<PAGE>
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[LOGO APPEARS HERE]
New England Funds
Where The Best Minds Meet
----------------------------------------
Semiannual Report and Performance Update
----------------------------------------
New England
Value Fund
[ARTWORK APPEARS HERE]
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June 30, 1995
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<PAGE>
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July 20, 1995
Dear Shareholder:
We have good news to present in this Semiannual Report for New England
Value 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
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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
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New England Value Fund
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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(R) Index/3/
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/3/.
The data points from the graph are as follows:
New England Value Fund - Net Asset Value/1/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $10,000
6/86 $14,573
6/87 $18,040
6/88 $15,558
6/89 $16,852
6/90 $18,886
6/91 $19,251
6/92 $21,992
6/93 $25,568
6/94 $27,301
6/95 $32,985
</TABLE>
New England Value Fund - With Maximum Sales Charge/2/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $ 9,425
6/86 $13,735
6/87 $17,003
6/88 $14,663
6/89 $15,883
6/90 $17,800
6/91 $18,144
6/92 $20,727
6/93 $24,098
6/94 $25,731
6/95 $31,089
</TABLE>
Standard & Poor's 500 Index/3/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $10,000
6/86 $13,583
6/87 $16,991
6/88 $15,819
6/89 $19,065
6/90 $22,191
6/91 $23,831
6/92 $27,040
6/93 $30,714
6/94 $31,257
6/95 $39,381
</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, Class C and Class Y
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
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New England Value Fund
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Average Annual Total Returns 6/30/95
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<TABLE>
<CAPTION>
Class A Year to Date 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C>
Net Asset Value/1/ 18.84% 20.82% 11.80% 12.68%
With Max. Sales Charge/2/ 12.19 13.81 10.48 12.01
Standard & Poor's 500/4/ 20.14 25.99 12.03 14.60
Lipper Growth & Income Avg./5/ 16.75 19.74 11.18 12.60
<CAPTION>
Class B (Inception 9/13/93) Year to Date 1 Year Since Inception
<S> <C> <C> <C>
Net Asset Value/1/ 18.40% 19.75% 12.38%
With CDSC/3/ 14.40 15.75 10.84
Standard & Poor's 500/4/ 20.14 25.99 12.80
Lipper Growth & Income Avg./5/ 16.75 19.74 n/a
<CAPTION>
Class C Year to Date
<S> <C>
Net Asset Value/1/ 18.40%
Standard & Poor's 500/4/ 20.14
Lipper Growth & Income Avg./5/ 16.75
<CAPTION>
Class Y (Inception 3/31/94) Year to Date 1 Year Since Inception
<S> <C> <C> <C>
Net Asset Value/1/ 19.06% 20.81% 17.11%
Standard & Poor's 500/4/ 20.14 25.99 11.75z
Lipper Growth & Income Avg./5/ 16.75 19.74 15.12
</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. Class Y shares are available only to certain institutional
investors. Share price and return may vary.
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
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New England Value Fund
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[PHOTOS APPEAR HERE]
NEW ENGLAND VALUE FUND
Portfolio Managers: Doug Ramos, Carol McMurtie, Tricia Mills; Loomis, Sayles
& Co.
Investment sentiment during the first six months of 1995 fell into two distinct
phases -- both proving favorable for returns. In the first quarter of the year,
the financial markets celebrated what was generally viewed as the arrival of a
near-perfect "soft landing." Economic growth was moderating, interest rates
would stabilize, and inflation was kept in check -- all of which translated into
strong equity and fixed-income returns.
In the second quarter, however, the economic outlook banked slightly, moving
from a celebratory feeling to one of anxiety at the possibility of a bumpy
landing -- even a recession. Despite a feeling of economic uncertainty, the
financial markets continued to perform well. Bonds enjoyed a strong rally in
anticipation of the Federal Reserve Board's July interest rate cut lowering
short-term interest rates. Meanwhile stock markets climbed higher as they, too,
eagerly awaited the lower rates that would translate into economic growth later
on in the year.
How Your Fund Performed
Against this backdrop, your Fund achieved the first six New England Value Fund
months of 1995 with net asset value returns of 18.98% for Class A shares. This
one-year performance ranks your Fund 89 of 432 funds placing it in the top
quartile of its Lipper growth and income peer group. For the five- and ten-year
periods ended 6/30/95, the Lipper rankings are 59 of 188 and 55 of 113
respectively for Class A Shares.
3
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New England Value Fund
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At net asset value,
New England
Value Fund
outperformed
the Lipper Growth
and Income Fund
Average of 224
funds for the past
three-year period.
-------------------
How We Managed Your Fund
During the first half of the year, your Fund remained fully invested. We
continued to look for fundamentally strong companies with low price-to-earnings
ratios that are undervalued by the market in relation to their earnings growth
potential. Successful portfolio performance was based on the strong performance
of the technology and financial sectors. We are happy to report that this
strategy proved successful for the Fund during the first six months of 1995.
As the number of individuals demanding new technology climbs, this industry is
reaping the rewards of increased demand. Specifically, Intel and Texas
Instruments -- which are among the Fund's holdings -- proved to be top
performers. Business and the banking and financial services industries also
enjoyed an outstanding first half as firms in this sector benefited from a lower
interest rate environment. Companies which we favored included Bank of New York,
Dean Witter Discover, Golden West, and Green Tree.
The airline industry in general also fared well, especially during the second
quarter. Most airline issues exhibited improved fundamentals, including higher
yields and stronger revenue growth. Southwest Airlines contributed positively to
the Fund's performance. Selective emphasis in housing and building materials
also enhanced the Fund's return. Overall, this sector underperformed, but
individual stocks enjoyed a strong first half. For example,
4
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New England Value Fund
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Black & Decker -- one of our current favorites -- is enjoying strong product
growth here in the U.S., as well as a successful rollout of new products
overseas. It is also benefiting from improved economies of scale and overall
cost reductions.
On the sell side, we continued to eliminate stocks whose price-to-earnings
ratios have migrated up the P/E spectrum. For example, recent sales included
Circus Circus, and Glaxo, Plc. We also trimmed back holdings, taking profits in
such money-makers as Intel and Texas Instruments, and taking the opportunity to
reinvest proceeds in more defensive, higher-yielding areas. Although technology
as a sector remains extremely attractive, some issues are becoming too expensive
for our taste.
Outlook for Our Shareholders
Going forward, we see no reason to make substantial portfolio changes. We may
make tactical shifts to take advantage of specific trading opportunities or
fundamental changes in specific companies, but strategically we believe we are
well positioned for the coming months.
We expect slow economic growth to continue through much of the remainder of
1995, with a possible pickup toward the latter part of the year. Longer-term,
we're looking for a return to above-trend economic growth in the early part of
1996, as the economy builds momentum.
5
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New England Value Fund
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Such a scenario should bode well for equity investors. A slower economy
typically means moderate corporate earnings growth, a more attractive interest
rate environment, as well as relatively low inflation -- all together an
environment for stock success. Accordingly, equities should continue to perform
well, but are unlikely to repeat the double digit returns experienced during the
first half of the year.
As corporate earnings growth slows, the equity markets could become more
volatile. We don't expect a significant downturn in stock prices, but equities
may feel the strain as the market comes to term with reduced corporate earnings
growth. Accordingly, we are becoming more defensive in our stock selection
process, attempting to reduce risk in the portfolio. As mentioned, we've begun
to focus on higher yielding issues. Recent additions to the portfolio include
Ameritech, Bell South and various electric utility companies, which tend to be
less volatile.
As always, we remain committed to our fundamental bottom-up stock selection
process. Our goal is to invest in stocks that are undervalued in the marketplace
and have above-average earnings growth potential. We believe this approach will
benefit our shareholders over the long term.
6
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New England Value Fund
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Your Fund's Five Largest Investments 6/30/95*
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<TABLE>
<CAPTION>
Percentage
Company of Assets
--------------------------------------------------------------
<S> <C>
1. Philip Morris Companies, Inc. 2.1%
Cigarette, food, and brewing company
--------------------------------------------------------------
2. Carnival Corp. 2.0%
Cruise ship, hotel and casino company
--------------------------------------------------------------
3. Black & Decker Corp. 2.0%
Power tool and home products manufacturer
--------------------------------------------------------------
4. E.I. duPont de Nemours & Co., Inc. 1.9%
Large chemical, oil and gas company
--------------------------------------------------------------
5. PPG Industries, Inc. 1.9%
Producer of flat glass, paint and chemicals, etc.
</TABLE>
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Your Fund's Ten Largest Stock Sectors as of 6/30/95*
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<TABLE>
<CAPTION>
Industry Percentage of Assets
--------------------------------------------------------------
<S> <C>
Chemicals 8.2%
--------------------------------------------------------------
Insurance 7.1%
--------------------------------------------------------------
Banks 5.9%
--------------------------------------------------------------
Financial Services 6.9%
--------------------------------------------------------------
Conglomerates 5.2%
--------------------------------------------------------------
Aerospace 4.8%
--------------------------------------------------------------
Housing 4.8%
--------------------------------------------------------------
Office Equipment 4.7%
--------------------------------------------------------------
Oil 4.6%
--------------------------------------------------------------
Automobile & Related 3.9%
</TABLE>
*Portfolio holdings and asset allocations may change.
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
VALUE FUND
June 30, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--95.9% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE--4.8%
53,500 Boeing Co............................................... $ 3,350,437
62,000 Lockheed Martin Corp.................................... 3,913,750
61,200 Raytheon Co............................................. 4,750,650
------------
12,014,837
------------
AIRLINE--2.3%
47,600 AMR Corp. (c)........................................... 3,552,150
95,700 Southwest Airlines Co................................... 2,284,838
------------
5,836,988
------------
AUTOMOBILE & RELATED--3.9%
46,500 Chrysler Corp........................................... 2,226,187
82,000 Ford Motor Co........................................... 2,439,500
90,500 General Motors Corp..................................... 4,242,188
16,000 Goodyear Tire & Rubber Co............................... 660,000
------------
9,567,875
------------
BANKS--5.9%
85,600 Bank of New York, Inc................................... 3,456,100
55,000 Chemical Banking Corp................................... 2,598,750
17,400 First Interstate Bancorp................................ 1,396,350
37,200 Fleet Financial Group................................... 1,381,050
37,000 Golden West Financial Corp.............................. 1,743,625
47,400 NationsBank Corp........................................ 2,541,825
49,000 Norwest Corp............................................ 1,408,750
------------
14,526,450
------------
CHEMICAL--MAJOR--8.2%
27,300 Air Products & Chemicals, Inc........................... 1,521,975
69,400 E.I. Du Pont de Nemours & Co............................ 4,771,250
125,300 Georgia Gulf Corp. ..................................... 4,087,912
18,600 IMC Global, Inc. (c).................................... 1,006,725
110,800 PPG Industries, Inc..................................... 4,764,400
170,100 Praxair, Inc............................................ 4,252,500
------------
20,404,762
------------
ELECTRICAL EQUIPMENT--1.4%
26,300 General Electric Co..................................... 1,482,663
43,200 Honeywell, Inc.......................................... 1,863,000
------------
3,345,663
------------
</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>
ELECTRONIC COMPONENTS--2.9%
63,200 Intel Corp.............................................. $ 4,001,350
23,200 Texas Instruments, Inc.................................. 3,105,900
------------
7,107,250
------------
ENGINEERING AND CONSTRUCTION--1.5%
151,900 McDermott International, Inc............................ 3,664,588
------------
FINANCIAL SERVICES--6.9%
63,500 Dean Witter Discover & Co............................... 2,984,500
58,100 Federal Home Loan Mortgage Corp......................... 3,994,375
44,600 Federal National Mortgage Association................... 4,209,125
29,600 Green Tree Financial Corp............................... 1,313,500
48,000 MBNA Corp............................................... 1,620,000
84,200 Meditrust SBI........................................... 2,873,325
------------
16,994,825
------------
FOOD AGRIBUSINESS--0.6%
34,200 IBP Inc................................................. 1,487,700
------------
FOREST PRODUCTS--1.5%
79,400 Weyerhaeuser Co......................................... 3,741,725
------------
FREIGHT--TRANSPORTATION--1.4%
147,200 Canadian Pacific Ltd.................................... 2,557,600
18,500 Conrail, Inc............................................ 1,029,062
------------
3,586,662
------------
HEALTH CARE--DRUGS--1.5%
126,100 Glaxo Holdings PLC...................................... 3,073,688
13,600 Smithkline Beecham PLC.................................. 615,400
------------
3,689,088
------------
HEALTH CARE--SERVICES--1.3%
150,900 Beverly Enterprises, Inc. (c)........................... 1,867,387
41,700 U.S. Healthcare, Inc.................................... 1,277,063
------------
3,144,450
------------
HEALTH CARE--MED TECH--1.4%
112,000 C. R. Bard, Inc......................................... 3,360,000
------------
HOME PRODUCTS--1.9%
14,400 Avon Products, Inc...................................... 964,800
72,700 Premark International, Inc.............................. 3,771,313
------------
4,736,113
------------
</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>
HOUSING & BUILDING MATERIALS--4.8%
160,700 Masco Corp.............................................. $ 4,338,900
156,700 The Black & Decker Corp................................. 4,838,112
49,600 Whirlpool Corp.......................................... 2,728,000
------------
11,905,012
------------
INSURANCE--7.1%
152,600 ACE Ltd................................................. 4,425,400
25,100 American International Group, Inc....................... 2,861,400
55,400 Chubb Corp.............................................. 4,438,925
114,000 First Colony Corp....................................... 2,736,000
68,800 Lincoln National Corp................................... 3,010,000
------------
17,471,725
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LEISURE--3.4%
209,800 Carnival Corp........................................... 4,904,075
27,200 Eastman Kodak Co........................................ 1,649,000
23,100 Hasbro, Inc............................................. 733,425
63,700 Outboard Marine Corp.................................... 1,250,113
------------
8,536,613
------------
MACHINERY--2.1%
148,800 Case Equipment Corp..................................... 4,426,800
105,550 Consorcio G Grupo Dina Sa De, ADR (d)................... 329,844
205,800 Consorcio G Grupo Dina Sa De Series L, ADR (d).......... 411,600
------------
5,168,244
------------
METALS--1.5%
71,900 AK Steel Holding Corp. (c).............................. 1,959,275
35,700 Reynolds Metals Co...................................... 1,847,475
------------
3,806,750
------------
MULTI-INDUSTRY--5.2%
66,500 Allied Signal, Inc...................................... 2,959,250
22,300 Eaton Corp.............................................. 1,296,187
26,900 ITT Corp................................................ 3,160,750
16,500 Tenneco, Inc............................................ 759,000
80,600 Textron, Inc............................................ 4,684,875
------------
12,860,062
------------
NATURAL GAS--PIPELINES--3.0%
115,093 El Paso Natural Gas Co.................................. 3,280,150
70,000 Mapco, Inc.............................................. 4,060,000
------------
7,340,150
------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
OFFICE EQUIPMENT--4.7%
146,700 EMC Corp. (c)........................................... $ 3,557,475
35,600 Hewlett Packard Co...................................... 2,652,200
46,700 International Business Machines......................... 4,483,200
9,000 Xerox Corp.............................................. 1,055,250
------------
11,748,125
------------
OIL--MAJOR INTEGRATED--4.6%
93,200 Repsol S.A., ADR (d).................................... 2,947,450
3,900 Royal Dutch Petroleum Co., ADR (d)...................... 475,313
58,400 Sun, Inc................................................ 1,598,700
48,600 Tosco Corp.............................................. 1,549,125
119,600 Ultramar Corp........................................... 3,019,900
99,600 YPF Sociedad Anonima, ADR (d)........................... 1,879,950
------------
11,470,438
------------
OIL--SERVICE--0.3%
37,300 Dresser Industries, Inc................................. 829,925
------------
PAPER--1.3%
53,700 Mead Corp............................................... 3,188,437
------------
RETAIL--GENERAL MERCHANDISE--1.0%
33,000 Dayton Hudson Corp...................................... 2,367,750
------------
RETAIL--SPECIALTY--0.2%
44,900 TJX Companies, Inc...................................... 594,925
------------
TEXTILE & APPAREL--0.3%
21,800 Reebok International, Ltd............................... 741,200
------------
TOBACCO--2.9%
15,900 Loew's Corp............................................. 1,923,900
69,100 Philip Morris Companies Inc............................. 5,139,312
------------
7,063,212
------------
UTILITIES--ELECTRIC--2.7%
115,500 Pacific Gas & Electric Co............................... 3,349,500
192,900 SCE Corp................................................ 3,303,413
------------
6,652,913
------------
UTILITIES--TELECOMMUNICATIONS--3.4%
65,100 Ameritech Corp.......................................... 2,864,400
5,000 Bellsouth Corp.......................................... 317,500
47,300 GTE Corp................................................ 1,614,112
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE (A)
-------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES--TELECOMMUNICATIONS--CONTINUED
46,300 Sprint Corp........................................ $ 1,556,838
71,700 Telefonos De Mexico S.A., ADR (d).................. 2,124,112
------------
8,476,962
------------
Total Common Stocks (Identified Cost $190,549,602). 237,431,419
------------
PREFERRED STOCKS--2.0%
AUTOMOBILE & RELATED--0.5%
10,100 Chrysler Corp...................................... 1,342,038
------------
TOBACCO--1.5%
602,100 RJR Nabisco........................................ 3,687,862
------------
Total Preferred Stock (Identified Cost $5,865,659). 5,029,900
------------
SHORT-TERM INVESTMENTS--2.4%
FACE
AMOUNT
-------------------------------------------------------------------------------
$6,018,000 Chevron Corp. 5.900%, 7/03/95...................... 6,018,000
------------
Total Short Term Obligations (Identified Cost
$6,018,000)........................................ 6,018,000
------------
Total Investments--100.3%(Identified Cost
$202,433,261)(b)................................... 248,479,319
Cash & Receivables................................. 1,473,218
Liabilities........................................ (2,409,614)
------------
Total Net Assets--100%............................. $247,542,923
============
</TABLE>
<TABLE>
<S> <C>
(a) See Note 1A
(b) Federal Tax Information: At June 30, 1995 the net
unrealized appreciation on investments based on cost
of $202,433,261 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............................................... $51,794,848
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value............................................. (5,748,790)
-----------
Net unrealized appreciation............................ $46,046,058
===========
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate
issued by a U.S. bank representing the right to
receive securities of the foreign issuer described.
The value of ADRs are significantly influenced by
trading on exchanges not located in the United States
or Canada.
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
June 30, 1995
(unaudited)
<TABLE>
<S> <C>
ASSETS
Investments at value............................... $248,479,319
Cash............................................... 148
Receivable for:
Fund shares sold................................... 498,931
Securities sold.................................... 288,025
Dividends and Interest............................. 679,928
Foreign dividend tax reclaims...................... 6,186
------------
249,952,537
LIABILITIES
Payable for:
Securities purchased............................... $ 811,445
Fund shares redeemed............................... 1,326,402
Accrued expenses:
Management fees.................................... 149,671
Deferred trustees' fees............................ 47,536
Accounting and administrative...................... 3,841
Other expenses..................................... 70,719
----------
2,409,614
------------
$247,542,923
============
NET ASSETS
Net Assets consist of:
Capital paid in.................................... $187,182,174
Undistributed net investment income................ 1,387,317
Accumulated net realized gains .................... 12,927,374
Unrealized appreciation on investments............. 46,046,058
------------
NET ASSETS.......................................... $247,542,923
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A
shares ($221,032,294 divided by 25,568,517 shares
of beneficial interest)............................ $8.64
=====
Offering price per share (100/94.25 of $8.64)....... $9.17*
=====
Net asset value and offering price of Class B shares
($20,666,060 divided by 2,414,760 shares of benefi-
cial interest)..................................... $8.56**
=====
Net asset value and offering price of Class C shares
($271,912 divided by 31,768 shares of beneficial
interest).......................................... $8.56
=====
Net asset value and offering price of Class Y shares
($5,572,657 divided by 646,545 shares of beneficial
interest).......................................... $8.62
=====
Identified cost of investments...................... $202,433,261
============
</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.
7
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 2,889,025(a)
Interest.............................................. 148,743
-----------
3,037,768
Expenses
Management fees....................................... $835,459
Service fees--Class A................................. 253,912
Service and distribution fees--Class B................ 83,397
Service and distribution fees--Class C................ 570
Trustees' fees and expenses........................... 12,335
Accounting and administrative......................... 24,580
Custodian............................................. 60,408
Transfer agent........................................ 266,988
Audit and tax services................................ 20,000
Legal................................................. 12,993
Printing.............................................. 32,392
Registration.......................................... 23,555
Miscellaneous......................................... 11,209
--------
Total expenses........................................ 1,637,798
-----------
Net investment income................................. 1,399,970
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 12,995,732
Unrealized appreciation on Investments--net........... 25,104,537
-----------
Net gain on investment transactions................... 38,100,269
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $39,500,239
===========
</TABLE>
(a) Net of foreign witholding tax of $16,394.
See accompanying notes to financial statements.
8
<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 income............................ $ 2,012,017 $ 1,399,970
Net realized gain on investments................. 10,942,333 12,995,732
Unrealized appreciation (depreciation) on invest-
ments........................................... (15,995,953) 25,104,537
------------ ------------
Increase (decrease) in net assets from opera-
tions........................................... (3,041,603) 39,500,239
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A.......................................... (1,952,257) 0
Class B.......................................... (89,024) 0
Class C.......................................... 0 0
Class Y.......................................... (46,639) 0
Net realized gain on investments
Class A.......................................... (10,228,784) 0
Class B.......................................... (724,627) 0
Class C.......................................... 0 0
Class Y.......................................... (209,790) 0
------------ ------------
(13,251,121) 0
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions...................... 33,034,790 (657,328)
------------ ------------
Total increase in net assets..................... 16,742,066 38,842,911
NET ASSETS
Beginning of the period.......................... 191,957,946 208,700,012
------------ ------------
End of the period................................ $208,700,012 $247,542,923
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period.......................... $ 115,335 $ (12,653)
============ ============
End of the period................................ $ (12,653) $ 1,387,317
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
(unaudited)
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------ JUNE 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 6.51 $ 5.44 $ 6.69 $ 7.28 $ 7.87 $ 7.27
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income... 0.16 0.13 0.09 0.07 0.08 0.05
Net Realized and
Unrealized Gain (Loss)
on Investments......... (1.04) 1.35 1.02 1.16 (0.19) 1.32
-------- -------- -------- -------- -------- --------
Total From Investment
Operations............. (0.88) 1.48 1.11 1.23 (0.11) 1.37
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends From Net
Investment Income...... (0.16) (0.13) (0.09) (0.07) (0.08) 0.00
Distributions From Net
Realized Capital Gains. 0.00 (0.10) (0.43) (0.57) (0.41) 0.00
Distributions From Paid-
in Capital............. (0.03) 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- --------
Total Distributions..... (0.19) (0.23) (0.52) (0.64) (0.49) 0.00
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 5.44 $ 6.69 $ 7.28 $ 7.87 $ 7.27 $ 8.64
======== ======== ======== ======== ======== ========
Total Return (%)........ (13.6) 27.1 16.6 17.0 (1.4) 18.8**
Ratio of Operating
Expenses to Average Net
Assets (%)............. 1.31 1.28 1.32 1.34 1.37 1.41*
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.87 1.84 1.26 0.83 1.00 1.30*
Portfolio Turnover Rate
(%).................... 68 51 38 40 29 47*
Net Assets, End of
Period (000)........... $139,248 $145,790 $156,240 $189,779 $190,869 $221,032
</TABLE>
*Computed on an annualized basis.
**Not computed on an annualized basis.
See accompanying notes to financial statements.
10
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
(unaudited)
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS Y
--------------------------------------- ---------- -----------------------
SEPTEMBER 13(*) YEAR SIX MONTHS SIX MONTHS MARCH 31(*) SIX MONTHS
THROUGH ENDED ENDED ENDED THROUGH ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1994 1995
--------------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 7.97 $ 7.85 $ 7.23 $7.23 $ 7.57 $ 7.24
------ ------- ------- ----- ------ ------
Income From Investment
Operations
Net Investment Income... 0.11 0.04 0.02 0.02 0.10 0.05
Net Realized and
Unrealized Gain (Loss)
on Investments......... 0.39 (0.20) 1.31 1.31 0.08 1.33
------ ------- ------- ----- ------ ------
Total From Investment
Operations............. 0.50 (0.16) 1.33 1.33 0.18 1.38
------ ------- ------- ----- ------ ------
Less Distributions
Dividends From Net
Investment Income...... (0.05) (0.05) 0.00 0.00 (0.10) 0.00
Distributions From Net
Realized Capital Gains. (0.57) (0.41) 0.00 0.00 (0.41) 0.00
------ ------- ------- ----- ------ ------
Total Distributions..... (0.62) (0.46) 0.00 0.00 (0.51) 0.00
------ ------- ------- ----- ------ ------
Net Asset Value, End of
Period................. $ 7.85 $ 7.23 $ 8.56 $8.56 $ 7.24 $ 8.62
====== ======= ======= ===== ====== ======
Total Return (%)........ 6.5*** (2.0) 18.4*** 18.4*** 2.4*** 19.1***
Ratio of Operating
Expenses to Average Net
Assets (%)............. 2.16** 2.12 2.16** 2.16** 1.54** 1.30**
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.05** 0.25 0.55** 0.55** 1.05** 1.41**
Portfolio Turnover Rate
(%).................... 40 29 47** 47** 29 47**
Net Assets, End of
Period (000)........... $2,182 $13,830 $20,666 $ 272 $4,001 $5,573
</TABLE>
*Commencement of operations.
**Computed on an annualized basis.
***Not computed on an annualized basis.
See accompanying notes to financial statements.
11
<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, Class C and Class Y shares. The Fund
commenced its public offering of Class B shares on September 13, 1993, of Class
C shares on December 30, 1994 and of its Class Y shares on March 31, 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. Class Y shares do not pay a front end sales charge, a
contingent deferred sales charge or distribution fee. They are intended for
institutional investors with a minimum of $1,000,000 to invest. 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 Fund 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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
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.
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 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 Fund's ability to dispose of the underlying securities.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the six months ended June 30, 1995 were $51,918,335 and $52,889,865,
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>
$835,459 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
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
providing these services which include the following: (i) expenses for
personnel performing bookkeeping, accounting, internal auditing and financial
reporting functions and clerical functions relating to the 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 $24,580 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 $201,564 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 $253,912 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 $1,651,994.
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 $20,849 and $143 in service fees
under the Class B and Class C plans, respectively.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
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 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 $62,548 and $427 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 $303,807.
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.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
4. CAPITAL SHARES. At June 30, 1995 there was an unlimited number of shares of
beneficial interest authorized, divided into four classes, Class A, Class B,
Class C and Class Y 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................ 5,053,840 $ 39,866,883 1,863,831 $ 15,074,620
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 262,206 1,907,262 0 0
Distributions from net
realized gain............ 1,385,386 10,034,646 0 0
---------- ------------ ---------- ------------
6,701,432 51,808,791 1,863,831 15,074,620
Shares repurchased......... (4,561,136) (35,742,457) (2,555,691) (20,302,345)
---------- ------------ ---------- ------------
Net increase (decrease).... 2,140,296 16,066,334 (691,860) (5,227,725)
---------- ------------ ---------- ------------
<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................ 1,606,356 12,543,677 593,200 4,382,691
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 11,655 84,017 0 0
Distributions from net
realized gain............ 96,006 691,445 0 0
---------- ------------ ---------- ------------
1,714,017 13,319,139 593,200 4,382,691
Shares repurchased......... (77,767) (597,062) (92,339) (719,586)
---------- ------------ ---------- ------------
Net increase (decrease).... 1,636,250 12,722,077 500,861 3,663,105
---------- ------------ ---------- ------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
------------------------
CLASS C SHARES AMOUNT
------- ---------- ------------
<S> <C> <C>
Shares sold................ 31,768 249,175
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 0 0
Distributions from net
realized gain............ 0 0
---------- ------------
31,768 249,175
Shares repurchased......... 0 0
---------- ------------
Net increase (decrease).... 31,768 249,175
---------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
------------------------ ------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 528,311 $ 4,081,248 202,004 $ 1,516,265
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 6,446 46,639 0 0
Distributions from net
realized gain............ 29,091 209,789 0 0
---------- ------------ ---------- ------------
563,848 4,337,676 202,004 1,516,265
Shares repurchased......... (11,648) (91,297) (107,659) (858,148)
---------- ------------ ---------- ------------
Net increase (decrease).... 552,200 4,246,379 94,345 658,117
---------- ------------ ---------- ------------
Increase (decrease) derived
from capital shares
transactions.............. 4,328,746 $ 33,034,790 (64,886) $ (657,328)
========== ============ ========== ============
</TABLE>
16
<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.
17
<PAGE>
--------------------------------------------------------------------------------
REGULAR INVESTING PAYS
--------------------------------------------------------------------------------
Five Good Reasons to Invest Regularly
1. It's an easy way to build assets
2. It's convenient and effortless
3. It requires a low minimum to get started
4. It can help you reach important long-term goals like
retirement or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England Funds' automatic investment program, you
can invest as little as $50 a month in your New England Fund automatically --
without even writing a check. And, as you can see from the chart below, your
monthly investments can really add up over time.
--------------------------------------------------------------------------------
The Power of Monthly Investing
--------------------------------------------------------------------------------
A line graph appears here, illustrating the hypothetical accumulation of monthly
investments at an 8% annual rate of return. The data points of the graph are as
follows:
Monthly investments of $50:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $ 0
5 $ 3,661
10 $ 9,040
15 $16,943
20 $28,555
25 $45,618
</TABLE>
Monthly investments of $100:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $ 0
5 $ 7,322
10 $18,079
15 $33,886
20 $57,111
25 $91,236
</TABLE>
Monthly investments of $200:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $ 0
5 $ 14,643
10 $ 36,158
15 $ 67,772
20 $114,222
25 $182,472
</TABLE>
Monthly investments of $500:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $ 0
5 $ 36,608
10 $ 90,396
15 $169,429
20 $285,555
25 $456,181
</TABLE>
For illustrative purposes only. These figures represent hypothetical
accumulation at an 8% annual rate of return, and are not indicative of future
performance of any New England Fund. The value of a New England Fund will
fluctuate with changing market conditions.
This program cannot assure a profit nor protect against a loss in a declining
market. It does, however, ensure that you buy more shares when the price is low
and fewer shares when the price is high.
You can start an Investment Builder program with your current New England Fund
account, or with any of our other funds. To open an Investment Builder account
today, call your financial representative or New England Funds at
1-800-225-5478.
18
<PAGE>
SAVING FOR RETIREMENT
AN EARLY START CAN MAKE a BIG DIFFERENCE
With today's lengthening life spans, you may be retired for 20 years or more
after you complete your working career. Living these retirement years the way
you've dreamed of will require considerable financial resources. While it's
never too late to start a retirement savings program, it's certainly never too
early: The sooner you begin, the longer the time your money has to grow.
The chart below illustrates this point dramatically. One investor starts at age
30, saves for just 10 years, then leaves the investment to grow. The second
investor starts 10 years later but saves much longer -- for 25 years, in fact.
Can you guess which investor accumulates the greater retirement nest egg?
For the answer, look at the chart.
--------------------------------------------------------------------------------
An Early Start Can Make a Big Difference
--------------------------------------------------------------------------------
A chart in the form of a line graph appears here, comparing the growth of
investments made for 10 years by an investor who begins investing at age 30 to
the growth of investments made for twenty-five years by an investor who begins
investing at age 40. A hypothetical appreciation of 10% is assumed. The data
points from the graph are as follows:
Investor A - Begins investing at age 30 for 10 years:
<TABLE>
<CAPTION>
Age Growth of Investments
----- ---------------------
<S> <C>
30 $ 2,000
35 $ 15,431
40 $ 35,062
45 $ 56,468
50 $ 90,943
55 $146,464
60 $235,882
65 $379,890
</TABLE>
Investor B - Begins investing at age 40 for 25 years:
<TABLE>
<CAPTION>
Age Growth of Investments
----- ---------------------
<S> <C>
40 $ 2,000
45 $ 15,431
50 $ 37,062
55 $ 71,899
60 $128,005
65 $216,364
</TABLE>
Assumes 10% hypothetical appreciation. For illustrative purposes only and not
indicative of future performance of any New England Fund.
Investor A invested $20,000, less than half of investor B's commitment -- and
for less than half the time. Yet investor A wound up with a much greater
retirement nest egg. The reason? It's all thanks to an early start.
New England Funds has prepared a number of informative retirement planning
guides. Call your financial representative or New England Funds today, and ask
for the guide that best fits your personal needs.
19
<PAGE>
INFORMATION ON CALL
YOU CAN CALL NEW ENGLAND FUNDS DAY OR NIGHT
Do you like to keep on top of your New England Funds but can't always call us
during regular business hours? With Tele#Facts, New England Funds' 24-hours a
day automated telephone system, you can call us any time that's convenient for
you -- day or night!
By calling 1-800-346-5984 from any Touch-Tone(R) telephone, you can:
. Check the current value of your New England Fund account
. Find out the current yield and total return on any New England Fund
. Buy, sell or exchange fund shares
Just remember to have these four item with you before calling:
1. Your personal identification number which is the last four digits of your
Social Security number
2. The fund number -- two- or three-digit number listed on the Tele#Facts
wallet card
3. Function number -- listed on the Tele#Facts wallet card
4. Account number -- listed on all your statements
You can get the information you need to use Tele#Facts from the back of your
statement. If you need another Tele#Facts wallet card or have questions about
getting started, please call us at 1-800-225-5478.
So go ahead and give Tele#Facts a try. We think you'll enjoy this easy-to-use
and convenient service from New England Funds!
20
<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>
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New England Funds
Where The Best Minds Meet
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
95-0756 (VL58)
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