<PAGE> 1
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
BONDS & NOTES--79.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
-------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE BONDS--65.6%
AEROSPACE--0.9%
$ 400,000 Rohr Industries, Inc. 9.250%, 3/1/2017........................ $ 381,000
-----------
COMMUNICATION--2.6%
500,000 Century Communications Corp. Zero Coupon, 3/15/2003........... 235,000
850,000 Nextel Communications, Inc. Step Bond, 8/15/2004(d)........... 408,000
500,000 Tele Communications, Inc. 7.875%, 8/1/2013.................... 466,830
-----------
1,109,830
-----------
COMPUTER HARDWARE--2.1%
950,000 Digital Equipment Corp. 7.750%, 4/01/2023..................... 869,773
-----------
CRUDE PRODUCER--0.2%
75,000 Forest Oil Corp. 11.250%, 9/01/2003........................... 69,000
-----------
ELECTRIC--1.4%
625,000 Long Island Ltg. Co. 9.000%, 11/01/2022....................... 580,338
-----------
ENTERTAINMENT--0.1%
50,000 Time Warner, Inc. 9.150%, 2/01/2023........................... 51,859
-----------
ENVIRONMENTAL--2.0%
1,000,000 Envirotest Systems Corp. 9.125%, 3/15/2001.................... 830,000
-----------
FOREIGN--35.1%
70,000 Argentina (Republic of) 8.375%, 12/20/2003.................... 51,625
3,000,000 Argentina (Republic of) 5.000%, 3/31/2023..................... 1,425,000
225,000 BCO Nac. Com. Ext. 7.250%, 2/02/2004.......................... 160,313
2,875,000 Brazil (Federal Republic of) 4.250%, 4/15/2024................ 1,272,188
250,000 EMP ICA Soc. Contro. 9.750%, 2/11/1998........................ 208,750
2,500,000 Ecuador (Republic of) 3.000%, 2/28/2025....................... 812,500
700,000 Hydro Quebec, Zero Coupon, 8/15/2020, CAD(e).................. 50,772
2,250,000 Hydro Quebec, 9.625%, 7/15/2022, CAD(e)....................... 1,730,674
1,205,000 Ireland (Republic of) 6.250%,10/18/2004, IEP(f)............... 1,662,068
2,140,000 New Zealand Government, 8.000%, 11/15/2020, NZD(g)............ 1,473,886
2,435,000 Ontario Hydro, 8.900%, 8/18/2022, CAD(e)...................... 1,798,010
750,000 Ontario Province of Canada, Zero Coupon, 7/13/2022, CAD(e).... 51,012
2,125,000 Rogers Cablesystems Ltd. 9.650%, 1/15/2014, CAD(e)............ 1,315,358
2,580,000 Saskatchewan (Province of) 8.750%, 5/30/2025, CAD(e).......... 1,864,731
100,000 South Africa (Republic of) 9.625%, 12/15/1999, ZAR(h)......... 102,875
3,350,000 South Africa (Republic of) 12.000%, 2/28/2005, ZAR(h)......... 716,844
-----------
14,696,606
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 2
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS & NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
-------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE--0.3%
$ 225,000 Glycomed, Inc. 7.500%, 1/01/2003.............................. $ 148,500
-----------
HOME BUILDERS--0.4%
250,000 Hovnanian K Enterprises, Inc. 9.750%, 6/01/2005............... 192,500
-----------
MUNICIPALS--0.8%
3,750,000 Foothill/Eastern Transportation Corridor, Zero Coupon,
1/01/2030..................................................... 321,263
-----------
RESTAURANTS--0.5%
250,000 Flagstar Corp. 11.250%, 11/01/2004............................ 195,000
-----------
RETAIL--5.7%
1,250,000 Bradlees, Inc. 9.250%, 3/01/2003.............................. 368,750
1,250,000 K-Mart Corp. 9.350%, 1/02/2020................................ 1,242,025
1,000,000 Service Merchandise, 9.000%,12/15/2004........................ 785,000
-----------
2,395,775
-----------
STEEL--4.2%
150,000 Algoma Steel, Inc. 12.375%, 7/15/2005......................... 135,231
2,250,000 Geneva Steel Co. 9.500%, 1/15/2004............................ 1,608,750
-----------
1,743,981
-----------
TOBACCO--3.6%
500,000 RJR Nabisco, Inc. 7.625%, 9/15/2003........................... 482,545
1,000,000 RJR Nabisco, Inc. 9.250%, 8/15/2013........................... 1,022,300
-----------
1,504,845
-----------
TRANSPORTATION--3.4%
300,000 Delta Air Lines, Inc. 9.250%, 3 /15/2022...................... 319,581
1,000,000 United Air Lines, Inc. 9.125%, 1/15/2012...................... 1,029,400
65,000 United Air Lines, Inc. 3.9076%, 10/19/2018.................... 69,456
-----------
1,418,437
-----------
UTILITY--2.2%
500,000 Beaver VY II FDG Corp. 8.250%, 6/01/2003...................... 444,375
500,000 Beaver VY II FDG Corp. 9.000%, 6/01/2017...................... 420,000
61,000 PNPP II Funding Corp. 9.120%, 5/30/2016....................... 57,330
-----------
921,705
-----------
MISCELLANEOUS-- 0.1%
103,000 Midland Ross Corp. 6.000% 2/15/2007........................... 64,118
-----------
TOTAL NON-CONVERTIBLE BONDS (Identified Cost $27,814,070)..... 27,494,530
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 3
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS & NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
-------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS--13.7%
AEROSPACE--0.2%
$ 100,000 Rohr Industries, Inc. 7.000%, 10/01/2012...................... $ 82,000
-----------
AUTOMOTIVE--0.5%
300,000 Nascotech, Inc. 4.500%, 12/15/2003............................ 217,125
-----------
COMPUTER HARDWARE--3.4%
800,000 Ast Resh, Inc. Zero Coupon, 12/14/2013........................ 254,000
250,000 Computervision Corp. 8.000%,12/01/2009........................ 170,000
450,000 Conner Peripherals, Inc. 6.500%, 3/01/2002.................... 382,500
100,000 Data General Corp. 7.750%, 6/01/2001.......................... 91,000
250,000 Maxtor Corp. 5.750%, 3/01/2012................................ 156,875
643,000 Micropolis 6.000%, 3/15/2012.................................. 374,548
-----------
1,428,923
-----------
ELECTRIC--1.3%
550,000 Potomac Electric Power Co. 7.000%, 1/15/2018.................. 536,250
-----------
ELECTRONICS--1.1%
200,000 Edo Corp. 7.000%, 12/15/2011.................................. 120,000
500,000 Zenith Electric Convertible Sub. Deb. 6.250%, 4/01/2011....... 332,500
-----------
452,500
-----------
ENVIRONMENTAL--1.4%
750,000 Air & Water Technologies Corp. 8.000%, 5/15/2015.............. 592,500
-----------
FOREIGN--0.2%
100,000 Tubos De Acero, 7.500%, 6/12/1997............................. 77,000
-----------
HEALTH CARE--3.0%
1,150,000 Centocor, Inc. 7.250%, 2/01/2001.............................. 1,012,000
200,000 Centocor, Inc. 6.750%, 10/16/2001............................. 156,000
100,000 Chiron Corp. 1.900%, 11/17/2000............................... 80,000
-----------
1,248,000
-----------
RETAIL--1.6%
250,000 Bell Sports Corp. 4.250%, 11/15/2000.......................... 185,000
750,000 Hechinger Co. 5.500%,4/01/2012................................ 474,375
-----------
659,375
-----------
REAL ESTATE--0.1%
125,000 Rockefeller Properties, Zero Coupon, 12/31/2000............... 66,016
-----------
TECHNOLOGY--0.6%
245,000 Bolt Beranek & Newman, Inc. 6.000%, 4/01/2012................. 252,350
-----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 4
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS & NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (a)
-------------------------------------------------------------------------------------
<S> <C> <C>
TEXTILE--0.3%
$ 150,000 Dixie Yarns, Inc. 7.000%, 5/15/2012........................... $ 114,750
-----------
TOTAL CONVERTIBLE BONDS (Identified Cost $5,895,982).......... 5,726,788
-----------
COMMON STOCK--7.6%
<CAPTION>
SHARES DESCRIPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS--7.6%
32,000 Developers Diversified Reality................................ 920,000
22,000 Meditrust..................................................... 750,750
60,000 Simon Property Group, Inc..................................... 1,507,500
-----------
TOTAL COMMON STOCK (Identified Cost $3,089,455)............... 3,178,250
-----------
PREFERRED STOCK--5.5%
<CAPTION>
SHARES DESCRIPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC OIL--0.0%
$ 500 Kaneb Services, Inc........................................... $ 4,625
-----------
ELECTRIC UTILITIES--1.3%
30 Cleveland Electric Illum. Co.................................. 27,000
250 Cleveland Electric Illum. Co.................................. 222,500
4,686 Long Island LTG Co............................................ 87,019
8,400 Niagara Mohawk Power Corp..................................... 200,550
-----------
537,069
-----------
HOMEBUILDERS--1.2%
32,500 Kaufman & Broad Home Corp..................................... 503,750
-----------
MINING--0.6%
7,500 Pittstonco.................................................... 240,000
-----------
REAL ESTATE--1.2%
10,000 Rouse Company................................................. 510,000
-----------
STEEL--1.2%
11,000 Bethleham Steel Corp.......................................... 511,500
-----------
TOTAL PREFERRED STOCK (Identified Cost $2,241,383)............ 2,306,944
-----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 5
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION--CONTINUED
Investments as of June 30, 1995
(unaudited)
BONDS & NOTES--CONTINUED
SHORT-TERM INVESTMENT-- 5.0% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE(a)
-------------------------------------------------------------------------------------
<S> <C> <C>
$2,087,000 Repurchase Agreement with State Street Bank Bank and Trust
dated 6/30/95 at 5.50% to be repurchased at $2,087,957 on
7/3/95 collateralized by $2,130,000 U.S. Treasury Note 4.375%
due 8/15/96, with a value of $2,133,468....................... $ 2,087,000
-----------
Total Short-Term Investments (Identified Cost $2,087,000)..... 2,087,000
-----------
Total Investments--97.3% (Identified Cost $41,127,890)(b)..... 40,793,512
Cash, Receivables and Other Assets (c)........................ 2,892,564
Liabilities................................................... (1,773,740)
-----------
Total Net Assets--100%........................................ $41,912,336
==========
(a) See Note 1A
(b) Federal Tax Information: At June 30,1995 the net unrealized
depreciation on investments based on cost for federal income tax
purposes of $41,127,890 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost............................. $ 520,923
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value............................. (855,301)
---------
Net unrealized depreciation........................................... $(334,378)
=========
(c) Including deposits in foreign denominated currencies with a value of
$102,458 and a cost of $101,881.
(d) Debt obligation; initially issued in zero coupon form which converts
to coupon form at a specified date and rate.
(e) Denominated in Canadian dollars.
(f) Denominated in Irish pounds.
(g) Denominated in New Zealand dollars.
(h) Denominated in South African rands.
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 6
--------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value....................................... $40,793,512
Cash....................................................... 578
Foreign cash at Value...................................... 102,458
Receivable for:
Fund shares sold......................................... 1,801,539
Accrued Interest......................................... 921,206
Unamortized organization expense........................... 66,783
-----------
43,686,076
LIABILITIES
Payable for:
Fund shares redeemed..................................... $ 51,326
Securities purchased..................................... 1,623,396
Dividends declared....................................... 71,039
Accrued expenses:
Deferred trustees' fees.................................. 333
Accounting and administrative............................ 4,627
Other expenses........................................... 23,019
----------
1,773,740
-----------
NET ASSETS................................................... $41,912,336
==========
Net Assets consist of:
Capital paid in.......................................... $42,293,592
Distributions in excess of net investment income......... (54,115)
Accumulated net realized gains........................... 6,660
Unrealized depreciation on investments and foreign
currency............................................... (333,801)
-----------
NET ASSETS................................................... $41,912,336
==========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($16,855,056 divided by 1,366,907 shares of beneficial
interest).................................................. $12.33
======
Offering price per share (100/95.50 of $12.33)............... $12.91*
======
Net asset value and offering price of Class B shares
($17,629,597 divided by 1,429,834 shares of beneficial
interest).................................................. $12.33**
======
Net asset value and offering price of Class C shares
($7,427,683 divided by 602,647 shares of beneficial
interest).................................................. $12.33
======
Identified cost of investments............................... $41,127,890
==========
</TABLE>
*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.
See accompanying notes to financial statements.
7
<PAGE> 7
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the period May 1(a) through June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends...................................................... $ 34,765
Interest....................................................... 279,230
--------
313,995
Expenses
Management fees.............................................. $ 24,111
Service fees--Class A........................................ 3,820
Service and distribution fees--Class B....................... 15,196
Service and distribution fees--Class C....................... 6,616
Trustees' fees and expenses.................................. 1,825
Accounting and administrative................................ 11,027
Custodian.................................................... 11,007
Transfer agent............................................... 6,353
Audit and tax services....................................... 5,000
Legal........................................................ 2,324
Printing..................................................... 1,653
Registration................................................. 1,575
Amortization of organization expense......................... 1,136
Miscellaneous................................................ 1,036
--------
92,679
Less fees waived by the investment adviser..................... (24,111) 68,568
-------- --------
Net investment income.......................................... 245,427
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Realized gain on investments--net.............................. 6,660
--------
Unrealized appreciation (depreciation) on:
Investments--net............................................... (334,378)
Foreign currency transactions--net............................. 577
--------
Total unrealized depreciation on investments and foreign
currency transactions........................................ (333,801)
--------
Net loss on investment transactions............................ (327,141)
--------
NET DECREASE IN NET ASSETS FROM OPERATIONS....................... $(81,714)
========
</TABLE>
(a) Commencement of operations.
See accompanying notes to financial statements.
8
<PAGE> 8
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
MAY 1,(a)
THROUGH
JUNE 30,
1995
-----------
<S> <C>
FROM OPERATIONS
Net investment income.................................................. $ 245,427
Net realized gain on investment transactions........................... 6,660
Unrealized depreciation on investments................................. (333,801)
-----------
Decrease in net assets from operations................................. (81,714)
-----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A.............................................................. (135,378)
Class B.............................................................. (115,745)
Class C.............................................................. (48,419)
-----------
(299,542)
-----------
Increase from capital share transactions............................... 42,293,592
-----------
Total increase in net assets........................................... 41,912,336
NET ASSETS
Beginning of the period................................................ 0
-----------
End of the period...................................................... $41,912,336
==========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period................................................ $ 0
==========
End of the period...................................................... $ (54,115)
==========
</TABLE>
(a) Commencement of operations.
See accompanying notes to financial statements.
9
<PAGE> 9
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(unaudited)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------- --------- ---------
MAY 1,(a) MAY 1,(a) MAY 1,(a)
THROUGH THROUGH THROUGH
JUNE 30, JUNE 30, JUNE 30,
1995 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............. $12.50 $12.50 $12.50
--------- --------- ---------
Income From Investment Operations
Net Investment Income............................ 0.17 0.16 0.15
Net Realized and Unrealized Gain (Loss) on
Investments.................................... (0.15) (0.16) (0.15)
--------- --------- ---------
Total From Investment Operations................. 0.02 0.00 0.00
--------- --------- ---------
Less Distributions
Distributions From Net Investment Income......... (0.19) (0.17) (0.17)
--------- --------- ---------
Total Distributions.............................. (0.19) (0.17) (0.17)
--------- --------- ---------
Net Asset Value, End of Period................... $12.33 $12.33 $12.33
======== ======== ========
Total Return (%)................................. 0.2(c) 0.0(c) 0.0(c)
Ratio of Operating Expenses to Average Net Assets
(%)............................................ 1.41(b) 2.16(b) 2.16(b)
Ratio of Net Investment Income to Average Net
Assets (%)..................................... 7.23(b) 6.48(b) 6.48(b)
Portfolio Turnover Rate (%)...................... 4(b) 4(b) 4(b)
Net Assets, End of Period (000).................. $16,855 $17,630 $7,428
(a) Commencement of operations
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) The ratio of operating expenses to average
net assets without giving effect to the
voluntary expense limitations described in
Note 4 to the Financial Statements would have
been (%)..................................... 2.06(b) 2.81(b) 2.81(b)
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 10
--------------------------------------------------------------------------------
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 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 A, Class B and Class C shares on May 1, 1995. 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 subadviser, Loomis Sayles &
Company, L.P. ("Loomis Sayles") 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 Loomis Sayles 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 Loomis Sayles
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> 11
--------------------------------------------------------------------------------
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 principals. 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. Loomis Sayles 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> 12
--------------------------------------------------------------------------------
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.
g. ORGANIZATION EXPENSE. Costs incurred in 1995 in connection with the Fund's
organization and initial registration amounting to $67,920 were paid by the Fund
and are being amortized over 60 months beginning May 1, 1995.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
period ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- --------
<S> <C>
$39,220,010 $204,664
</TABLE>
3a. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays
management fees payable to its investment adviser, New England Funds Management
L.P. ("NEFM") at the annual rate of 0.65% of the first $200 million Fund's
average daily net assets and 0.60% of such assets in excess of $200 million.
NEFM pays the Fund's investment subadviser, Loomis Sayles at the rate of 0.35%
of the first $200 million of the Fund's average daily net assets and 0.30% of
such assets in excess of $200 million. Certain officers and directors of the
NEFM and Loomis Sayles are also officers or trustees of the Fund. NEFM and
Loomis Sayles are wholly owned subsidiaries of New England Investment Companies,
L.P. ("NEIC") which is a majority owned subsidiary of New England Mutual Life
Insurance Company. Fees earned by NEFM and Loomis Sayles under the management
agreement in effect during the period ended June 30, 1995 are as follows:
<TABLE>
<CAPTION>
FEES EARNED
-----------
<S> <C>
$11,115(a) New England Fund's Management, L.P.
$12,996(a) Loomis, Sayles & Company, L.P.
</TABLE>
(a) Before reduction pursuant to voluntary expense limitations. See Note 4.
b. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England
Funds"), the Fund's distributor, 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, 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 period ended June 30, 1995, these expenses
amounted to $11,027 and are shown separately in the financial statements as
accounting and administrative services.
13
<PAGE> 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
c. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent to the Fund. For the period ended June 30, 1995, the Fund paid
New England Funds $3,752 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 period
ended June 30, 1995, the Fund paid New England Funds $3,820 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.
Under the Class B and Class C Plans, 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 period ended June 30,
1995, the Fund paid New England Funds $3,799 and $1,654 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 a
monthly distribution fee at the annual rate of up to 0.75% of the average daily
net assets attributable to the Fund's Class B shares 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 period ended June 30, 1995, the Fund paid New England Funds
$11,397 and $4,962 in distribution fees under the Class B and Class C Plans,
respectively.
14
<PAGE> 14
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
Commissions (including contingent deferred sales charges) on Fund shares paid to
New England Funds by investors of shares of the Fund during the period ended
June 30, 1995 amounted to $355,246.
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, NEFM, 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 $800
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. EXPENSE LIMITATIONS. Under an expense deferral arrangement which NEFM and
Loomis Sayles may terminate at any time, NEFM and Loomis Sayles have agreed to
waive advisory and subadvisory fees until further notice, subject to the
obligation of the Fund to pay NEFM such fees to the extent that the Fund's
expenses fall below the annual rate of 1.40% for Class A shares and 2.15% for
Class B shares and Class C shares; provided however in any period, that the Fund
is not obligated to pay any fees waived by NEFM and Loomis Sayles more than two
years after the end of the fiscal year in which such fee was waived. As a result
of the Fund's expenses exceeding the foregoing expense limitation during the
period ended June 30, 1995, NEFM waived its entire advisory fee of $11,115 and
Loomis Sayles waived its entire subadvisory fee of $12,996.
15
<PAGE> 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
June 30, 1995 (unaudited)
5. CAPITAL SHARES. At June 30, 1995 there was an unlimited number of shares of
beneficial interest authorized divided into three classes, Class A, Class B and
Class C capital stock. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
MAY 1,(a)
THROUGH
JUNE 30,
1995
-------------------------
CLASS A SHARES AMOUNT
------------------------------------------------------------- --------- -----------
<S> <C> <C>
Shares sold.................................................. 1,373,479 $17,088,492
Shares issued in connection with the reinvestment of:
Distributions from net investment income................... 8,856 109,441
--------- -----------
1,382,335 17,197,933
Shares redeemed.............................................. (15,428) (192,483)
--------- -----------
Net increase (decrease)...................................... 1,366,907 $17,005,450
======== ==========
</TABLE>
<TABLE>
<CAPTION>
MAY 1,(a)
THROUGH
JUNE 30,
1995
-------------------------
CLASS B SHARES AMOUNT
------------------------------------------------------------- --------- -----------
<S> <C> <C>
Shares sold.................................................. 1,433,752 $17,834,196
Shares issued in connection with the reinvestment of:
Distributions from net investment income................... 5,899 72,855
--------- -----------
1,439,651 17,907,051
Shares redeemed.............................................. (9,817) (122,397)
--------- -----------
Net increase................................................. 1,429,834 $17,784,654
======== ==========
</TABLE>
<TABLE>
<CAPTION>
MAY 1,(a)
THROUGH
JUNE 30,
1995
-------------------------
CLASS C SHARES AMOUNT
------------------------------------------------------------- --------- -----------
<S> <C> <C>
Shares sold.................................................. 655,708 $ 8,159,341
Shares issued in connection with the reinvestment of:
Distributions from net investment income................... 2,377 29,330
--------- -----------
658,085 8,188,671
Shares redeemed.............................................. (55,438) (685,183)
--------- -----------
Net increase................................................. 602,647 $ 7,503,488
======== ==========
Total increase from capital share transactions............... 3,399,388 $42,293,592
======== ==========
</TABLE>
(a) Commencement of operations.
16
<PAGE> 16
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> 17
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Boston, Massachusetts
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