<PAGE> 1
[NEW ENGLAND FUNDS LOGO]
NEW ENGLAND FUNDS
Where The Best Minds Meet
SEMIANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
BOND INCOME FUND
[ART WORK APPEARS HERE]
JUNE 30,1995
<PAGE> 2
July 20, 1995
DEAR SHAREHOLDER:
We have good news to present in this Semiannual Report for New England Bond
Income 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> 3
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> 4
NEW ENGLAND BOND INCOME 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 chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Govt/Corp. Bond Index(4) and
the Cost of Living(5). The data points from the graph are as follows:
A $10,000 INVESTMENT IN CLASS A SHARES
COMPARED TO GOVT/CORP. BOND INDEX(4) AND THE COST OF LIVING(5)
New England Bond Income Fund - Net Asset Value(1)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/30 $10,000
6/86 $11,655
6/87 $12,353
6/88 $13,326
6/89 $14,571
6/90 $15,483
6/91 $17,034
6/92 $19,673
6/93 $22,393
6/94 $21,894
6/95 $25,026
</TABLE>
New England Bond Income Fund - With Maximum Sales Charge(2)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/30 $ 9,550
6/86 $11,131
6/87 $11,797
6/88 $12,641
6/89 $13,915
6/90 $14,786
6/91 $16,268
6/92 $18,787
6/93 $21,386
6/94 $20,909
6/95 $23,900
</TABLE>
Lehman Intermediate Gov't./Corp.(4)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/30 $10,000
6/86 $11,620
6/87 $12,268
6/88 $13,221
6/89 $14,572
6/90 $15,711
6/91 $17,366
6/92 $19,652
6/93 $21,703
6/94 $21,647
6/95 $23,892
</TABLE>
Cost of Living(5)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/30 $10,000
6/86 $10,174
6/87 $10,552
6/88 $10,968
6/89 $11,535
6/90 $12,074
6/91 $12,641
6/92 $13,031
6/93 $13,421
6/94 $13,710
6/95 $14,099
</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, C and 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
<PAGE> 5
NEW ENGLAND BOND INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS 6/30/95
<TABLE>
<CAPTION>
CLASS A (Inception 11/7/73) YEAR TO DATE 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Net Asset Value(1) 12.92% 14.32% 10.09% 9.61%
With Max. Sales Charge(2) 7.80 9.14 9.07 9.10
Lipper Intermediate Investment
Grade Debt Average(6) 10.22 10.91 8.67 9.10
</TABLE>
<TABLE>
<CAPTION>
CLASS B (Inception 9/13/93) YEAR TO DATE 1 YEAR SINCE INCEPTION
<S> <C> <C> <C>
Net Asset Value(1) 12.51% 13.48% 3.34%
With CDSC(3) 8.51 9.48 1.84
Lehman Intermediate Gov't./Corp.(4) 9.60 10.37 3.89
Lipper Intermediate Investment
Grade Debt Average(6) 10.22 10.91 n/a
</TABLE>
<TABLE>
<CAPTION>
CLASS C (Inception 12/30/94) SINCE INCEPTION
<S> <C>
Net Asset Value(1) 10.94%
Lehman Intermediate Gov't./Corp.(4) 9.60
Lipper Intermediate Investment
Grade Debt Average(6) 10.22
</TABLE>
<TABLE>
<CAPTION>
CLASS Y (Inception 12/30/94) SINCE INCEPTION
<S> <C>
Net Asset Value(1) 12.78%
Lehman Intermediate Gov't./Corp.(4) 9.60
Lipper Intermediate INvestment
Grade Debt Average(6) 10.22
</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 4.5% at the time of
purchase of Class A shares.
(3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum
4% sales charge is applied to a redemption of Class B shares. The sales
charge will decrease over time, declining to zero five years after the
purchase of shares.
(4) Lehman Intermediate Government/Corporate Bond Index is an unmanaged index of
investment grade bonds issued by the U.S. Government and U.S. corporations
having maturities between one and ten years. The Index performance has not
been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments.
(5) Cost of Living is based on the Consumer Price Index, a widely recognized
measure of the cost of goods and services in the United States, calculated
by the U.S. Bureau of Labor Statistics.
(6) Lipper Average is an average of the total return performance (calculated on
the basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund ranking
service.
2
<PAGE> 6
NEW ENGLAND BOND INCOME FUND
[PHOTO OF CATHY BUNTING APPEARS HERE]
NEW ENGLAND BOND INCOME FUND
Portfolio Manager: Cathy Bunting
Back Bay Advisors, L.P.(R)
The bond market staged a strong rally in the first half of 1995 as investors
grew more and more optimistic about the outlook for fixed-income securities. The
Federal Reserve Board's February 1995 rate increase, the last in a year-long
series, helped achieve the Fed's goal of cooling the economy while allaying
investor fears of rekindled inflation. The market drew strength from the growing
prospect of declining interest rates, which it saw as a likely byproduct of a
slowing economy. Sluggish economic activity, which implies lower inflation,
therefore led bond prices higher beginning early in the year, in anticipation of
lower rates to come. The markets' expectations proved accurate as the Federal
Reserve Board cut the Fed Funds rate by 0.25%, just after the period's end, on
July 6, 1995.
Overall, corporate bonds outperformed U.S. government securities thanks
primarily to rising corporate profits. Strong equity markets also benefited
bonds, as investor confidence spread to fixed-income securities; rising stock
prices also meant lower dividend yields, diminishing the appeal of stocks for
income-oriented investors. And for most of the period, the supply of corporate
securities of the type your fund invests in was restrained.
3
<PAGE> 7
NEW ENGLAND BOND INCOME FUND
The economic scenario we have been observing is the much-discussed "soft
landing": Despite slowdowns in key industries like housing, retail sales and
manufactured goods, the economy appears to be slackening without sliding into
recession. Companies are maintaining inventories to support current sales
levels, in contrast to late 1994 when firms stockpiled inventory to meet
anticipated demand for goods.
How Your Fund Performed
New England Bond Income Fund turned in a strong performance in the first half of
1995. Within an overall climate of robust markets and improving corporate
earnings, a number of sectors contributed to the Fund's positive results. For
the period January through June, the Fund had a total return on net asset value
of 12.92% for Class A shares. This compares favorably with a return of 9.60% for
the Lehman Intermediate Government/Corporate Bond Index,(4) and 10.22% for the
Lipper Intermediate Investment Grade Debt Average(6) for the same period.
How We Managed Your Fund
To take advantage of strength where it was most concentrated, we committed
around 10% of the portfolio to electric and gas utilities and 9% to the cable
and media sectors. We favored gas utilities because of increased profitability
in the sector. Electric utilities were attractive
4
<PAGE> 8
NEW ENGLAND BOND INCOME FUND
thanks to an overall industry recovery, improved balance sheets and our belief
that these securities had overreacted to the prospect of competition in their
marketplaces. In the cable and media sectors, takeovers and consolidations led
to stronger credits and a number of upgrades.
We also devoted almost 15% of the Fund to Canadian securities, both U.S. dollar-
and Canadian dollar-denominated. In Canada we were attracted to better yields
than were available domestically. The Canadian dollar is stabilizing and
Canadian goods, at today's currency levels, are attractively priced in world
markets. In addition, concerns about the separatist movement in Quebec have
abated in the wake of flagging popular support. Canada also appears to be taking
effective steps to deal with its budget deficit.
We are also holding a smaller percentage of the Fund in corporates than has been
our practice. With corporate bond yields not much higher than those available on
U.S. Treasuries, we feel that the higher quality of the U.S. government issues
is an attractive trade-off for the slight give-up in income. Therefore the
portfolio's overall quality is roughly equivalent to a security rated in the
lower range of AA.
5
<PAGE> 9
NEW ENGLAND BOND INCOME FUND
Investment Outlook
Last December we expressed an optimistic view for the fixed-income markets, and
that view has been borne out. Our outlook for the second half of the year calls
for economic growth in the range of 2% - 2.5%. While the Federal Reserve Board
has taken an initial step toward loosening the monetary reins, it does not
follow that there will be a series of cuts parallel to the increases of 1994 -
95. Rather, we think the Fed will opt to wait and assess the effects of its
first move before undertaking another cut.
In managing the Bond Income Fund, we seek to deliver attractive income with
reasonable risk. With 1994's challenges behind us, we are again very optimistic
about the outlook for bonds. We believe our record of positive returns in 13 of
the last 14 years, plus strong performance in the first half of 1995, continue
to justify your long-term confidence.
6
<PAGE> 10
NEW ENGLAND BOND INCOME FUND
PORTFOLIO COMPOSITION 6/30/95*
A pie chart appears here, depicting New England Bond Income Fund's portfolio
composition at 6/30/95 by security type. The pie chart is broken in pieces
representing security types in the following percentages:
<TABLE>
<CAPTION>
Security Type Percentage
------------- ----------
<S> <C>
Utilities 11.6%
Foreign
Canadian government bonds 7.5%
U.S. Government and Federal Agencies
Primarily Government National Mortgage Association 22.8%
Corporate Bonds
Includes financial companies, banks, publishing,
oil & gas, telecommunications 36.4%
Yankee Bonds
Foreign Bonds traded in U.S. dollars 10.3%
Short-Term Cash & Equivalents 11.4%
</TABLE>
* Portfolio composition will change with market
and economic conditions.
7
<PAGE> 11
[NEW ENGLAND FUNDS LOGO]
NEW ENGLAND FUNDS
Where the Best Minds Meet
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
BOND INCOME FUND
JUNE 30, 1995
<PAGE> 12
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
BONDS AND NOTES--88.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (A)
-----------------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS--3.2%
$ 5,788,000 Dow Chemical Co. 8.550%, 10/15/09.............................. $ 6,566,023
-----------
FEDERAL AGENCIES--17.9%(C)
507,317 Federal Home Loan Bank 9.000%, 5/01/01......................... 526,818
3,500,000 Federal National Mortgage Association 6.450%, 6/10/03.......... 3,406,830
8,000,000 Federal National Mortgage Association 7.850%, 9/10/04.......... 8,294,880
1,000,000 Federal National Mortgage Association 7.875%, 2/24/05.......... 1,088,270
978,289 Federal National Mortgage Association 7.500%, 11/01/24......... 982,877
7,864,535 Government National Mortgage Association 7.000%, 2/15/24....... 7,751,521
8,738,571 Government National Mortgage Association 7.500%, 6/15/23....... 8,801,401
5,009,128 Government National Mortgage Association 8.500%, with various 5,207,941
maturities to 2023...........................................
362,645 Government National Mortgage Association 9.000%, with various 381,343
maturities to 2016...........................................
633,852 Government National Mortgage Association 11.500%, with various 710,472
maturities to 2016...........................................
-----------
37,152,353
-----------
FINANCE AND BANKING--11.5%
6,075,000 American General Financial Corp. 8.450%, 10/15/09.............. 6,908,490
4,750,000 Associates Corp. of North America 8.550%, 7/15/09.............. 5,479,648
6,100,000 ITT Financial Corp. 8.350%, 11/01/04........................... 6,878,665
2,500,000 Pitney Bowes Credit Corp. 8.625%, 2/15/08...................... 2,895,750
1,700,000 Toronto Dominion Bank Ontario 7.875%, 8/15/04.................. 1,788,230
-----------
23,950,783
-----------
FOREIGN--7.5%
3,600,000 Government of Canada 6.250%, 2/01/98 (d)....................... 2,561,308
7,500,000 Government of Canada 8.500%, 4/01/02 (d)....................... 5,670,676
3,000,000 Province of Alberta CDA 6.375% 6/01/04 (d)..................... 1,947,980
5,000,000 Province of British Columbia CDA 7.750%, 6/16/23 (d)........... 3,569,276
2,400,000 Province of Ontario CDA 8.000%, 3/11/03 (d).................... 1,723,509
-----------
15,472,749
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 13
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS AND NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (A)
-----------------------------------------------------------------------------------------
<S> <C> <C>
OIL AND GAS--10.6%
$ 900,000 Coastal Corp. 10.000%, 2/01/01................................. $ 1,021,842
4,440,000 Coastal Corp. 10.250%, 10/15/04................................ 5,327,334
1,000,000 Maxus Energy Corp. 10.190%, 5/09/96............................ 998,750
1,000,000 Oryx Energy Co. 9.750%, 9/15/98................................ 1,002,500
2,375,000 Oryx Energy Co. 10.000%, 6/15/99............................... 2,550,156
4,400,000 Oryx Energy Co. 10.000%, 4/01/01............................... 4,818,000
3,200,000 Southern California Gas 8.750%,10/01/21........................ 3,591,328
2,500,000 USX Marathon Group 9.125%, 1/15/13............................. 2,650,225
-----------
21,960,135
-----------
PUBLISHING--6.7%
5,000,000 News America Holdings Inc. 9.500%, 7/15/24..................... 5,881,250
1,000,000 Time Warner Entertainment Co. LP. 10.150%, 5/01/12............. 1,168,750
3,500,000 Time Warner Entertainment Co. LP 10.150%, 5/01/12.............. 3,692,500
4,000,000 Western Publishing Group Inc. 7.650%, 9/15/02.................. 3,255,000
-----------
13,997,500
-----------
TELECOMMUNICATION--4.4%
4,500,000 Tele-Communications Inc. 9.250%, 1/15/2023..................... 4,576,680
4,000,000 US West Communication 8.875%, 6/01/31.......................... 4,452,280
-----------
9,028,960
-----------
U.S. GOVERNMENT--4.8%
1,000,000 U.S. Treasury Notes 6.875%, 7/31/99............................ 1,031,170
4,500,000 U.S. Treasury Notes 8.500%, 11/15/00........................... 5,006,970
2,000,000 U.S. Treasury Notes 10.750%, 5/15/03........................... 2,558,060
1,000,000 U.S. Treasury Notes 11.125%, 8/15/03........................... 1,308,770
-----------
9,904,970
-----------
UTILITIES -- DIVERSIFIED--6.9%
3,000,000 Arizona Public Service Co. 10.250%, 5/15/20.................... 3,508,290
2,500,000 New York State Electric & Gas Corp. 9.875%, 2/01/20............ 2,663,725
3,000,000 New York State Electric & Gas Corp. 8.875%, 11/01/21........... 3,332,250
5,000,000 Tennessee Valley Authority 6.125%, 7/15/03..................... 4,868,850
-----------
14,373,115
-----------
UTILITIES--ELECTRIC--4.7%
6,000,000 Arizona Public Service Co. 8.000%, 12/30/15.................... 5,993,880
1,200,000 Texas Utilities Electric Co. 10.150%, 3/01/99.................. 1,341,012
2,300,000 Texas Utilities Electric Co. 8.875%, 2/01/22................... 2,485,150
-----------
9,820,042
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 14
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS AND NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (A)
-----------------------------------------------------------------------------------------
<S> <C> <C>
YANKEE--10.3%
$ 2,000,000 Asian Development Bank 11.125%, 5/01/98........................ $ 2,249,740
1,200,000 British Columbia Hydro & Petroleum 12.500%, 9/01/13............ 1,444,740
5,375,000 Columbia Republic 7.250%, 2/23/04.............................. 5,078,569
500,000 Columbia Republic 8.750%, 10/06/99............................. 517,710
6,750,000 Hydro Quebec 8.050%, 7/07/24................................... 7,352,505
600,000 Petroleos Mexicanos 7.100%, 4/07/97............................ 561,444
3,200,000 Petroleos Mexicanos 8.625%, 12/01/23........................... 2,144,000
2,000,000 Province of Ontario CDA 6.125%, 8/17/99........................ 1,991,200
-----------
21,339,908
-----------
Total Bonds and Notes (Identified Cost $180,042,996)........... 183,566,538
SHORT-TERM INVESTMENTS--9.9%
5,320,000 American Express Credit Corp. 5.500%, 7/03/95.................. 5,318,374
5,320,000 General Motots Acceptance Corp. 5.800%, 7/03/95................ 5,318,286
10,000,000 Household Financial Corp. 6.050%, 7/03/95...................... 9,996,639
-----------
Total Short-Term Investment (Identified Cost $20,633,299)...... 20,633,299
------------
Investments -- 98.4% (Identified Cost $200,676,295) (b)........ 204,199,837
Cash and Receivables........................................... 3,961,820
Liabilities.................................................... (771,745)
-----------
Total Net Assets -- 100%....................................... $207,389,912
===========
(a) See note 1A
(b) Federal Tax Information: At June 30, 1995 the net unrealized
appreciation on investments based on cost for federal income tax
purposes of $200,676,295 was as follows:
Aggregate unrealized appreciation for all investments in which there
is an excess of value over tax cost.................................. $ 7,268,842
Aggregate unrealized depreciation for all investments in which there
is an excess of tax cost over value.................................. (3,745,300)
-----------
Net unrealized appreciation.......................................... $ 3,523,542
===========
At December 31, 1994, the Fund had a capital loss carryover of
approximately $3,102,000 which expires December 31, 2002. This may be
available to offset future realized capital gains, if any, to the
extent provided by regulations.
(c) The Fund's investments in mortgaged backed securities of the Federal
Home Loan Bank and the Government National Mortgage Association are
interests in separate pools of mortgage.
(d) Denominated in Canadian dollars.
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 15
STATEMENT OF ASSETS & LIABILITIES
June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.......................................... $204,199,837
Cash.......................................................... 13,977
Receivable for:
Fund shares sold............................................ 149,291
Accrued Interest............................................ 3,798,552
-----------
208,161,657
LIABILITIES
Payable for:
Fund shares redeemed........................................ 438,483
Dividends declared.......................................... 105,085
Accrued expenses:
Management fees............................................. 74,210
Deferred trustees' fees..................................... 59,391
Accounting and administrative............................... 4,054
Other expenses.............................................. 90,522
-------
771,745
-----------
NET ASSETS...................................................... $207,389,912
===========
Net Assets consist of:
Capital paid in............................................. $205,690,346
Undistributed net investment income......................... 387,283
Accumulated net realized losses............................. (2,211,259)
Unrealized appreciation on investments and foreign
currency.................................................. 3,523,542
-----------
NET ASSETS...................................................... $207,389,912
===========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($188,815,850 divided by 15,785,699 shares of beneficial
interest)..................................................... $11.96
=====
Offering price per share (100/95.50 of $11.96).................. $12.52*
=====
Net asset value and offering price of Class B shares
($16,413,483 divided by 1,372,106 shares of beneficial
interest)..................................................... $11.96**
=====
Net asset value and offering price of Class C shares ($205,843
divided by 17,200 shares of beneficial interest).............. $11.97
=====
Net asset value and offering price of Class Y shares ($1,954,736
divided by 163,416 shares of beneficial interest)............. $11.96
=====
Identified cost of investments.................................. $200,676,295
===========
<FN>
* Based upon single purchases of less than $100,000. 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.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 16
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest..................................................... $ 7,465,056
Expenses
Management fees............................................ $ 402,948
Service fees -- Class A.................................... 210,091
Service and distribution fees -- Class B................... 62,097
Service and distribution fees -- Class C................... 473
Trustees' fees and expenses................................ 16,855
Accounting and administrative.............................. 26,748
Custodian.................................................. 64,522
Transfer agent............................................. 219,105
Audit and tax services..................................... 18,500
Legal...................................................... 27,135
Printing................................................... 37,445
Registration............................................... 21,891
Miscellaneous.............................................. 11,785 1,119,595
---------- ----------
Net investment income........................................ 6,345,461
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments -- net........................................... (20,308)
Foreign currency transactions -- net......................... 911,981
----------
Total realized gain on investments and foreign currency
transactions............................................... 891,673
----------
Unrealized appreciation on:
Investments -- net........................................... 16,229,120
Foreign currency transactions -- net......................... 6,558
----------
Total realized gain on investments and foreign currency
transactions............................................... 16,235,678
----------
Net gain on investment transactions.......................... 17,127,351
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS..................... $23,472,812
==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1994 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................................... $ 11,141,142 $ 6,345,461
Net realized gain (loss) on investment transactions........ (3,105,994) 891,673
Unrealized appreciation (depreciation) on investments...... (15,742,553) 16,235,678
----------- -----------
Increase (decrease) in net assets from operations.......... (7,707,405) 23,472,812
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A.................................................. (10,609,441) (5,587,639)
Class B.................................................. (362,940) (367,999)
Class C.................................................. -- (2,627)
Class Y.................................................. -- (43,911)
----------- -----------
(10,972,381) (6,002,176)
----------- -----------
Increase from capital share transactions................... 1,551,627 25,122,233
----------- -----------
Total increase (decrease) in net assets.................... (17,128,159) 42,592,869
NET ASSETS
Beginning of the period.................................... 181,925,202 164,797,043
----------- -----------
End of the period.......................................... $164,797,043 $207,389,912
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period.................................... $ 11,424 $ 43,998
=========== ===========
End of the period.......................................... $ 43,998 $ 387,283
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 18
FINANCIAL HIGHLIGHTS
(unaudited)
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1990 1991 1992 1993 1994 1995
------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $ 11.23 $ 11.12 $ 12.14 $ 12.12 $ 12.18 $ 10.95
------- -------- -------- -------- -------- ----------
Income From Investment Operations
Net Investment Income............ 0.89 0.88 0.85 0.77 0.72 0.40
Net Realized and Unrealized Gain
(Loss) on Investments.......... (0.10) 1.04 0.01 0.66 (1.23) 0.99
------- -------- -------- -------- -------- ----------
Total From Investment
Operations..................... 0.79 1.92 0.86 1.43 (0.51) 1.39
------- -------- -------- -------- -------- ----------
Less Distributions
Distributions From Net Investment
Income......................... (0.90) (0.90) (0.86) (0.78) (0.72) (0.38)
Distributions From Net Realized
Capital Gains.................. 0.00 0.00 (0.02) (0.59) 0.00 0.00
------- -------- -------- -------- -------- ----------
Total Distributions.............. (0.90) (0.90) (0.88) (1.37) (0.72) (0.38)
------- -------- -------- -------- -------- ----------
Net Asset Value, End of Period... $ 11.12 $ 12.14 $ 12.12 $ 12.18 $ 10.95 $ 11.96
======= ======== ======== ======== ======== ==========
Total Return (%)................. 7.5 18.1 7.5 12.1 (4.2) 12.9(b)
Ratio of Operating Expenses to
Average Net Assets (%)......... 1.18 1.15 1.08 1.04 1.08 1.18(a)
Ratio of Net Investment Income to
Average Net Assets (%)......... 8.05 7.69 7.08 6.10 6.46 7.06(a)
Portfolio Turnover Rate (%)...... 126 218 89 202 77 102(a)
Net Assets, End of Period
(000).......................... $85,372 $113,759 $145,184 $179,264 $155,362 $188,816
<FN>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 19
FINANCIAL HIGHLIGHTS--CONTINUED
(unaudited)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
SEPTEMBER 13,(a) YEAR SIX MONTHS
THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995
---------------- ------------ ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $13.06 $12.18 $ 10.95
------ ------ --------
Income From Investment Operations
Net Investment Income........................ 0.20 0.63 0.36
Net Realized and Unrealized Gain (Loss) on
Investments................................ (0.30) (1.23) 0.99
------ ------ --------
Total From Investment Operations............. (0.10) (0.60) 1.35
------ ------ --------
Less Distributions
Distributions From Net Investment Income..... (0.19) (0.63) (0.34)
Distributions From Net Realized Capital
Gains...................................... (0.59) 0.00 0.00
------ ------ --------
Total Distributions.......................... (0.78) (0.63) (0.34)
------ ------ --------
Net Asset Value, End of Period............... $12.18 $10.95 $ 11.96
====== ====== ========
Total Return (%)............................. (0.8)(c) (4.9) 12.5(c)
Ratio of Operating Expenses to Average Net
Assets (%)................................. 1.81(b) 1.83 1.93(b)
Ratio of Net Investment Income to Average Net
Assets (%)................................. 4.79(b) 5.71 6.31(b)
Portfolio Turnover Rate (%).................. 202 77 102(b)
Net Assets, End of Period (000).............. $2,661 $9,435 $ 16,413
<FN>
(a) Commencement of operations
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 20
FINANCIAL HIGHLIGHTS--CONTINUED
(unaudited)
<TABLE>
<CAPTION>
CLASS C CLASS Y
---------- ----------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1995 1995
---------- ----------
<S> <C> <C>
Net Asset Value, Beginning of Period............................. $10.95 $10.95
---------- ----------
Income From Investment Operations
Net Investment Income............................................ 0.20 0.37
Net Realized and Unrealized Gain (Loss) on Investments........... 0.99 1.01
---------- ----------
Total From Investment Operations................................. 1.19 1.38
---------- ----------
Less Distributions
Distributions From Net Investment Income......................... (0.17) (0.37)
---------- ----------
Total Distributions.............................................. (0.17) (0.37)
---------- ----------
Net Asset Value, End of Period................................... $11.97 $11.96
========== ==========
Total Return (%)................................................. 10.9(b) 12.8(b)
Ratio of Operating Expenses to Average Net Assets (%)............ 1.93(a) 0.93(a)
Ratio of Net Investment Income to Average Net Assets (%)......... 6.31(a) 7.31(a)
Portfolio Turnover Rate (%)...................................... 102(a) 102(a)
Net Assets, End of Period (000).................................. $ 206 $1,955
<FN>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
1. The Fund is a Series of The New England Funds Trust I, a Massachusetts
business trust (the "Trust"), and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (each such series of shares a
"Fund").
The Fund offers Class A, Class B, Class C and Class Y shares. The Fund commenced
its public offering of Class B shares on September 13, 1993 and Class C and
Class Y shares on December 30, 1994. Class A shares are sold with a maximum
front end sales charge of 4.50%. Class B shares do not pay a front end sales
charge, but pay a higher ongoing distribution fee than Class A shares, 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
fees. 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 all classes
of shares, except that each class bears expenses unique to that class (including
the Rule 12b-1 service and distribution fees applicable to such class), and
votes as a class only with respect to its own Rule 12b-1 plan. Shares of each
class would receive their pro-rata share of the net assets 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. The Fund's investment adviser, Back Bay Advisors, L.P.
("Back Bay Advisors"), under the supervision of the Fund's trustees, determines
the value of the Fund's portfolio of securities, using valuations provided by a
pricing service selected by Back Bay Advisors and other information with respect
to transactions in securities, including quotations from securities dealers.
Valuations of securities and other assets owned by the Fund for which market
quotations are readily available are based on those quotations. Short-term
obligations that will mature in 60 days or less are stated at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value as determined in good faith by Back Bay Advisors under the
supervision of the Fund's trustees.
B. FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and
11
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
sales of investment securities, income and expenses are translated on the
respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Reported net realized foreign exchange gains or losses arise from: sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities including investments in securities at fiscal year
end, resulting from changes in the exchange rate.
C. 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 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.
D. 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.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily to
shareholders of record at the time and are paid monthly.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for mortgage backed securities and foreign
currency transactions for book and tax purposes. Permanent book and tax basis
differences will result in reclassifications to capital accounts.
F. 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. Back Bay Advisors 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
12
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
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
six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------------------- --------------------------------
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
------------- ------------ ------------- ------------
<S> <C> <C> <C>
$14,507,010 $83,231,311 $ 639,854 $85,447,243
</TABLE>
Transactions in forward currency contracts fo the Fund for the six months ended
June 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
SALES OF
FORWARD
CURRENCY
CONTRACTS
------------
AGGREGATE
FACE VALUE
OF CONTRACTS
------------
<S> <C>
Contracts opened........................................ $ 12,697,635
Contracts closed........................................ (12,697,635)
------------
Open at June 30, 1995................................... $0
===========
</TABLE>
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, Back Bay Advisors. Certain officers and directors of the
adviser and its affiliated companies are also officers or trustees of the Fund.
Back Bay Advisors 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 in effect during the six
months ended June 30, 1995 provided for fees as set forth below:
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE
FEES EARNED RATE ANNUAL NET ASSET VALUE LEVELS
---------- ------------------ ------------------------------
<S> <C> <C>
$402,948 0.500% the first $100 million
0.375% the excess over $100 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 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,
13
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
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 $26,748 and are shown separately
in the financial statements as accounting and administrative services.
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 $154,246 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 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 $210,091 in fees
under the Class A Plan. If the expenses of New England Funds that are otherwise
reimbursable under the Class A Plan incurred in any year exceed the amounts
payable by the Fund under the Class A Plan, the unreimbursed amount (together
with unreimbursed amounts from prior years) may be carried forward for
reimbursement in future years in which the Class A Plan remains in effect. The
amount of unreimbursed expenses carried forward into 1995 is $1,919,349.
Under the Class B and Class C Plans, the Fund pays New England Funds monthly
service fees 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 $15,524 and $118 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 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
14
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
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 $46,573 and $355 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 $228,914.
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 Back Bay
Advisors, 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 Annual Retainer $125
</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. 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....................... 2,782,679 $ 31,957,441 2,745,896 $ 72,567,106
Shares issued in connection with
the reinvestment of:
Distributions from net
investment income............. 831,850 9,458,333 444,846 5,129,677
---------- ------------ ---------- ------------
3,614,529 41,415,774 3,190,742 77,696,783
Shares redeemed................... (4,144,078) (47,250,851) (1,598,996) (60,369,757)
---------- ------------ ---------- ------------
Net increase (decrease)........... (529,549) $ (5,835,077) 1,591,746 $ 17,327,026
========= =========== ========= ===========
</TABLE>
15
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
<TABLE>
<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....................... 733,069 $ 8,400,341 537,546 $ 6,557,905
Shares issued in connection with
the reinvestment of:
Distributions from net
investment income............. 28,872 324,828 27,934 322,991
---------- ------------ ---------- ------------
761,941 8,725,169 565,480 6,880,896
Shares redeemed................... (118,627) (1,338,465) (55,258) (1,118,926)
---------- ------------ ---------- ------------
Net increase...................... 643,314 $ 7,386,704 510,222 $ 5,761,970
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
-----------------------
CLASS C SHARES AMOUNT
------ --------- -----------
<S> <C> <C>
Shares sold....................... 26,177 $ 300,916
Shares issued in connection with
the reinvestment of:
Distributions from net
investment income............. 194 2,274
--------- -----------
26,371 303,190
Shares redeemed................... (9,171) (105,630)
--------- -----------
Net increase...................... 17,200 $ 197,560
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
-----------------------
CLASS Y SHARES AMOUNT
------ --------- -----------
<S> <C> <C>
Shares sold....................... 161,558 $ 1,813,804
Shares issued in connection with
the reinvestment of:
Distributions from net
investment income............. 3,781 43,910
--------- -----------
165,339 1,857,714
Shares redeemed................... (1,923) (22,037)
--------- -----------
Net increase...................... 163,416 $ 1,835,677
========= ===========
Total increase from capital share
transactions.................... 113,765 $ 1,551,627 2,282,584 $ 25,122,233
========= =========== ========= ===========
</TABLE>
5. ACQUISITION OF NEW ENGLAND GLOBAL GOVERNMENT FUND. On April 28, 1995, New
England Bond Income Fund acquired all the net assets of New England Global
Government Fund pursuant to a plan of reorganization approved by New England
Global Government Fund shareholders on April 25, 1995. The acquisition was
accomplished by a tax-free exchange of 1,513,135 shares of New England Bond
Income Fund Class A shares (valued at $17,368,227) for 1,520,543 shares of New
16
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
England Global Government Fund Class A; and 132,100 New England Bond Income Fund
Class B shares (valued at $1,516,371) for 132,855 shares of New England Global
Government Fund Class B. New England Global Government Fund's net assets at that
date ($18,118,598), including $958,329 of unrealized appreciation, were combined
with those of New England Bond Income Fund. The combined net assets of New
England Bond Income Fund immediately after the acquisition was $209,288,778.
17
<PAGE> 28
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> 29
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 $ 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> 30
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 items 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!
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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.
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