<PAGE>
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[NEW ENGLAND FUND LOGO APPEARS HERE]
New England Funds
Where The Best Minds Meet
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Semiannual Report and Performance Update
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[ARTWORK APPEARS HERE]
New England
Growth Fund
-------------
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
Growth Fund, which includes your Portfolio Manager's commentary and complete
financial information.
Market Overview
Investors who stayed the course in 1995 were amply rewarded. Major U.S.
stock market indices soared to record highs and the bond market staged a
spectacular comeback from its 1994 lows. Fueling the rally was clear evidence
that the economy had begun to slow down as a result of the interest rate hikes
engineered by the Federal Reserve Board to keep inflation in check. Indeed, with
declining housing starts and rising unemployment numbers reported in the first
half of 1995, expectations grew that the Fed's next move would be downward, to
prevent the slowing economy from slipping into recession.
The bond market surged at the prospect of lower rates, and the stock market
followed suit, with the Standard & Poor's 500/(R)/ Index gaining 20.14% during
the first half of the year. The large, blue-chip companies led the way, in part
because a weak U.S. dollar gave them a competitive advantage overseas and
contributed to surprisingly healthy earnings reports. Finally, on July 6, just
after this reporting period ended, the Fed lowered a key short-term rate by
0.25%, a relatively modest move, but a significant psychological change in
direction.
Your Financial Adviser -- A Trusted Ally
As a shareholder in New England Funds, you have a valuable ally you can
turn to at all times -- your financial adviser. This experienced
continued
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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 Growth Fund
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INVESTMENT RESULTS THROUGH JUNE 30, 1995
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities index
measures the performance of a theoretical portfolio. Unlike a fund, the index is
unmanaged; there are no expenses that affect the results. In addition, few
investors could purchase all of the securities necessary to match the index.
And, if they could, they would incur transaction costs and other expenses.
--------------------------------------------------------------------------------
A $10,000 Investment in Class A Shares
--------------------------------------------------------------------------------
Compared to Standard & Poor's 500 Index/3/
A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Standard & Poor's 500 Index/3/.
The data points from the graph are as follows:
New England Growth Fund - Net Asset Value/1/
<TABLE>
<CAPTION>
Year Amount
------ --------
<S> <C>
6/80 $ 10,000
6/81 $ 15,718
6/82 $ 15,716
6/83 $ 32,192
6/84 $ 24,843
6/85 $ 32,757
6/86 $ 45,441
6/87 $ 57,051
6/88 $ 52,795
6/89 $ 56,618
6/90 $ 69,889
6/91 $ 78,869
6/92 $ 92,790
6/93 $100,092
6/94 $100,913
6/95 $126,848
</TABLE>
New England Growth Fund - With Maximum Sales Charge/2/
<TABLE>
<CAPTION>
Year Amount
------ --------
<S> <C>
6/80 $ 9,350
6/81 $ 14,696
6/82 $ 14,695
6/83 $ 30,099
6/84 $ 23,228
6/85 $ 30,628
6/86 $ 42,487
6/87 $ 53,343
6/88 $ 49,363
6/89 $ 52,937
6/90 $ 65,346
6/91 $ 73,743
6/92 $ 86,759
6/93 $ 93,586
6/94 $ 94,354
6/95 $118,603
</TABLE>
S&P 500/3/
<TABLE>
<CAPTION>
Year Amount
------ --------
<S> <C>
6/80 $ 10,000
6/81 $ 12,047
6/82 $ 10,671
6/83 $ 17,181
6/84 $ 16,391
6/85 $ 21,504
6/86 $ 29,210
6/87 $ 36,537
6/88 $ 34,016
6/89 $ 40,996
6/90 $ 47,720
6/91 $ 51,246
6/92 $ 58,147
6/93 $ 66,046
6/94 $ 67,215
6/95 $ 84,684
</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. All Index and Fund
performance assumes reinvested distributions.
1
<PAGE>
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New England Growth Fund
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Average Annual Total Returns 6/30/95
--------------------------------------------------------------------------------
Class A (Inception 11/27/68) Year to Date 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C>
Net Asset Value/1/ 27.51% 25.70% 12.66% 14.50%
With Max. Sales Charge/2/ 19.18 17.53 11.15 13.73
Standard & Poor's 500/3/ 20.14 25.99 12.03 14.60
Lipper Growth Average/4/ 17.47 22.26 11.45 13.15
</TABLE>
These returns represent past performance. Investment return and principal
value will fluctuate so that shares, upon redemption, may be worth more or
less than original cost.
Notes to Charts and Performance Update
/1/ Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
/2/ With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 6.50% at the time of
purchase.
/3/ Standard & Poor's 500/(R)/ 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.
/4/ Lipper Average is an average of the total return performance (calculated on
the basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund ranking
service.
2
<PAGE>
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New England Growth Fund
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[PHOTO APPEARS HERE]
Portfolio Management Discussion
Portfolio Manager: G. Kenneth Heebner
Capital Growth Management
New England Growth Fund achieved a total return of 27.51% for Class A
shares at net asset value as of 6/30/95. This compared favorably to the
20.14% return of the Standard & Poor's 500 Index/3/ for the same six-
month period.
In the first quarter of 1995, evidence of a weakening economy appeared
in the auto and housing sectors. The trend continued throughout the
second quarter spreading to retail sales and cutting construction
spending by 1.5% in May to make the month the worst in four years for
construction spending and the second down month in a row. Signs of
weakness also took their toll on consumer confidence as measured by an
index drop from 102 in April to 92.8 in May.
In its attempt to contain inflation, has the Federal Reserve Board
engineered the very first "soft landing" (slowdown without recession),
or has it ushered in a recession? Though the answer remains to be seen,
we favor the soft landing scenario. Lower interest rates will encourage
consumer spending in the months ahead. In fact, signs of an increase in
consumer spending were already evident in late June and employment
gains were well above average. Personal income should continue to rise
and the weaker dollar might well stimulate exports.
3
<PAGE>
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New England Growth Fund
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Interest rates on long-term government bonds have fallen to 6.5% from
8.3% in the fall of 1994. We expect the decline in rates to carry into
1996 as we experience a slow growth economy with no immediate threat of
higher inflation.
While the diminished threat of inflation and weaker business activity
helped bring about lower interest rates for the bond market, the
driving force behind the equity market has been rising corporate
profits. One year ago, the estimate of earnings per share of the S&P
500 Index was $27. The S&P was at 444, a price 16.5 times earnings.
Today, after an increase of 23%, the S&P 500 has reached 544. However,
the current earnings estimate of $34 prices the market once again at
roughly 16 times earnings.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Net Asset Value Annual Total Returns %
6/30/85-6/30/95
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N. E. Growth Fund 31.86 38.72 25.55 -7.46 7.24 23.44 12.85 17.65 7.87 .82 25.70
Lipper Growth Avg./1/ 23.62 33.02 14.48 -6.25 15.95 13.70 5.06 12.02 16.07 .97 22.26
S&P 500/2/ 31.19 35.83 25.09 -6.90 20.52 16.40 7.39 13.47 13.58 1.77 25.99
----------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Lipper Growth Fund average comprises the performance of 537 growth funds
as measured by Lipper Analytical Services, an independent fund ranking
service.
/2/ Most of the common stocks in the unmanaged Standard & Poor's 500 Index are
listed on the New York Stock Exchange.
4
<PAGE>
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New England Growth Fund
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New England Growth Fund is positioned to capitalize on continued growth in
corporate earnings with major emphasis on technology, airlines and New York City
banks. The Fund's three largest holdings are Citicorp (7.2% of Fund assets),
Hewlett-Packard Company (6.5%) and the Intel Corporation (6.3%).
--------------------------------------------------------------------------------
Your Fund's Ten Largest Investments*
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
Company of Assets
--------------------------------------------------------------------------------
<S> <C>
1. Citicorp 7.2%
Commercial banking, New York
--------------------------------------------------------------------------------
2. Hewlett-Packard Co. 6.5%
Manufactures precision electronic products
and systems for data measurement
--------------------------------------------------------------------------------
3. Intel Corp. 6.3%
Manufacturer of memory chips
and semiconductors
--------------------------------------------------------------------------------
4. Chemical Banking Corp. 5.7%
Commercial banking, New York and Texas
--------------------------------------------------------------------------------
5. Delta Air Lines, Inc. 5.6%
Domestic, international air service
--------------------------------------------------------------------------------
6. Aluminum Co. of America 5.6%
Leading U.S. aluminum producer
--------------------------------------------------------------------------------
7. Champion International Corp. 5.4%
Produces building materials and paper products
--------------------------------------------------------------------------------
8. AMR Corp. 5.4%
Holding company for American Airlines
--------------------------------------------------------------------------------
9. Microsoft Corp. 5.1%
Leading U.S. software company
--------------------------------------------------------------------------------
10. American International Group, Inc. 5.0%
Major international insurance holding company
--------------------------------------------------------------------------------
</TABLE>
* Portfolio holdings may vary.
5
<PAGE>
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[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
New England Funds
Where the Best Minds Meet
Portfolio Composition, Financial Statements and Highlights
NEW ENGLAND
GROWTH FUND
June 30, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--100.0% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
--------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE--5.0%
929,000 Boeing Company...................................... $ 58,178,625
--------------
AIRLINES--11.0%
838,000 AMR Corporation(c).................................. 62,535,750
878,000 Delta Air Lines, Inc. .............................. 64,752,500
--------------
127,288,250
--------------
ALUMINUM--5.6%
1,290,000 Aluminum Company of America......................... 64,661,250
--------------
AUTO & RELATED--2.2%
593,000 General Motors Corp. ............................... 25,795,500
--------------
BANKS-MONEY CENTER--15.2%
370,000 Bankamerica Corp. .................................. 19,471,250
1,406,000 Chemical Banking Corporation........................ 66,433,500
1,433,300 Citicorp............................................ 82,952,238
100,000 J. P. Morgan & Co., Inc. ........................... 7,012,500
--------------
175,869,488
--------------
BANKS-REGIONAL--4.6%
1,327,000 Bank of New York, Inc. ............................. 53,577,625
--------------
BROKERS-INVESTMENT SERVICES--2.1%
465,000 Merrill Lynch & Co., Inc. .......................... 24,412,500
--------------
CHEMICAL--1.6%
340,000 Air Products & Chemicals, Inc. ..................... 18,955,000
--------------
COMPUTER SOFTWARE & SERVICES--5.1%
656,000 Microsoft Corporation(c)............................ 59,286,000
--------------
ELECTRONIC & COMMUNICATION EQUIPMENT--2.3%
440,000 Nokia Corp. ........................................ 26,235,000
--------------
ELECTRONIC COMPONENTS--12.1%
1,162,800 Intel Corporation................................... 73,619,775
848,000 Micron Technology, Inc. ............................ 46,534,000
151,000 Texas Instruments, Inc. ............................ 20,215,125
--------------
140,368,900
--------------
FOOD-RETAILERS/WHOLESALERS--4.8%
747,000 Philip Morris Companies, Inc. ...................... 55,558,125
--------------
INSURANCE--5.0%
511,200 American International Group, Inc. ................. 58,276,800
--------------
LEISURE--4.5%
854,000 Eastman Kodak Company............................... 51,773,750
--------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PORTFOLIO COMPOSITION--Continued
Investments as of June 30, 1995
(unaudited)
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE (A)
------------------------------------------------------------------------------
<C> <S> <C>
MACHINERY--5.0%
678,000 Deere & Company................................. $ 58,053,750
--------------
MISCELLANEOUS--2.0%
298,000 United Technologies Corporation................. 23,281,250
--------------
MICROCOMPUTERS--6.5%
1,015,000 Hewlett Packard Company......................... 75,617,500
--------------
PAPER-PRODUCTS/CONSUMER--5.4%
1,210,000 Champion International Corporation.............. 63,071,250
--------------
Total Common Stocks (Identified Cost
$935,842,473).................................. 1,160,260,563
--------------
SHORT-TERM INVESTMENTS--0.6%
<CAPTION>
FACE
AMOUNT
------------------------------------------------------------------------------
<C> <S> <C>
$7,075,000 Chevron Oil Finance 5.900%, 7/03/95............. 7,075,000
--------------
Total Short-Term Investments (Identified Cost
$7,075,000).................................... 7,075,000
--------------
Total Investments--100.6%
(Identified Cost $942,917,473)(b).............. 1,167,335,563
Cash and Receivables............................ 53,980,395
Liabilities..................................... (61,593,022)
--------------
Total Net Assets--100%.......................... $1,159,722,936
==============
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1995 the net unrealized appreciation on in-
vestments based on cost of $942,917,473 for federal in-
come tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax
cost.................................................... $ 226,414,072
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value................................................... (1,995,982)
--------------
Net unrealized appreciation ............................ $ 224,418,090
==============
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
June 30 ,1995
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.............................. $1,167,335,563
Cash.............................................. 1,093
Receivable for:
Fund shares sold................................ 438,875
Securities sold................................. 51,780,052
Dividends and Interest.......................... 1,760,375
--------------
1,221,315,958
LIABILITIES
Payable for:
Securities purchased............................ $58,766,010
Fund shares redeemed............................ 1,937,794
Dividends declared.............................. 13,227
Accrued expenses:
Management fees................................. 635,791
Deferred trustees' fees......................... 55,295
Accounting and administrative................... 3,841
Other expenses.................................. 181,064
-----------
61,593,022
--------------
$1,159,722,936
==============
NET ASSETS
Net Assets consist of:
Capital paid in................................. $ 888,447,102
Undistributed net investment income............. 2,337,768
Accumulated net realized gains.................. 44,519,976
Unrealized appreciation on investments.......... 224,418,090
--------------
NET ASSETS......................................... $1,159,722,936
==============
Shares of beneficial interest outstanding, no par
value............................................. 102,660,596
==============
Computation of offering price:
Net asset value and redemption price per share (Net
assets/Shares of beneficial interest outstanding). $11.30
======
Offering price per share (Net asset value per share
x 100/93.5)*...................................... $12.09*
======
Identified cost of investments..................... $ 942,917,473
==============
</TABLE>
* Based upon single purchases of less than $25,000.
Reduced sales charges apply for purchases in excess of these amounts.
See accompanying notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 8,561,214
Interest.............................................. 69,643
------------
8,630,857
Expenses
Management fees..................................... $3,512,713
Service fees........................................ 1,284,291
Trustees' fees and expenses......................... 13,750
Accounting and administrative....................... 24,531
Custodian........................................... 77,123
Transfer agent...................................... 1,238,508
Audit and tax services.............................. 20,000
Legal............................................... 12,593
Printing............................................ 118,094
Registration........................................ 12,534
Miscellaneous....................................... 6,100
----------
Total expenses........................................ 6,320,237
------------
Net investment income................................. 2,310,620
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 44,508,222
Unrealized appreciation on Investments--net........... 210,667,132
------------
Net gain on investment transactions................... 255,175,354
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $257,485,974
============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1994 1995
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 11,636,622 $ 2,310,620
Net realized gain on investments.............. 69,441,182 44,508,222
Unrealized appreciation (depreciation) on
investments.................................. (160,094,787) 210,667,132
-------------- --------------
Increase (decrease) in net assets from
operations................................... (79,016,983) 257,485,974
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... (11,691,898) (730,120)
Net realized gain on investments.............. (75,068,482) (308,954)
-------------- --------------
(86,760,380) (1,039,074)
-------------- --------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................. 103,348,947 44,138,478
Net asset value of shares issued in connection
with the reinvestment of:
Dividends from net investment income......... 11,394,237 701,915
Distributions from net realized gain......... 73,363,874 301,529
-------------- --------------
188,107,058 45,141,922
Cost of shares redeemed....................... (234,414,542) (130,296,123)
-------------- --------------
Decrease in net assets derived from capital
share transactions........................... (46,307,484) (85,154,201)
-------------- --------------
Total increase (decrease) in net assets....... (212,084,847) 171,292,699
NET ASSETS
Beginning of the period....................... 1,200,515,084 988,430,237
-------------- --------------
End of the period............................. $ 988,430,237 $1,159,722,936
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period....................... $ 842,903 $ 757,268
============== ==============
End of the period............................. $ 757,268 $ 2,337,768
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 10,029,304 4,712,278
Issued in connection with the reinvestment of:
Dividends from net investment income......... 1,268,865 60,877
Distributions from net realized gain......... 8,167,520 26,152
-------------- --------------
19,465,689 4,799,307
Redeemed...................................... 23,054,096 (13,511,449)
-------------- --------------
Net change.................................... (3,588,407) (8,712,142)
============== ==============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(UNAUDITED) SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------- JUNE 30,
1990 1991 1992 1993 1994 1995
----- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period..................... $8.49 $ 8.85 $11.19 $10.08 $10.44 $ 8.87
----- ------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income...... 0.07 0.10 0.09 0.02 0.11 0.01
Net Realized and Unrealized
Gain (Loss) on Investments. 0.38 4.92 (0.83) 1.12 (0.84) 2.43
----- ------ ------ ------ ------ ------
Total From Investment
Operations................. 0.45 5.02 (0.74) 1.14 (0.73) 2.44
----- ------ ------ ------ ------ ------
Less Distributions
Dividends From Net Investment
Income..................... (0.09) (0.10) (0.09) (0.01) (0.11) (0.01)
Distributions From Net
Realized Capital Gains..... 0.00 (2.57) (0.28) (0.77) (0.73) 0.00
Distributions From Paid-in
Capital.................... 0.00 (0.01) 0.00 0.00 0.00 0.00
----- ------ ------ ------ ------ ------
Total Distributions.......... (0.09) (2.68) (0.37) (0.78) (0.84) (0.01)
----- ------ ------ ------ ------ ------
Net Asset Value, End of
Period..................... $8.85 $11.19 $10.08 $10.44 $ 8.87 $11.30
===== ====== ====== ====== ====== ======
Total Return (%)............. 5.1 56.7 (6.6) 11.3 (7.1) 27.5**
Ratio of Operating Expenses
to Average Net Assets (%).. 1.23 1.14 1.15 1.18 1.19 1.23*
Ratio of Net Investment
Income to Average Net
Assets (%)................. 0.77 0.89 0.89 0.16 1.05 0.45*
Portfolio Turnover Rate (%).. 185 186 218 145 141 189*
Net Assets, End of Period
(000,000).................. $ 614 $ 997 $1,174 $1,201 $ 988 $1,160
</TABLE>
* Computed on an annualized basis.
** Not computed on an annualized basis.
See accompanying notes to financial statements.
7
<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 following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price. Short-term obligations with a remaining
maturity of less than sixty days are stated at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Interest income for the Fund is increased by the
accretion of discount. In determining net gain or loss on securities sold, the
cost of securities has been determined on the identified cost basis.
C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax basis differences will result in
reclassification to the capital accounts.
E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price. The Fund's adviser is responsible for determining that
the value of the collateral is at all times at least equal to the repurchase
price. Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the six months ended June 30, 1995 were $974,067,946 and
$1,053,069,125 respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. During the six
months ended June 30, 1995, the Fund incurred management fees payable to its
investment adviser, Capital Growth Management Limited Partnership ("Capital
Growth Management"). Certain officers and directors of the adviser and its
affiliated companies are also officers or trustees of the Fund. Capital Growth
Management is a subsidiary of New England Investment Companies, L.P., ("NEIC")
which is a majority owned subsidiary of New England Mutual Life Insurance
Company. The management agreement in effect during the six months ended June
30, 1995 provided for fees as set forth below:
<TABLE>
<CAPTION>
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
----------- ---------------------- -----------------------------
<S> <C> <C>
$3,512,713 0.750% the first $200 million
0.700% the next $300 million
0.650% the excess over $500 million
</TABLE>
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England
Funds"), the Fund's distributor, is a wholly owned subsidiary of NEIC and
performs certain accounting and administrative services for the Fund. The Fund
reimburses New England Funds for all or part of New England Funds' expenses of
providing these services which include the following: (i) expenses for
personnel performing bookkeeping, accounting, internal auditing and financial
reporting functions and related 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 $24,531 and are shown separately in the financial statements as
Accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent for the Fund. For the six months ended June 30, 1995, the Fund
paid New England Funds $951,516 as compensation for its services in that
capacity.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--Continued
June 30, 1995 (unaudited)
D. SERVICE FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has
adopted a Service Plan relating to the Fund (the "Plan"). Under the 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 of the Fund, 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 the Fund and/or the maintenance of
shareholder accounts. For the six months ended June 30, 1995, the Fund paid New
England Funds $1,284,291 in fees under the Plan. If the expenses of New England
Funds that are otherwise reimbursable under the Plan incurred in any year
exceed the amounts payable by the Fund under the Plan, the unreimbursed amount
(together with unreimbursed amounts from prior years) may be carried forward
for reimbursement in future years in which the Plan remains in effect. The
amount of unreimbursed expenses carried forward at June 30, 1995 is $2,030,882.
Commissions 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 $996,871.
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 Capital
Growth Management, 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.
10
<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.
11
<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.
12
<PAGE>
================================================================================
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>
[NEW ENGLAND FUNDS LOGO APPEARS HERE]
New England Funds
Where The Best Minds Meet
-------------------------------
399 Boylston Street
Boston, Massachusetts
02116
-------------------------------
95-0753 (GF58)
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