848
Shares repurchased............. (1,944,564) (28,617,642) (948,435) (15,401,475)
---------- ----------- -------- -----------
Net increase (decrease)........ (89,908) (1,046,073) (243,908) (3,838,627)
---------- ----------- -------- -----------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
----------------------- ---------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold.................... 700,346 10,332,881 192,097 3,104,309
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income....................... 0 0 0 0
Distributions from net
realized gain................ 0 0 0 0
---------- ----------- -------- -----------
700,346 10,332,881 192,097 3,104,309
Shares repurchased............. (109,499) (1,591,551) (71,598) (1,148,845)
---------- ----------- -------- -----------
Net increase (decrease)........ 590,847 8,741,330 120,499 1,955,464
---------- ----------- -------- -----------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
---------------------
CLASS C SHARES AMOUNT
------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold.................... 6,632 106,965
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income....................... 0 0
Distributions from net
realized gain................ 0 0
-------- -----------
6,632 106,965
Shares repurchased............. 0 0
-------- -----------
Net increase (decrease)........ 6,632 106,965
---------- ----------- -------- -----------
Increase (decrease) derived
from capital shares
transactions.................. 500,939 $ 7,695,257 (116,777) $(1,776,198)
========== =========== ======== ===========
</TABLE>
15
<PAGE>
As a New England Funds stock fund shareholder, it's important that you're kept
up-to-date on all changes to the stock funds prospectus. Since there's been a
change in management for New England Star Advisers Fund, we've included a copy
of the supplement to the prospectus below.
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND STAR ADVISERS FUND
Supplement dated July 13, 1995
to New England Star Advisers Fund Prospectus
dated May 1, 1995
and New England Stock Funds Prospectus dated
May 1, 1995
The following information reflects changes in the investment management and
policies of the Loomis, Sayles & Company, L.P. ("Loomis Sayles") segment of New
England Star Advisers Fund (the "Fund"):
. Jeffrey C. Petherick, Vice President of Loomis Sayles and New England
Funds Trust I, and Mary Champagne, Vice President of Loomis Sayles, have
day-to-day management responsibility for the segment of the Fund that is
allocated to Loomis Sayles. Mr. Petherick has co-managed the Loomis
Sayles segment of the Fund since the Fund's inception. Mr. Petherick was
an investment manager at Masco Corporation prior to joining Loomis
Sayles in 1990. Ms. Champagne has co-managed the Loomis Sayles segment
of the Fund since July 1995. Prior to joining Loomis Sayles in 1993, Ms.
Champagne served as a portfolio manager at NBD Bank for 10 years.
. Loomis Sayles manages its segment of the portfolio by investing
primarily in stocks of small cap companies with good earnings growth
potential, that Loomis Sayles believes are undervalued by the market.
Typically, such companies range in size from $100 million to $500
million in market capitalization, have better than average growth rates
at below average price/earnings ratios and have strong balance sheets
and cash flow. Loomis Sayles seeks to build a core small cap portfolio
of solid growth companies' stock, with a smaller emphasis on special
situations and turnarounds (companies that have experienced significant
business problems but which Loomis Sayles believes have favorable
prospects for recovery), as well as unrecognized stocks.
16
<PAGE>
--------------------------------------------------------------------------------
New England Funds
--------------------------------------------------------------------------------
Stock Funds
International Equity Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
Bond Funds
High Income Fund
Strategic Income Fund
Government Securities Fund
Bond Income Fund
Limited Term U.S. Government Fund
Adjustable Rate U.S. Government Fund
Tax Exempt Funds
Tax Exempt Income Fund
Massachusetts Tax Free Income Fund
Intermediate Term Tax Free Fund of California
Intermediate Term Tax Free Fund of New York
Money Market Funds
Cash Management Trust
-- Money Market Series
-- U.S. Government Series
Tax Exempt Money Market Trust
To learn more, and for a free prospectus,
contact your financial representative.
New England Funds, L.P.
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors
when it is preceded or accompanied by the 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>
[LOGO APPEARS HERE]
New England Funds
Where The Best Minds Meet
--------------------------------
399 Boylston Street
Boston, Massachusetts
02116
--------------------------------
95-0755 (CG58)
[LOGO] Printed on Recycled Paper
