<PAGE>
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[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
New England Funds
Where The Best Minds Meet
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Semiannual Report and Performance Update
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New England [ARTWORK APPEARS HERE]
Balanced Fund
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June 30, 1995
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<PAGE>
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July 20, 1995
Dear Shareholder:
We have good news to present in this Semiannual Report for New England
Balanced Fund, which includes your Portfolio Manager's commentary and complete
financial information.
Market Overview
Investors who stayed the course in 1995 were amply rewarded. Major U.S.
stock market indices soared to record highs and the bond market staged a
spectacular comeback from its 1994 lows. Fueling the rally was clear evidence
that the economy had begun to slow down as a result of the interest rate hikes
engineered by the Federal Reserve Board to keep inflation in check. Indeed, with
declining housing starts and rising unemployment numbers reported in the first
half of 1995, expectations grew that the Fed's next move would be downward, to
prevent the slowing economy from slipping into recession.
The bond market surged at the prospect of lower rates, and the stock market
followed suit, with the Standard & Poor's 500(R) Index gaining 20.14% during
the first half of the year. The large, blue-chip companies led the way, in part
because a weak U.S. dollar gave them a competitive advantage overseas and
contributed to surprisingly healthy earnings reports. Finally, on July 6, just
after this reporting period ended, the Fed lowered a key short-term rate by
0.25%, a relatively modest move, but a significant psychological change in
direction.
Your Financial Adviser -- A Trusted Ally
As a shareholder in New England Funds, you have a valuable ally you can
turn to at all times -- your financial adviser. This experienced
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<PAGE>
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professional can help you design an asset allocation program suitable to your
goals and risk tolerance. Most important, during times of market volatility or
uncertainty, your adviser can help you avoid making costly mistakes, such as
trying to "time" the market. Investors who go it alone can overreact to short-
term market events, buying and selling on the basis of this week's headlines, or
chasing the latest "hot" investment. Such behavior can derail an otherwise
prudent investment program. But investors who work with a financial adviser
receive guidance throughout the market's ups and downs. Your adviser will help
you place short-term market swings in their proper perspective and keep you
focused on your long-term investment program.
Your adviser is just one of the experts whose talents we have tapped in our
effort to bring the best minds in the business to the task of managing your
money. These experts are a vital part of the investment process at New England
Funds, and we encourage you to take advantage of their skills to the fullest.
We invite you to read the accompanying management commentary and financial
highlights. If you have any questions or comments, please contact your financial
adviser or New England Funds directly at 800-225-5478. Once again, we appreciate
your continued confidence and investment in New England Funds.
Sincerely,
/s/ Peter S. Voss /s/ Henry L.P. Schmelzer
Peter S. Voss Henry L.P. Schmelzer
Chairman President
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<PAGE>
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New England Balanced Fund
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INVESTMENT RESULTS THROUGH JUNE 30, 1995
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities index
measures the performance of a theoretical portfolio. Unlike a fund, the index is
unmanaged; there are no expenses that affect the results. In addition, few
investors could purchase all of the securities necessary to match the index.
And, if they could, they would incur transaction costs and other expenses.
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A $10,000 Investment in Class A Shares
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Compared to Standard & Poor's 500 Index/4/ and a blend of Standard & Poor's
500 and Lehman Intermediate Government/Corporate Bond Indices/5/
A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Standard & Poor's 500 Index/4/
and a blend of Standard & Poor's 500 and Lehman Intermediate
Government/Corporate Bond Indices/5/. The data points from the graph are as
follows:
New England Balanced Fund-Net Asset Value/1/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $10,000
6/86 $13,708
6/87 $15,437
6/88 $14,523
6/89 $16,056
6/90 $16,050
6/91 $16,952
6/92 $19,586
6/93 $22,689
6/94 $23,517
6/95 $27,571
</TABLE>
New England Balanced Fund-With Maximum Sales Charge/2/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $9,425
6/86 $12,920
6/87 $14,549
6/88 $13,688
6/89 $15,133
6/90 $15,127
6/91 $15,977
6/92 $18,460
6/93 $21,384
6/94 $22,165
6/95 $25,986
</TABLE>
S&P/Lehman Interm. Gov't./Corp./5/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $10,000
6/86 $12,896
6/87 $15,251
6/88 $14,981
6/89 $17,516
6/90 $19,862
6/91 $21,548
6/92 $24,427
6/93 $27,476
6/94 $27,767
6/95 $33,466
</TABLE>
S&P 500/4/
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
6/85 $10,000
6/86 $13,583
6/87 $16,991
6/88 $15,819
6/89 $19,065
6/90 $22,191
6/91 $23,831
6/92 $27,040
6/93 $30,714
6/94 $31,257
6/95 $39,381
</TABLE>
This illustration represents past performance of Class A shares and cannot
predict future results. Investment return and principal value may vary,
resulting in a gain or loss on the sale of shares. Class B, Class C and Class Y
share performance will be greater or less than that shown based on differences
in inception date, fees and sales charges. All Index and Fund performance
assumes reinvested distributions.
1
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New England Balanced Fund
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<TABLE>
<CAPTION>
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Average Annual Total Returns 6/30/95
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Class A (Inception 11/27/68) Year to Date 1 Year 5 Years 10 Years
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<S> <C> <C> <C> <C>
Net Asset Value/1/ 16.23% 17.24% 11.43% 10.67%
With Max. Sales Charge/2/ 9.52 10.46 10.12 10.02
Standard & Poor's 500/4/ 20.14 25.99 12.03 14.60
Lipper Balanced Average/6/ 13.70 16.02 10.44 11.52
<CAPTION>
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Class B (Inception 9/13/93) Year to Date 1 Year Since Inception
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value/1/ 15.72% 16.34% 8.34%
With CDSC/3/ 11.72 12.34 6.76
Standard & Poor's 500/4/ 20.14 25.99 12.80
S&P/ Lehman G/C Blend/5/ 13.09 20.52 9.77
Lipper Balanced Average/6/ 13.70 16.02 6.64
<CAPTION>
-----------------------------------------------------------------------------------------
Class C (Inception 12/30/94) Since Inception
-----------------------------------------------------------------------------------------
<S> <C>
Net Asset Value/1/ 15.72%
Standard & Poor's 500/4/ 20.14
S&P/ Lehman G/C Blend/5/ 13.09
Lipper Balanced Average/6/ 13.70
<CAPTION>
-----------------------------------------------------------------------------------------
Class Y (Inception 3/10/94) Year to Date 1 Year Since Inception
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value/1/ 16.44% 17.79% 9.89%
Standard & Poor's 500/4/ 20.14 25.99 15.97
S&P/ Lehman G/C Blend/5/ 13.09 20.52 14.34
Lipper Balanced Average/6/ 13.70 16.02 11.05
</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. The Fund was changed from an equity income fund to
a balanced fund on March 1, 1990. Results for periods prior to that date
reflect former investment policies and are not necessarily representative of
results that would have been achieved had the Fund's current investment
policies then been in effect.
Notes to Charts and Performance Update
/1/ Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
/2/ With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at the time of
purchase of Class A shares.
/3/ With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum
4% sales charge is applied to a redemption of Class B shares. The sales
charge will decrease over time, declining to zero five years after the
purchase of shares.
/4/ Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing the
performance of 500 major companies, most of which are listed on the New York
Stock Exchange. The S&P 500 performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments.
/5/ Represented by a 65% weighting in the Standard & Poor's 500 Index (S&P 500)
and a 35% weighting in the Lehman Intermediate Government/Corporate Bond
Index. Indices are rebalanced to 65%/35% at the end of each year. 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 indices' performance has
not been adjusted for ongoing management, distribution and operating
expenses and sales charges applicable to mutual fund investments.
/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
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New England Balanced Fund
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[PHOTOS APPEAR HERE]
NEW ENGLAND BALANCED FUND
Portfolio Managers: Doug Ramos, Meri Anne Beck; Loomis, Sayles & Co.
It was the best of times for both the stock and bond markets. Amid
declining interest rates and subdued inflation concerns, both stock and
bond markets in the first six months of 1995 rewarded investors with
record-setting performances. During the first two quarters of 1995 the
bond market staged its strongest rally since the third and fourth
quarters of 1984. Stock prices have risen virtually without
interruption since December, with major stock-market indexes surging to
new highs. Fixed-income securities also had their own share of
impressive gains.
How Your Fund Performed
We are pleased to report that our assessment of the markets and Fund
positioning generated outstanding results for our shareholders. For the
six months ended June 30, 1995, New England Balanced Fund provided a
total return of 16.23% for Class A shares, at net asset value. Your
Fund has outperformed the Lipper Balanced Fund Average of 212 funds.
The average balanced fund returned 13.7% for the same six-month period.
How We Managed Your Fund
Our overall approach reflected our belief that in 1995 economic
activity would continue at low to moderate levels, inflationary
pressures would remain subdued, and interest rates would remain stable.
With this outlook, which proved to be correct, we overweighted the
portfolio in equities, expecting -- again correctly -- that they would
outperform bonds. At the end of June, about 61%
3
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New England Balanced Fund
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of the portfolio was invested in stocks, and 39% in bonds. Our asset
allocation benefited the Fund, because the equity markets during the
first half of 1995 outperformed the bond market accounting for much of
the Fund's performance.
In the equity segment of the Fund, we followed our value-oriented
bottom-up stock selection process in search of good opportunities. Our
concentration in the Business/Financial Services sector (23% of Fund
assets), Technology (11%), and Capital Goods (11%) served the Fund
well. Successful picks in technology stocks -- Intel, Texas
Instruments, Hewlett-Packard, and IBM -- boosted the Fund's equity
portion to above-market performance in the first six months of 1995.
The Financial Services sector, which is sensitive to interest rates,
prospered in the low-rate environment. The Fund also benefited from
investments in airlines, and aerospace and defense stocks, which
produced strong returns in the second quarter.
During the quarter we increased both credit quality and the average
maturity of the portfolio. At the end of June, the average maturity of
the bonds in the portfolio was about seven years. We improved call
protection by increasing our exposure to non-callable bonds. We
maintained broad diversification along the maturity spectrum, with an
emphasis on intermediate-term bonds. The industrial and financial
sectors together made up about half of the Fund's bond holdings, while
19% was in mortgage-related securities and 14% in U.S. government and
agency bonds.
4
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New England Balanced Fund
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Our bond selection process is research driven by in-depth credit
analysis. We analyze the yield differential between various bonds and
sectors in order to pursue additional value and provide the potential
for stability for shareholders in both up and down markets
Economic Outlook
The current economic and business climates are favorable for both
stocks and bonds. The Federal Reserve interest rate policy has brought
a slowing economy and diminished inflation concerns. A number of
economic reports indicated recessionary trends in certain areas of the
economy, which prompted the Federal Reserve to cut interest rates for
the first time in three years in an effort to prevent a broad
recession.
We believe that the chances of recession in the near future are slim
and that the economy will stay in low gear through the remainder of the
year, which bodes well for fixed-income securities. For the equity
markets, however, a slower economy can translate into lower corporate
earnings growth, which, in turn, could keep stock prices from moving up
at a dramatic rate. To prepare for the potential shift in the stock
market, we have become slightly more defensive in the Fund's equity
portion, placing more emphasis on higher-yielding stocks, and trimming
back our exposure in the technology sector.
5
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New England Balanced Fund
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The Value of Long-Term Perspective
Experienced investors always remember that short-term fluctuations are
a normal part of investing. The best way to capture investment
opportunities that can materialize in a matter of hours is to be in the
market over the long term, and to own a diversified mix of investments.
Your Fund gives you professionally managed asset allocation in stocks
and bonds, as well as diversification of individual securities. Keep in
mind that, like any mutual fund with significant stock holdings, your
Fund is a long-term investment, designed to help you in the pursuit of
your investment goals.
This is a time of great optimism in the securities markets. Our goal as
managers of the Balanced Fund is to adhere to our bottom-up fundamental
stock research and careful credit analysis to focus on above-average
returns, along with reduced volatility over time. We look forward to
continuing to assist you with your long-term investment plans.
6
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New England Balanced Fund
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Your Fund's Asset Diversification 6/30/95*
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A graph in the form of a pie chart appears here, illustrating the asset
diversification of New England Balanced Fund as of June 30, 1995. The pie chart
is broken in pieces representing the asset diversification in the following
percentages:
<TABLE>
<CAPTION>
Asset Diversification Percentages
--------------------- -----------
<S> <C>
Stocks 60.9%
Bonds 38.5%
Cash 0.6%
</TABLE>
<TABLE>
<CAPTION>
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Your Fund's Five Largest Stock Holdings 6/30/95*
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Percentage of
Company Net Assets
----------------------------------------------------------------------------
<S> <C>
1. Mead Corporation 1.4%
A manufacturer of paper and wood products,
and lumber
----------------------------------------------------------------------------
2. Texas Instruments 1.4%
Major electronic equipment corporation
----------------------------------------------------------------------------
3. International Business Machines (IBM) 1.4%
The world's largest computer manufacturer
----------------------------------------------------------------------------
4. Case Corp. 1.4%
Manufacturer of farm and construction equipment
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5. Intel Corp. 1.3%
Semiconductor and memory circuit manufacturer
----------------------------------------------------------------------------
</TABLE>
*Portfolio holdings and asset allocations may change.
7
<PAGE>
[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
New England Funds
Where The Best Minds Meet
Portfolio Composition, Financial Statements and Highlights
NEW ENGLAND
BALANCED FUND
June 30, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--59.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE--2.1%
40,700 Lockheed Martin Corp. .................................. $ 2,569,188
38,600 Raytheon Co. ........................................... 2,996,325
------------
5,565,513
------------
AIRLINE--1.0%
36,700 AMR Corp. (c)........................................... 2,738,738
------------
AUTOMOBILE & RELATED--2.6%
19,100 Chrysler Corp. ......................................... 914,413
88,400 Ford Motor Co. ......................................... 2,629,900
67,000 General Motors Corp. ................................... 3,140,625
------------
6,684,938
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BANKS--3.4%
65,200 Chemical Banking Corp. ................................. 3,080,700
37,300 First Interstate Bancorp. .............................. 2,993,325
73,100 Fleet Norstar Financial Group........................... 2,713,837
------------
8,787,862
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CHEMICAL--4.7%
45,000 E.I. DuPont de Nemours & Co. ........................... 3,093,750
77,100 Georgia Gulf Corp. (c).................................. 2,515,388
75,200 PPG Industries, Inc. ................................... 3,233,600
131,900 Praxair, Inc. .......................................... 3,297,500
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12,140,238
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ELECTRONIC COMPONENTS--2.7%
54,800 Intel Corp. ............................................ 3,469,525
26,700 Texas Instruments, Inc. ................................ 3,574,462
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7,043,987
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ELECTRICAL EQUIPMENT--1.5%
42,700 General Electric Co. ................................... 2,407,213
34,800 Honeywell, Inc. ........................................ 1,500,750
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3,907,963
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ENGINEERING & CONSTRUCTION--0.9%
95,600 McDermott International Inc. ........................... 2,306,350
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FINANCIAL SERVICES--4.5%
44,800 Federal Home Loan Mortgage Corp. ....................... 3,080,000
30,500 Federal National Mortgage Association................... 2,878,437
90,300 MBNA Corp. ............................................. 3,047,625
83,700 Meditrust SBI........................................... 2,856,263
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11,862,325
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</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
FOREST PRODUCTS--1.0%
61,600 Weyerhaeuser Co. ....................................... $ 2,902,900
------------
FREIGHT--TRANSPORTATION--1.1%
164,500 Canadian Pacific Ltd. .................................. 2,858,188
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HEALTH CARE--DRUGS--0.1%
7,900 Smithkline Beecham PLC.................................. 357,475
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HEALTH CARE--MED.TECH.--0.3%
28,700 C. R. Bard, Inc. ....................................... 861,000
------------
HEALTH CARE--SERVICES--1.1%
224,500 Beverly Enterprises, Inc. (c)........................... 2,778,188
------------
HOME PRODUCTS--1.3%
65,200 Premark International Inc. ............................. 3,382,250
------------
HOUSING & BUILDING MATERIALS--1.0%
95,600 Masco Corp. ............................................ 2,581,200
------------
INSURANCE--4.6%
118,800 ACE, Ltd. .............................................. 3,445,200
23,812 American International Group, Inc. ..................... 2,714,568
35,300 Chubb Corp. ............................................ 2,828,412
83,000 Providian Corp. ........................................ 3,008,750
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11,996,930
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LEISURE--1.2%
134,300 Carnival Cruise Lines, Inc. ............................ 3,139,262
------------
MACHINERY--1.5%
118,900 Case Corp. ............................................. 3,537,275
29,300 Consorcio G Grupo Dina SA DE ADR (d).................... 91,563
127,800 Consorcio G Grupo Dina SA DE Series L ADR (d)........... 255,600
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3,884,438
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METALS--0.6%
53,300 AK Steel Holding Corp.(c)............................... 1,452,425
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MULTI INDUSTRY--3.7%
73,000 Allied Signal, Inc. .................................... 3,248,500
28,700 ITT Corp. .............................................. 3,372,250
51,400 Textron, Inc. .......................................... 2,987,625
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9,608,375
------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
NATURAL GAS PIPELINES--2.0%
83,100 El Paso Natural Gas Co. ................................ $ 2,368,350
48,900 Mapco, Inc. ............................................ 2,836,200
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5,204,550
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OFFICE EQUIPMENT--3.2%
39,400 Hewlett Packard Co. .................................... 2,935,300
36,900 International Business Machines ........................ 3,542,400
17,300 Xerox Corp. ............................................ 2,028,425
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8,506,125
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OIL--3.0%
94,500 Repsol S.A., ADR (d).................................... 2,988,563
40,300 Sun, Inc. .............................................. 1,103,212
115,600 Ultramar Corp. ......................................... 2,918,900
37,400 YPF Sociedad Anonima ADR (d)............................ 705,925
------------
7,716,600
------------
PAPER/PAPER PRODUCTS--1.4%
62,800 Mead Corp. ............................................. 3,728,750
------------
RETAIL--1.2%
31,400 Dayton Hudson Corp. .................................... 2,252,950
91,100 TJX Companies........................................... 1,207,075
------------
3,460,025
------------
TOBACCO--1.9%
14,200 Loews Corp. ............................................ 1,718,200
44,100 Philip Morris Companies, Inc. .......................... 3,279,937
------------
4,998,137
------------
UTILITIES--TELECOMMUNICATIONS--2.9%
92,300 GTE Corp. .............................................. 3,149,737
89,200 Sprint Corp. ........................................... 2,999,350
46,500 Telefonos de Mexico SA ................................. 1,377,562
------------
7,526,649
------------
UTILITIES--ELECTRIC--2.4%
109,700 Pacific Gas & Electric Co. ............................. 3,181,300
182,500 SCE Corp. .............................................. 3,125,312
------------
6,306,612
------------
Total Common Stocks (Identified Cost $127,384,743)...... 154,287,993
------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
PREFERRED STOCKS--1.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (A)
---------------------------------------------------
<C> <S> <C>
AUTOMOBILE & RELATED--
0.8%
14,800 Chrysler Corp. ......... $ 1,966,550
------------
TOBACCO--1.0%
RJR Nabisco Holdings
437,800 Corp. .................. 2,681,525
------------
Total Preferred Stocks
(Identified Cost
$4,916,414)............. 4,648,075
------------
MEDIUM & LONG TERM BONDS & NOTES--38.5%
<CAPTION>
FACE
AMOUNT
---------------------------------------------------
<C> <S> <C>
BANKS--3.3%
Bankers Trust New York
$2,400,000 Corp. 8.125%, 4/01/02.. 2,537,232
Chase Manhattan Corp.
1,140,000 10.000%, 6/15/99........ 1,264,921
Chase Manhattan Corp.
2,200,000 7.875%, 8/01/04......... 2,251,766
Export, Import Bank of
1,100,000 Japan 9.500%, 6/29/00... 1,243,000
First Interstate
Bancorp. 12.750%,
600,000 5/01/97................. 664,494
First National Tennessee
600,000 Corp. 10.375%, 6/01/99.. 668,316
------------
8,629,729
------------
EQUIPMENT TRUST
CERTIFICATES--1.9%
American Airlines
2,000,000 10.180%, 1/02/13........ 2,325,000
Delta Air Lines, Inc.
1,000,000 7.790%, 12/01/98........ 1,020,140
Delta Air Lines, Inc.
500,000 9.530%, 11/17/99........ 540,730
Delta Air Lines, Inc.
600,000 9.200%, 9/23/14......... 643,500
U.S. Air, Inc. 10.550%,
232,000 1/15/05................. 229,808
U.S. Air, Inc. 10.700%,
350,000 1/15/07................. 349,758
------------
5,108,936
------------
FINANCE--4.7%
American General Corp.
2,000,000 9.625%, 7/15/00......... 2,252,060
Associates Corp of N.A
2,375,000 8.350%, 12/22/98........ 2,521,514
International Lease
Finance Corp. 8.040%,
2,430,000 12/01/97................ 2,524,867
International Lease
Finance Corp. 8.125%,
2,000,000 1/15/98................. 2,085,340
Secured Finance 9.050%,
2,425,000 12/15/04................ 2,762,002
------------
12,145,783
------------
HEALTH CARE--1.6%
Columbia/HCA Healthcare
1,775,000 Co. 8.020%, 8/05/02..... 1,885,458
Hospital Corp. of
America zero coupon,
3,050,000 6/01/00................. 2,176,998
------------
4,062,456
------------
INDUSTRIAL--6.4%
Carnival Cruise Lines,
2,000,000 Inc. 7.050%, 5/15/05.... 2,006,560
Coastal Corp. 10.000%,
2,650,000 2/01/01................. 3,006,743
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
MEDIUM & LONG TERM BONDS & NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (A)
-------------------------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL--CONTINUED
$1,650,000 Hertz Corp. 9.000%, 7/24/00......................... $ 1,810,826
500,000 Litton Industries, Inc. 12.625%, 7/01/05............ 520,845
2,000,000 Royal Caribbean Cruise Line 8.125%, 7/28/04......... 2,090,720
500,000 Sears Roebuck & Co. 9.300%, 4/15/98................. 536,090
2,975,000 Standard Oil Co. 9.000%, 6/01/19.................... 3,233,498
2,000,000 Tenneco, Inc. 10.000%, 3/15/08...................... 2,473,140
1,000,000 WalMart Stores Inc. 6.750%, 5/15/02................. 1,014,650
------------
16,693,072
------------
INSURANCE--0.9%
1,095,000 Progressive Corp. 10.000%, 12/15/00................. 1,254,202
1,000,000 USF&G Corp. 8.375%, 6/15/01......................... 1,063,900
------------
2,318,102
------------
MORTGAGE BACKED--6.9%
750,000 Federal Home Loan Mortgage Corp. 7.750%, 10/15/98... 771,563
2,819 Federal Home Loan Mortgage Corp. 8.750%, 1/15/20.... 2,814
2,000,000 Federal Home Loan Mortgage Corp. 7.500%, 7/15/20.... 2,040,000
1,000,000 Federal Home Loan Mortgage Corp. 6.500%, 3/15/23.... 936,250
Federal National Mortgage Association 9.000%,
3,000,000 7/25/06............................................. 3,148,110
Federal National Mortgage Association 7.000%,
1,750,000 4/25/07............................................. 1,746,465
Federal National Mortgage Association 7.500%,
324,564 6/01/15............................................. 328,449
Federal National Mortgage Association 8.500%,
1,374,123 6/25/24............................................. 1,417,491
General Electric Capital Mortgage Services, Inc.
2,065,000 10.000%, 3/25/24.................................... 2,197,924
172,933 Mortgage Securities III Trust 9.000%, 4/01/10....... 178,171
3,000,000 Paine Webber CMO Trust 9.000%, 10/20/03............. 3,130,290
Residential Funding Mortgage Securities Co., Inc.
1,473,471 6.000%, 12/25/08.................................... 1,409,006
575,000 Westam Mortgage Financial Corp. 8.950%, 8/01/18..... 643,097
------------
17,949,630
------------
PAPER/PAPER PRODUCTS--0.4%
500,000 Westvaco Corp. 9.650%, 3/01/02...................... 568,830
500,000 Westvaco Corp. 10.300%, 1/15/19..................... 536,955
------------
1,105,785
------------
SECURITIES--1.6%
1,500,000 Lehman Brothers Holdings, Inc. 8.875%, 11/01/98..... 1,581,375
Lehman Brothers Holdings, Inc. Floating Rate Note,
2,600,000 6.810%, 10/12/95 (e)................................ 2,532,998
------------
4,114,373
------------
TELEPHONE--1.2%
500,000 Central Telephone Co. 9.280%, 11/27/00.............. 560,225
Southern Bell Telephone & Telegraph Co. 8.750%,
2,500,000 11/01/24............................................ 2,601,300
------------
3,161,525
------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
MEDIUM & LONG TERM BONDS & NOTES--CONTINUED
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE (A)
-------------------------------------------------------------------------------
<C> <S> <C>
TOBACCO--1.4%
$1,802,000 Philip Morris Companies, Inc. 7.625%, 5/15/02...... $ 1,864,331
1,735,000 RJR Nabisco, Inc. 9.250%, 8/15/13.................. 1,773,691
------------
3,638,022
------------
UTILITIES--1.0%
1,000,000 Colorado Interstate Gas Co. 10.000%, 6/15/05....... 1,093,360
1,500,000 Louisiana Power & Light Co. 10.670%, 1/02/17....... 1,605,270
------------
2,698,630
------------
YANKEE/SUPRANATIONAL--1.2%
600,000 Hydro Quebec Mountain Bank 6.520%, 2/23/06......... 569,814
2,450,000 SKF AB 7.625%, 7/15/03............................. 2,521,956
------------
3,091,770
------------
U.S. GOVERNMENT & AGENCIES--6.0%
Federal Home Loan Mortgage Corp. Floating Rate
2,575,000 1.875%, 8/23/95 (e)................................ 2,267,622
1,000,000 Federal Home Loan Mortgage Corp. 8.460%, 11/20/99.. 1,007,960
1,000,000 Federal Home Loan Mortgage Corp. 8.750%, 2/03/05... 1,053,540
Federal National Mortgage Association Principal
1,165,000 Only, 10/10/01..................................... 1,076,204
Federal National Mortgage Association 8.050%,
1,000,000 5/20/04............................................ 1,027,890
Federal National Mortgage Association 7.000%,
1,346,700 8/25/16............................................ 1,346,700
3,000,000 U.S. Treasury Notes 8.750%, 10/15/97............... 3,181,860
1,000,000 U.S. Treasury Notes 8.875%, 2/15/99................ 1,093,750
775,000 U.S. Treasury Bonds 10.750%, 2/15/03............... 986,916
2,000,000 U.S. Treasury Bonds 10.375%, 11/15/12.............. 2,645,320
------------
15,687,762
------------
Total Medium & Long Term Bonds & Notes Identified
Cost ($97,793,754)................................. 100,405,575
------------
SHORT-TERM INVESTMENTS--0.2%
469,000 Associates Corp. of North America 6.000% 7/03/95... 469,000
------------
Total Short-Term Investments (Identified Cost
$469,000).......................................... 469,000
------------
Total Investments--99.6% (Identified Cost
$230,563,911) (b).................................. 259,810,643
Cash & Receivables................................. 2,552,826
Liabilities........................................ (1,358,667)
------------
Total Net Assets--100%............................. $261,004,802
============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
<TABLE>
<S> <C>
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1995 the net unrealized
appreciation on investments based on cost of $230,563,911 for
federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost.............. $34,274,478
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (5,027,746)
-----------
Net unrealized appreciation.................................. $29,246,732
===========
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued
by a U.S. bank representing the right to receive securities
of the foreign issuer described. The values of ADRs are
significantly influenced by trading on exchanges not located
in the United States or Canada.
(e) Floating rate notes are instruments whose interest rates vary
with changes in a designated base rate on a specific date.
These notes reset quarterly based upon a specific index. The
maturity date shown is the next interest rate reset date. The
final maturity on these instruments are 1/12/99 and 11/23/98,
respectively.
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $259,810,643
Cash.................................................. 921
Receivable for:
Fund shares sold.................................... 324,955
Dividends and Interest.............................. 2,220,795
Foreign dividend tax reclaims....................... 6,155
------------
262,363,469
LIABILITIES
Payable for:
Securities purchased................................ $739,842
Fund shares redeemed................................ 314,645
Dividends declared.................................. 34,209
Accrued expenses:
Management fees..................................... 156,129
Deferred trustees' fees............................. 43,566
Accounting and administrative....................... 3,892
Other expenses...................................... 66,384
--------
1,358,667
------------
$261,004,802
============
NET ASSETS
Net Assets consist of:
Capital paid in..................................... $225,042,916
Undistributed net investment income................. 347,769
Accumulated net realized gains...................... 6,367,385
Unrealized appreciation on investments.............. 29,246,732
------------
NET ASSETS $261,004,802
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($181,086,310 divided by 14,043,411 shares of
beneficial interest).................................. $12.89
======
Offering price per share (100/94.25 of $12.89)......... $13.68*
======
Net asset value and offering price of Class B shares
($29,865,793 divided by 2,324,380 shares of beneficial
interest)............................................. $12.85**
======
Net asset value and offering price of Class C shares
($305,369 divided by 23,784 shares of beneficial
interest)............................................. $12.84
======
Net asset value and offering price of Class Y shares
($49,747,330 divided by 3,856,930 shares of beneficial
interest)............................................. $12.90
======
Identified cost of investments......................... $230,563,911
============
</TABLE>
*Based upon single purchases of less than $50,000. Reduced sales charges apply
for purchases in excess of these amounts.
**Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See accompanying notes to financial statements.
9
<PAGE>
STATEMENT OF OPERATIONS
Six months ended June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 1,948,758(a)
Interest.............................................. 3,851,899
-----------
5,800,657
Expenses
Management fees..................................... $876,751
Service fees--Class A............................... 209,174
Service and distribution fees--Class B.............. 125,265
Service and distribution fees--Class C.............. 726
Trustees' fees and expenses......................... 12,352
Accounting and administrative....................... 24,675
Custodian........................................... 61,283
Transfer agent...................................... 266,877
Audit and tax services.............................. 20,000
Legal............................................... 12,435
Printing............................................ 31,867
Registration........................................ 30,259
Miscellaneous....................................... 10,302
--------
Total expenses........................................ 1,681,966
-----------
Net investment income................................. 4,118,691
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 6,454,327
Unrealized appreciation on Investments--net........... 25,335,464
-----------
Net gain on investment transactions................... 31,789,791
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $35,908,482
===========
</TABLE>
(a) Net of foreign taxes of $9,190.
See accompanying notes to financial statements.
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1994 JUNE 30, 1995
------------ -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................ $ 5,939,028 $ 4,118,691
Net realized gain on investments................. 3,627,356 6,454,327
Unrealized appreciation (depreciation) on
investments..................................... (15,017,290) 25,335,464
------------ ------------
Increase (decrease) in net assets from
operations...................................... (5,450,906) 35,908,482
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A........................................ (4,538,717) (2,652,854)
Class B........................................ (369,316) (327,149)
Class C........................................ -- (3,122)
Class Y........................................ (935,325) (787,797)
Net realized gain on investments
Class A........................................ (2,833,357) --
Class B........................................ (376,051) --
Class C........................................ -- --
Class Y........................................ (703,988) --
------------ ------------
(9,756,754) (3,770,922)
------------ ------------
Increase in net assets derived from capital share
transactions.................................... 71,331,610 9,744,687
------------ ------------
Total increase in net assets..................... 56,123,950 41,882,247
NET ASSETS
Beginning of the period.......................... 162,998,605 219,122,555
------------ ------------
End of the period................................ $219,122,555 $261,004,802
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period.......................... $ 10,949 $ -0-
============ ============
End of the period................................ $ -0- $ 347,769
============ ============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
FINANCIAL HIGHLIGHTS
(unaudited)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------- JUNE 30,
1990 1991 1992 1993 1994 1995
------- ------- ------- -------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.47 $ 8.11 $ 10.15 $ 11.16 $ 12.13 $ 11.27
------- ------- ------- -------- -------- --------
Income From Investment
Operations.............
Net Investment Income... 0.35 0.30 0.30 0.31 0.33 0.21
Net Realized and
Unrealized Gain (Loss)
on Investments......... (1.34) 2.05 1.10 1.26 (0.65) 1.60
------- ------- ------- -------- -------- --------
Total From Investment
Operations............. (0.99) 2.35 1.40 1.57 (0.32) 1.81
------- ------- ------- -------- -------- --------
Less Distributions
Dividends From Net
Investment Income...... (0.35) (0.30) (0.30) (0.31) (0.33) (0.19)
Distributions From Net
Realized Capital Gains. 0.00 0.00 (0.09) (0.29) (0.21) 0.00
Distributions From Paid-
in Capital............. (0.02) (0.01) 0.00 0.00 0.00 0.00
------- ------- ------- -------- -------- --------
Total Distributions..... (0.37) (0.31) (0.39) (0.60) (0.54) (0.19)
------- ------- ------- -------- -------- --------
Net Asset Value, End of
Period................. $ 8.11 $ 10.15 $ 11.16 $ 12.13 $ 11.27 $ 12.89
======= ======= ======= ======== ======== ========
Total Return (%)........ (10.6) 29.2 13.9 14.2 (2.7) 16.2**
Ratio of Operating
Expenses to Average Net
Assets (%)............. 1.58 1.53 1.48 1.40 1.40 1.42*
Ratio of Net Investment
Income to Average Net
Assets (%)............. 4.00 3.18 2.84 2.66 2.91 3.48*
Portfolio Turnover Rate
%...................... 68 51 38 50 36 48*
Net Assets, End of
Period (000)........... $52,134 $67,467 $90,527 $158,308 $158,332 $181,086
</TABLE>
* Computed on an annualized basis.
**Not computed on an annualized basis.
See accompanying notes to financial statements.
12
<PAGE>
FINANCIAL HIGHLIGHTS--Continued
(unaudited)
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS Y
--------------------------------------- ---------- -------------------------
SEPTEMBER 13(*) YEAR SIX MONTHS SIX MONTHS MARCH 8(*) SIX MONTHS
THROUGH ENDED ENDED ENDED THROUGH ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1994 1995
--------------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ... $12.16 $ 12.11 $ 11.24 $11.24 $ 12.20 $ 11.27
------ ------- ------- ------ ------- -------
Income From Investment
Operations
Net Investment Income... 0.16 0.26 0.16 0.12 0.38 0.23
Net Realized and
Unrealized Gain (Loss)
on Investments......... 0.24 (0.66) 1.60 1.64 (0.72) 1.61
------ ------- ------- ------ ------- -------
Total From Investment
Operations............. 0.40 (0.40) 1.76 1.76 (0.34) 1.84
Less Distributions
Dividends From Net
Investment Income...... (0.16) (0.26) (0.15) (0.16) (0.38) (0.21)
Distributions From Net
Realized Capital Gains. (0.29) (0.21) 0.00 0.00 (0.21) 0.00
------ ------- ------- ------ ------- -------
Total Distributions..... (0.45) (0.47) (0.15) (0.16) (0.59) (0.21)
------ ------- ------- ------ ------- -------
Net Asset Value, End of
Period................. $12.11 $ 11.24 $ 12.85 $12.84 $ 11.27 $ 12.90
====== ======= ======= ====== ======= =======
Total Return (%)........ 3.3*** (3.4) 15.7*** 15.7*** (2.8)*** 16.4***
Ratio of Operating
Expenses to Average Net
Assets (%)............. 2.36** 2.15 2.17** 2.17** 0.99** 1.00**
Ratio of Net Investment
Income to Average Net
Assets (%)............. 1.92** 2.13 2.73** 2.73** 3.69** 3.90**
Portfolio Turnover Rate
(%).................... 50 36 48** 48** 36 48**
Net Assets, End of
Period (000)........... $4,691 $21,607 $29,866 $ 305 $39,183 $49,747
</TABLE>
*Commencement of operations.
**Computed on an annualized basis.
***Not computed on an annualized basis.
See accompanying notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
1. The Fund is a Series of New England Funds Trust I, a Massachusetts business
trust (the "Trust"), and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (each such series of shares a
"Fund").
The Fund offers Class A, Class B, Class C and Class Y shares. The Fund
commenced its public offering of Class B shares on September 13, 1993, of Class
C shares on December 30, 1994 and of its Class Y shares on March 8, 1994. Class
A shares are sold with a maximum front end sales charge of 5.75%. Class B
shares do not pay 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 a front end or contingent deferred sales charge and do not convert to
any other 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 each class of shares, except that
each class bears expenses unique to that class (including the Rule 12b-1
service and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class would
receive their pro-rata share of the net assets attributable to their class, if
the Fund were liquidated. In addition, the Trustees declare separate dividends
on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price. Debt securities (other than short-term
obligations with a remaining maturity of less than sixty days) are valued on
the basis of valuations furnished by a pricing service, selected by the Fund's
adviser as authorized by the Board of Trustees, which service determines
valuations for normal, institutional-size trading units of such securities
using market information, transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Short-term obligations with a remaining maturity of less
than sixty days are stated at amortized cost, which approximates value.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Interest income for the Fund is increased by the
accretion of discount. In determining net gain or loss on securities sold, the
cost of securities has been determined on the identified cost basis.
C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax differences are primarily due to differing
treatments for mortgage backed securities, real estate limited partnership
investments and market discount transactions.
E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price. The Fund's adviser is responsible for determining that
the value of the collateral is at all times at least equal to the repurchase
price. Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------------------------- -----------------------------------
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
--------------- ----------- --------------- -----------
<S> <C> <C> <C>
$8,393,925 $61,425,816 $2,228,025 $53,848,896
</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, Loomis, Sayles & Company, L.P. ("Loomis, Sayles"). Certain
officers and directors of the adviser and its affiliated companies are also
officers or trustees of the Fund. Loomis, Sayles is a wholly owned subsidiary
of New England Investment Companies, L.P. ("NEIC"), which is a majority owned
subsidiary of New England Mutual Life Insurance Company. The management
agreement for the Fund in effect during the six months ended June 30, 1995
provided for fees as set forth below:
<TABLE>
<CAPTION>
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
----------- ---------------------- -----------------------------
<S> <C> <C>
$876,751 0.750% the first $200 million
0.700% the next $300 million
0.650% the excess over $500 million
</TABLE>
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
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, shareholder reports and notices, proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities and reports and questionnaires for SEC compliance, and (iii)
registration, filing and other fees in connection with requirements of
regulatory authorities. For the six months ended June 30, 1995 these expenses
amounted to $24,675 and are shown separately in the financial statements as
Accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds, L.P. ("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 $195,805 as compensation for its
services in that capacity.
D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act,
the Trust has adopted a Service Plan relating to the Fund's Class A Shares (the
"Class A Plan") and Service and Distribution Plans relating to the Fund's Class
B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, the Fund pays New England Funds a monthly service fee
at the annual rate of up to 0.25% of the average daily net assets attributable
to the Fund's Class A shares, as reimbursement for expenses (including certain
payments to securities dealers, who may be affiliated with New England Funds)
incurred by the New England Funds in providing personal services to investors
in Class A shares and/or the maintenance of shareholder accounts. For the six
months ended June 30, 1995, the Fund paid New England Funds $209,174 in fees
under the Class A Plan. If the expenses of New England Funds that are otherwise
reimbursable under the Class A Plan incurred in any year exceed the amounts
payable by the Fund under the Class A Plan, the unreimbursed amount (together
with unreimbursed amounts from prior years) may be carried forward for
reimbursement in future years in which the Class A Plan remains in effect. The
amount of unreimbursed expenses carried forward at June 30, 1995 is $2,041,399.
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
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
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 $31,316 and $182 in service fees under
the Class B and Class C plans, respectively.
Also under the Class B and Class C Plan, 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 and Class C shares, as
compensation for services provided and expenses (including certain payments to
securities dealers, who may be affiliated with New England Funds) incurred by
New England Funds in connection with the marketing or sale of Class B and Class
C shares. For the six months ended June 30, 1995, the Fund paid New England
Funds $93,949 and $544 in distrtribution 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 $355,470.
E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation directly
to its officers or trustees who are directors, officers or employees of Loomis-
Sayles, New England Funds, NEIC or their affiliates, other than registered
investment companies. Each other trustee is compensated by the Fund as follows:
<TABLE>
<S> <C>
Annual Retainer $2,400
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Retainer $125/year
</TABLE>
A deferred compensation plan is available to the trustees on a voluntary basis.
Each participating trustee will receive an amount equal to the value that such
deferred compensation would have had, had it been invested in the Fund on the
normal payment date.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
4. CAPITAL SHARES. At June 30, 1995 there was an unlimited number of shares of
beneficial interest authorized, divided into four classes, Class A, Class B,
Class C and Class Y capital stock. Transactions in capital shares were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
------------------------ ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 4,117,368 $ 49,373,937 1,223,738 $ 14,804,364
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 374,414 4,341,420 204,514 2,533,673
Distributions from net
realized gain............ 242,287 2,722,897 0 0
---------- ------------ ---------- ------------
4,734,069 56,438,254 1,428,252 17,338,037
Shares repurchased......... (3,735,100) (44,017,575) (1,434,531) (17,337,148)
---------- ------------ ---------- ------------
Net increase (decrease).... 998,969 12,420,679 (6,279) 889
---------- ------------ ---------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
------------------------ ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 1,610,212 19,092,139 550,057 6,594,968
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 30,005 344,757 24,849 307,164
Distributions from net
realized gain............ 31,737 355,643 0 0
---------- ------------ ---------- ------------
1,671,954 19,792,539 574,906 6,902,132
Shares repurchased......... (136,236) (1,590,989) (173,488) (2,050,450)
---------- ------------ ---------- ------------
Net increase (decrease).... 1,535,718 18,201,550 401,418 4,851,682
---------- ------------ ---------- ------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995
------------------------
CLASS C SHARES AMOUNT
------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 24,340 291,869
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 229 2,852
Distributions from net
realized gain............ 0 0
---------- ------------
24,569 294,721
Shares repurchased......... (785) (10,024)
---------- ------------
Net increase (decrease).... 23,784 284,697
---------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995
------------------------ ------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 3,533,970 41,411,129 727,519 8,748,132
Shares issued in connection
with the reinvestment of:
Dividends from net
investment income........ 82,209 942,750 63,292 784,819
Distributions from net
realized gain............ 61,245 687,599 0 0
---------- ------------ ---------- ------------
3,677,424 43,041,478 790,811 9,532,951
Shares repurchased......... (200,251) (2,332,097) (411,054) (4,925,532)
---------- ------------ ---------- ------------
Net increase (decrease).... 3,477,173 40,709,381 379,757 4,607,419
---------- ------------ ---------- ------------
Increase (decrease) derived
from capital shares
transactions.............. 6,011,860 $ 71,331,610 798,680 $ 9,744,687
========== ============ ========== ============
</TABLE>
18
<PAGE>
As a New England Funds stock fund shareholder, it's important that you're kept
up-to-date on all changes to the stock funds prospectus. Since there's been a
change in management for New England Star Advisers Fund, we've included a copy
of the supplement to the prospectus below.
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND STAR ADVISERS FUND
Supplement dated July 13, 1995
to New England Star Advisers Fund Prospectus
dated May 1, 1995
and New England Stock Funds Prospectus dated
May 1, 1995
The following information reflects changes in the investment management and
policies of the Loomis, Sayles & Company, L.P. ("Loomis Sayles") segment of New
England Star Advisers Fund (the "Fund"):
. Jeffrey C. Petherick, Vice President of Loomis Sayles and New England
Funds Trust I, and Mary Champagne, Vice President of Loomis Sayles, have
day-to-day management responsibility for the segment of the Fund that is
allocated to Loomis Sayles. Mr. Petherick has co-managed the Loomis
Sayles segment of the Fund since the Fund's inception. Mr. Petherick was
an investment manager at Masco Corporation prior to joining Loomis
Sayles in 1990. Ms. Champagne has co-managed the Loomis Sayles segment
of the Fund since July 1995. Prior to joining Loomis Sayles in 1993, Ms.
Champagne served as a portfolio manager at NBD Bank for 10 years.
. Loomis Sayles manages its segment of the portfolio by investing
primarily in stocks of small cap companies with good earnings growth
potential, that Loomis Sayles believes are undervalued by the market.
Typically, such companies range in size from $100 million to $500
million in market capitalization, have better than average growth rates
at below average price/earnings ratios and have strong balance sheets
and cash flow. Loomis Sayles seeks to build a core small cap portfolio
of solid growth companies' stock, with a smaller emphasis on special
situations and turnarounds (companies that have experienced significant
business problems but which Loomis Sayles believes have favorable
prospects for recovery), as well as unrecognized stocks.
19
<PAGE>
-------------------------------------------------------------------------------
REGULAR INVESTING PAYS
-------------------------------------------------------------------------------
Five Good Reasons to Invest Regularly
1. It's an easy way to build assets
2. It's convenient and effortless
3. It requires a low minimum to get started
4. It can help you reach important long-term goals like
retirement or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England Funds' automatic investment program, you
can invest as little as $50 a month in your New England Fund automatically --
without even writing a check. And, as you can see from the chart below, your
monthly investments can really add up over time.
-------------------------------------------------------------------------------
The Power of Monthly Investing
-------------------------------------------------------------------------------
A line graph appears here, illustrating the hypothetical accumulation of monthly
investments at an 8% annual rate of return. The data points of the graph are as
follows:
Monthly investments of $50:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $0
5 $3,661
10 $9,040
15 $16,943
20 $28,555
25 $45,618
</TABLE>
Monthly investments of $100:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $0
5 $7,322
10 $18,079
15 $33,886
20 $57,111
25 $91,236
</TABLE>
Monthly investments of $200:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $0
5 $14,643
10 $36,158
15 $67,772
20 $114,222
25 $182,472
</TABLE>
Monthly investments of $500:
<TABLE>
<CAPTION>
Years Growth of Monthly Investments
------- -----------------------------
<S> <C>
0 $0
5 $36,608
10 $90,396
15 $169,429
20 $285,555
25 $456,181
</TABLE>
For illustrative purposes only. These figures represent hypothetical
accumulation at an 8% annual rate of return, and are not indicative of future
performance of any New England Fund. The value of a New England Fund will
fluctuate with changing market conditions.
This program cannot assure a profit nor protect against a loss in a declining
market. It does, however, ensure that you buy more shares when the price is low
and fewer shares when the price is high.
You can start an Investment Builder program with your current New England Fund
account, or with any of our other funds. To open an Investment Builder account
today, call your financial representative or New England Funds at
1-800-225-5478.
20
<PAGE>
--------------------------------------------------------------------------------
New England Funds
--------------------------------------------------------------------------------
Stock Funds
International Equity Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
Bond Funds
High Income Fund
Strategic Income Fund
Government Securities Fund
Bond Income Fund
Limited Term U.S. Government Fund
Adjustable Rate U.S. Government Fund
Tax Exempt Funds
Tax Exempt Income Fund
Massachusetts Tax Free Income Fund
Intermediate Term Tax Free Fund of California
Intermediate Term Tax Free Fund of New York
Money Market Funds
Cash Management Trust
-- Money Market Series
-- U.S. Government Series
Tax Exempt Money Market Trust
To learn more, and for a free prospectus,
contact your financial representative.
New England Funds, L.P.
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors
when it is preceded or accompanied by the Fund's current prospectus,
which contains information about distribution charges, management and
other items of interest. Investors are advised to read the prospectus
carefully before investing.
<PAGE>
[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
New England Funds
Where The Best Minds Meet
--------------------------------
399 Boylston Street
Boston, Massachusetts
02116
--------------------------------
95-0758 (BL58)
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