[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
ANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
INTERNATIONAL
EQUITY FUND
[ARTWORK APPEARS HERE]
DECEMBER 31, 1995
<PAGE>
January 31, 1996
DEAR SHAREHOLDER,
ItOs a real pleasure to present to you the 1995 Annual Report for New
England International Equity Fund, containing your portfolio managersO
commentaries and complete financial information.
INTERNATIONAL MARKETS LAGGED THE U.S. IN 1995
In 1995 lower interest rates and solid corporate earnings growth
propelled the U.S. stock market into record territory. At the same
time, most overseas markets lagged the U.S., as a result of continued
economic weakness in Europe and the Pacific Rim. The accompanying
report from your managers at Draycott provides detailed background on
the economic trends which impacted your Fund in 1995.
NEW ENGLAND FUNDS - WHERE THE BEST MINDS MEET
Over this past year we launched our new corporate identity - Where the
Best Minds Meet -which we believe reflects the essence of New England
Funds. Our unique multiple adviser structure brings together some of
the best investment minds in the business. As recent examples,
consider New England Star Advisers Fund, managed by four prominent
equity advisers, and New England Star Worldwide Fund, a global fund
introduced this January which builds off the Star Advisers concept.
In addition, last May we launched New England Strategic Income Fund,
under the management of Dan Fuss of Loomis Sayles. One of the
industryOs most respected managers, Dan Fuss was named 1995Os OBond
Fund Manager of the YearO by Morningstar for his past record of
accomplishment in fund management at Loomis Sayles.*
* Morningstar is a third party, independent mutual fund rating
service.
<PAGE>
1995 DALBAR AWARD FOR SERVICE EXCELLENCE
Where the Best Minds Meet also refers to your financial adviser and
all the people at New England Funds who provide you with quality
service. We are proud to report that in recognition of our ongoing
quality initiatives, New England Funds has been named a 1995 Quality
Tested Service Seal Winner by DALBAR, an independent mutual fund
service rating company. The coveted DALBAR award was given to only
seven companies for Oproviding the highest tier of service excellence
in the mutual fund industry.O
OUTLOOK FOR 1996
After two years of underperformance, many international markets appear
attractive relative to the U.S. at this point. As always, we
recommend that you review your asset allocation program with your
financial adviser, so that your investments are properly diversified.
We believe you will find your portfolio managersO commentary
informative. If you have any questions or comments, please contact
your financial adviser or New England Funds directly at 800-225-5478.
Also, please contact New England Funds for a prospectus on any of the
funds
mentioned above. The prospectus details investment objectives and
risks, as well as management fees and expenses. You should read it
carefully before investing or sending money.
Sincerely,
/S/ Peter S. Voss /S/Henry L.P. Schmelzer
Peter S. Voss Henry L.P. Schmelzer
Chairman President
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
INVESTMENT RESULTS THROUGH DECEMBER 31, 1995
Putting Performance into Perspective
The graph comparing your FundOs 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 FundOs 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
[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 Morgan
Stanley Capital International Europe Australia Far East Index (MSCI
EAFE)(4). The data points from the graph are as follows:
Compared to Morgan Stanley Capital International Europe Australia Far
East Index (MSCI EAFE)(4)
New England International Equity Fund - Net Asset Value(1)
Year Amount
- ----- ------
12/95 $14,067
12/94 $13,298
12/93 $12,306
12/92 $9,511
5/21/92 $10,000
New England International Equity Fund - With Maximum Sales Charge(2)
Year Amount
- ----- ------
12/95 $13,258
12/94 $12,534
12/93 $11,599
12/92 $8,964
5/21/92 $9,425
MSCI EAFE(4)
Year Amount
- ----- ------
12/95 $14,930
12/94 $13,384
12/93 $12,386
12/92 $9,317
5/21/92 $10,000
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.
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/95
<TABLE><CAPTION>
<S> <C> <C>
CLASS A (Inception 5/21/92) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 5.78% 9.88%
With Max. Sales Charge(2) -0.33 8.10
Lipper International Avg.(5) 9.41 9.71
CLASS B (Inception 9/13/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 5.02% 5.49%
With CDSC(3) 1.02 4.26
MSCI EAFE(4) 11.55 9.10
Lipper International Avg.(5) 9.41 8.81
CLASS C (Inception 12/30/94) 1 Year
Net Asset Value(1) 5.22%
MSCI EAFE(4) 11.55
Lipper International Avg.(5) 9.41
CLASS Y (Inception 9/9/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 6.56% 7.00%
MSCI EAFE(4) 11.55 9.10
Lipper International Avg.(5) 9.41 8.81
<FN>
These returns represent past performance. Investment return and
principal value will fluctuate so that shares, upon redemption,
may be worth more or less than original cost. Class Y shares are
available only to certain institutional investors. Share price
and return may vary.
NOTES TO CHARTS AND PERFORMANCE UPDATE
1 Net Asset Value (NAV) performance assumes reinvestment of all
distributions and does not reflect the payment of a sales charge
at the time of purchase.
2 With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at
the time of purchase of Class A shares.
3 With Contingent Deferred Sales Charge (CDSC) performance assumes
a maximum 4% sales charge is applied to a redemption of Class B
shares. The sales charge will decrease over time, declining to
zero five years after the purchase of shares. Class C shares are
available only to eligible institutional investors and are not
subject to a sales charge.
4 Morgan Stanley Capital International (MSCI) Europe Australia Far
East Index (EAFE) is an arithmetical average (weighted by market
value) of the performance (in U.S. dollars) of 1,036 companies
representing stock markets in Europe, Australia, New Zealand and
the Far East. The Index performance has not been adjusted for
ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments.
5 Lipper Average is an average of the total return performance
(calculated on the basis of net asset value) of funds with
similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
</TABLE>
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
[PHOTO]
[PHOTO]
NEW ENGLAND INTERNATIONAL
EQUITY FUND
Portfolio Managers: Nicholas Carn, and Tim Griffen
(pictured); Gregory Eckersley, and Nigel Hankin Draycott Partners,
Ltd.
Declining interest rates and low inflation characterized the
investment climate worldwide in 1995, as European economies began to
slow. Despite their slower growth, European markets fared relatively
well, while the financial markets of Southeast Asia - which continue
to be dominated by increasing inflation and upward pressures on
interest rates - provided a sharp contrast. In Japan, the economy
remained weak, although there were some signs of renewed growth late
in the year.
HOW YOUR FUND PERFORMED
Against this backdrop, your Fund delivered a net asset value return of
5.78% for Class A shares for the twelve months ended December 31,
1995.
HOW WE MANAGED YOUR FUND
Our investment goal over the past year was two-fold: a gradual
increase in exposure to the Japanese market while maintaining a
significant weighting in the United Kingdom.
In the United Kingdom, economic forces continue to set the stage for
strong corporate earnings growth, thereby providing attractive
investment opportunities. Of the
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
major markets, the British stock market was one of 1995Os top-
performers, delivering a return of close to 19% in U.S. dollar terms.
British holdings accounted for more than 20% of assets for much of
1995 - a position which helped boost performance.
Our investment policy in Britain over the past twelve months was to
shift attention away from export-oriented sectors, which tended to
underperform, toward those sectors more related to domestic
consumption. We also avoided those sectors related to housing and
building construction, which tended to lag. One of our favorite
British stocks was Glaxo Wellcome, a drug company that benefited from
a combination of growing global drug sales and a significant reduction
in operating costs.
In Japan, the economy has now been struggling for more than five
years. Real estate prices have fallen, banks have suffered and
consumer spending has slowed. Yet, foreign demand for Japanese goods
is still strong, resulting in a significant trade surplus and, until
this past summer, a rising yen. The surge in the U.S. dollar versus
the yen later in 1995 was just one sign that Japanese fiscal and
monetary policy is beginning to produce results. In fact, we
witnessed what we believed to be an important low for the Japanese
stock market this past year, suggesting that a full economic recovery
for that country may lie ahead.
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
Reflecting our bullish view on Japanese equities, we gradually
increased our position in Japan over the past twelve months. Japanese
holdings now account for over 40% of the portfolio - up from around
25% at mid-year. Sectors we found attractive in Japan included
financial services and banking - industries we believe will be the
major beneficiaries of the end of deflation in that country.
Over the past twelve months, we continued to emphasize Oblue chipO
companies in major non-U.S. markets. An example was Asahi Bank, one
of the so-called Japanese city banks. With the company on sound
footing and business growing, AsahiOs operating profits are reaching
record levels. Another one of our favorites is Takashimaya, a
specialty retailer poised to benefit from a rebound in domestic
consumption and a further relaxation in JapanOs very strict rules
regarding new store openings.
In addition to our weightings in Japan and the United Kingdom, we also
sought out opportunities in Spain, Switzerland, Norway, the
Netherlands and Germany. We maintained positions in Singapore,
Malaysia and Thailand early in the year, but later gradually cut back
positions in Southeast Asia given our concerns over interest rates and
domestic inflationary pressures.
Finally, we avoided Mexico and the extremely speculative markets of
Latin America, a move which helped shelter the Fund from dramatic
underperformance in that corner of the world.
OUTLOOK FOR OUR SHAREHOLDERS
International stock markets continue to offer tremendous opportunities
for investors who recognize the wisdom of international
diversification and are aware of its risks. In fact, given 1995Os
sharp gains in domestic markets, foreign markets may represent greater
relative value in the near term.
Our emphasis on fundamental research and discovery of undervalued
stocks and market situations remain keys to successful investment in
1996. Looking ahead, we expect further drops in interest rates
throughout Europe and a continued slowing of European economies, some
to near-recessionary levels. On the other hand, we are quite
optimistic about Japan. WeOre looking for continued improvement in
Japanese financial conditions in the near term, with the potential for
a full economic recovery within the next six months.
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
TOP 5 HOLDINGS AS OF DECEMBER 31, 1995
PERCENTAGE
COMPANY OF ASSETS
1. FUJI BANK 2.0%
Most profitable bank in Japan. Third largest in terms of market
cap. The Fuji Bank has made notable progress in establishing a
state of the art asset liability management system. It has also
written off most of its bad debts from the bubble years making it
able to aggressively move into new, more profitable niches.
2. MITSUBISHI BANK 1.9%
Largest bank in Japan by market capitalization. The recent merger
with Bank of Tokyo and acquisition of Nippon Credit will result
in substantial tax savings for the next several years. This bank
has twice the assets of the next largest bank in the world.
3. SONY CORP. 1.9%
Major consumer electronics maker. Sony has a significant share
of the CD - ROM market. Its Playstation video game system is a
major hit. 1996 products will include DVD players, flat panel
televisions, digital satellite television and digital VCRs.
4. SUMITOMO BANK 1.9%
Largest bank in the Osaka area. Aggressive in new product
innovation. The Sumitomo bank will benefit from new deposit
products which target offshore investments, one of the bankOs key
strengths.
5. ASAHI BANK 1.9%
Third largest consumer branch network among Japanese city banks.
The Asahi bank has been very aggressive in focusing on the medium
and small company market. Its consumer financing group is
growing faster than any other Japanese bank.
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
YOUR FUNDOS PORTFOLIO ALLOCATION AS OF 12/31/95
COUNTRY PERCENTAGE OF ASSETS
Japan 43.6%
Great Britain 22.7%
Germany 5.2%
Switzerland 4.8%
Spain 4.7%
Netherlands 4.2%
Italy 4.2%
Australia 3.7%
Finland 1.7%
Norway 1.6%
South Korea 0.7%
Short-term cash & equivalents 2.1%
Portfolio composition is subject to change.
<PAGE>
NEW ENGLAND INTERNATIONAL EQUITY FUND
GLOSSARY FOR MUTUAL FUND INVESTORS
TOTAL RETURNS - The change in value of a mutual fund investment over a
specific time period, assuming all earnings are reinvested in
additional shares of the fund. Expressed as a percentage.
INCOME DISTRIBUTIONS - Payments to shareholders resulting from the net
interest or dividend income earned by a fundOs portfolio.
CAPITAL GAINS DISTRIBUTIONS - Payments to shareholders of profits
earned from selling securities in a fundOs portfolio. Capital gains
distributions are usually paid once a year.
PRICE/EARNINGS RATIO - Current market price of a stock divided by its
earnings per share. Also known as the Omultiple,O the price/earnings
ratio gives investors an idea of how much they are paying for a
companyOs earning power and is a useful tool for evaluating the costs
of different issues.
GROWTH INVESTING - An investment style that emphasizes companies with
strong earnings growth. Growth investing is generally considered more
aggressive than OvalueO investing.
VALUE INVESTING - A relatively conservative investment approach that
focuses on companies that may be temporarily out of favor or whose
earnings or assets arenOt fully reflected in their stock prices. Value
stocks will tend to have a lower price/earnings ratio than that of
growth stocks.
STANDARD & POOROS 500 - Market value-weighted index showing the change
in aggregate market value of 500 stocks relative to the base period of
1941D1943. It is composed mostly of companies listed on the New York
Stock Exchange.
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
INTERNATIONAL
EQUITY FUND
DECEMBER 31, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1995
<TABLE>
<S> <C> <C>
COMMON STOCKS-97.2% OF TOTAL NET ASSETS SHARES(A) VALUE(B)
AUSTRALIA3.7%
- ----------------------------------------------------------------------
Advanced Bank of Australia 92,600 $741,956
Amcor Ltd. 52,450 370,355
Broken Hill Proprietary Co. 73,850 1,042,924
Coles Myer Ltd. 40,000 124,573
CSR Limited 266,500 867,601
John Fairfax 262,000 545,265
Lend Lease Corp. 47,600 689,906
Mayne Nickless. Ltd. 125,950 561,692
National Australia Bank 89,300 803,129
News Corporation 158,500 845,867
North, Ltd. 280,500 781,831
Normandy Mining, Ltd. 538,500 780,493
QNI, Ltd. 258,296 545,236
WMC, Ltd. 163,250 1,048,373
Woolworths, Ltd. 115,900 279,111
----------
10,028,312
----------
FINLAND-1.7%
- ----------------------------------------------------------------------
Cultor OY 40,000 1,655,401
Kymmene Corp. 28,000 740,332
Nokia (AB) OY 56,800 2,193,958
----------
4,589,691
----------
GERMANY-5.2%
- ----------------------------------------------------------------------
Adidas AG (e) 25,150 1,330,697
Hochtief AG 7,550 2,047,368
Hugo Boss AG 1,265 1,050,272
Mannesmann AG 10,951 3,486,456
Siemens AG 3,960 2,167,027
SGL Carbon (e) 23,000 1,779,715
Veba AG 57,100 2,424,113
----------
14,285,648
----------
GREAT BRITAIN-22.7%
- ----------------------------------------------------------------------
ASDA Group 1,532,900 2,642,521
BAT Industries 338,439 2,980,197
Barclays 95,250 1,091,699
Bass 214,650 2,395,186
British Aerospace 213,100 2,633,757
British Airways 217,400 1,573,356
British Telecommunication 387,150 2,122,441
British Sky Broadcast 238,500 1,505,672
Burton Group 611,900 1,278,157
Caradon PLC 734,630 2,230,473
<PAGE>
PORTFOLIO COMPOSITIONCONTINUED
Investments as of December 31, 1995
COMMON STOCKS-(CONTINUED) SHARES(A) VALUE(B)
Great Britain-(continued)
- ----------------------------------------------------------------------
Compass Group 375,284 $2,855,865
Commercial Union 180,900 1,764,330
Courtaulds 299,300 1,889,508
General Electric 374,450 2,058,632
Glaxo Wellcome 261,300 3,713,146
Ladbroke Group 1,167,500 2,656,294
Lloyds TSB Group 473,064 2,435,483
Pearson 204,700 1,982,147
Pillar Property Investment 535,450 1,180,834
Prudential Corp. 185,000 1,190,907
Reed International 224,410 3,420,693
Shell Transportation & Trading 134,045 1,772,625
Smithkline Beecham 241,550 2,663,465
Telewest Communications 560,000 1,348,035
Thorn EMI 97,760 2,302,423
TI Group 314,450 2,239,095
Tomkins 430,250 1,880,966
United News & Media PLC 277,150 2,386,432
Williams Holdings 366,200 1,862,564
-----------
62,056,903
-----------
ITALY-4.2%
- ----------------------------------------------------------------------
BCA Fideuram Spa 786,950 909,282
Cartiere Burgo Spa 195,000 973,081
Credito Italiano 1,305,000 1,520,189
Edison 121,100 521,574
ENI Spa 390,000 1,362,928
Olivetti & C Spa 2,630,000 2,108,140
RAS 261,000 1,601,541
Saipem 349,750 806,035
Telecom Italia Spa 1,059,300 1,113,912
Unicem (Union Cem) 226,800 575,524
----------
11,492,206
----------
JAPAN-43.6%
- ----------------------------------------------------------------------
Asahi Bank 404,000 5,086,683
Asahi Glass Co. 221,000 2,461,501
Bank of Tokyo 144,000 2,524,358
Canon, Inc. 163,000 2,952,155
Dai Nippon Printing 200,000 3,389,831
Daiwa Securities 95,000 1,453,753
East Japan Railway 614 2,985,259
Fuji Bank 240,000 5,299,758
Honda Motor Co. 163,000 3,362,615
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-(CONTINUED) SHARES(A) VALUE(B)
JAPAN-(CONTINUED)
- ----------------------------------------------------------------------
Isetan Co. 163,000 $2,683,777
Ishikawajima Har 625,000 2,633,172
Kirin Brewery Co., Ltd. 163,000 1,926,005
Matsushita Electric Ind. 240,000 3,905,085
Mitsubishi Bank 222,000 5,224,794
Mitsubishi Corp. 192,000 2,361,646
Mitsubishi Chemical 374,000 1,818,383
Mitsubishi Heavy Industries Ltd. 290,000 2,311,574
Mitsui & Co. 221,000 1,939,235
Mitsukoshi 394,000 3,701,501
Mitsui Fudosan Co. 192,000 2,361,646
Nippondenso Co. 144,000 2,691,719
Nippon Steel Corp. 864,000 2,962,286
Nippon Tel & Tel CP 166 1,342,470
Nomura Securities 174,000 3,791,768
Odakyu Electric Railway 394,000 2,690,266
Okumura Corp. 221,000 2,012,010
Onward Kashiyama 168,000 2,733,559
Ricoh Co. 213,000 2,331,138
Sakura Bank 192,000 2,436,029
Sanwa Bank 192,000 3,905,085
Sony Corp. 86,000 5,155,835
Sumitomo Bank 240,000 5,090,557
Sumitomo Marine & Fire Insurance Co. 8,000 65,705
Sumitomo Realty & Development 336,000 2,375,593
Sumitomo Rubber 269,000 2,245,792
Takashimaya 154,000 2,461,017
Tokai Bank 317,000 4,421,114
Toto 217,000 3,026,441
Yakult Honsha Co. 240,000 3,277,482
Yamanouchi Pharmaceutical 183,000 3,934,722
-----------
119,333,319
-----------
Akzo NV 26,100 3,018,732
Fortis Amev NV 53,900 3,610,800
Nutricia Ver Bedrj 15,750 1,273,976
N.V. Koninklijke Sphinx Gustav 42,600 822,958
Philips Electronics N.V. 77,400 2,797,532
-----------
11,523,998
-----------
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-(CONTINUED) SHARES(A) VALUE(B)
NORWAY-1.6%
- ----------------------------------------------------------------------
Kvaerner AS 26,450 $ 935,381
Norske Skogsindust, B Shares 83,300 2,301,432
Schibsted AS 95,000 1,289,844
------------
4,526,657
------------
SOUTH KOREA-0.7%
- ----------------------------------------------------------------------
Daewoo Electronics 10,000 110,860
Daewoo Electronics New Shares 500 5,543
Daewoo Heavy Inds. 10,000 108,927
LG Chemicals 7,000 133,548
LG Electronics, Inc. 14,000 487,270
Korea Electric Power 18,700 742,456
Korea First Bank 27,185 241,800
Ssangyong Cement 9,000 251,756
------------
2,082,160
------------
SPAIN-4.7%
- ----------------------------------------------------------------------
Acerinox SA 28,083 2,840,712
BCO Santander SA 54,700 2,746,274
Gas Natural SDG/ SA 21,300 3,318,796
Sevillana de Electric 523,100 4,062,326
------------
12,968,108
------------
SWITZERLAND-4.8%
- ----------------------------------------------------------------------
Alusuisse Lonza HD 3,813 3,021,311
Roche Holdings AG 579 4,580,299
Sandoz AG 1,500 1,373,212
Zurich Versicherun 13,597 4,066,723
------------
13,041,545
------------
United States-0.1%
KIA Motors Corp. 6,000 138,000
------------
Total Stocks (Identified Cost $245,004,667) 266,066,547
------------
FACE
SHORT-TERM INVESTMENT-2.1% AMOUNT
- ----------------------------------------------------------------------
- -
Repurchase Agreement with Goldman Sachs
& Co. dated 12/29/95 at 5.80% to be
repurchased at $5,853,770 on 1/02/96
collateralized by $4,520,000
U.S.Treasury Bond 11.75% due 2/15/01,
with a value of $5,975,440. $5,850,000 5,850,000
------------
Total Short-Term Investment
(Identified Cost $5,850,000) 5,850,000
------------
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-(CONTINUED) SHARES(A) VALUE(B)
Total Investments-99.3%
(Identified Cost $250,854,667) (b) $271,916,547
Cash, receivables and other assets (d) 3,586,321
Liabilities (1,576,076)
------------
Total Net Assets-100% $273,926,792
------------
------------
<FN>
(a) Ordinary shares unless noted otherwise.
(b) See Notes 1A and 1B.
(c) Federal Tax Information: At December 31,
1995 the net unrealized appreciation on
investments based on cost for federal
income tax purposes of $252,921,570 was
as follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost $24,238,758
Aggregate gross unrealized depreciation
for all investments in which there is an
excess of tax cost over value (5,243,781)
------------
Net unrealized appreciation $18,994,977
------------
------------
At December 31, 1995, the Fund had a capital loss carryover of
approximately $4,837,000 which may be available to offset
realized capital gains, if any, to the extent provided by
regulations. This amount will expire December 31, 2003. To the
extent that these losses are used to offset any future net
realized gains, it is unlikely that the gains would be
distributed to shareholders since any such distribution may be
taxable to shareholders as ordinary income.
(d) IncIuding deposits in foreign denominated currencies with a value
of $1,912,069 and a cost of $1,907,510.
(e) Non income producing security.
TEN LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1995 (UNAUDITED)
Banking 15.7% Finance 7.0%
Consumer Basics 10.0 Consumer Durables 6.4
Basic Industries 9.4 Utilities 5.7
Consumer Non-Durables 7.9 Miscellaneous Industries 4.9
Capital Goods 7.1 Communications 3.4
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE><CAPTION>
<S> <C> <C>
ASSETS
Investments at value $271,916,547
Cash 29,062
Foreign cash at value 1,912,069
Receivable for:
Fund shares sold 834,514
Dividends and interest 319,640
Foreign taxes 393,128
Prepaid registration expense 12,000
Unamortized organization expenses 85,908
-----------
275,502,868
LIABILITIES
Payable for:
Securities purchased $371,103
Fund shares redeemed 423,169
Withholding taxes 45,261
Dividends declared 69,673
Accrued expenses:
Management fees 444,369
Administrative services 47,967
Deferred trusteesO fees 2,848
Accounting and administrative 3,687
Other expenses 167,999
---------
1,576,076
-----------
NET ASSETS $273,926,792
===========
Net Assets consist of:
Capital paid in $259,734,077
Undistributed net investment income 20,518
Accumulated net realized losses (6,903,798)
Unrealized appreciation on investments and
foreign currency transactions 21,075,995
------------
NET ASSETS $273,926,792
============
Computation of net asset value and
offering price:
Net asset value and redemption price
of Class A shares ($136,847,721
divided by 8,483,936 shares of
beneficial interest) $16.13
======
Offering price per share (100/94.25 of $16.13) $17.11*
=======
Net asset value and offering price of
Class B shares ($52,894,577
divided by 3,320,238 of beneficial
interest) $15.93**
========
Net asset value and offering price
of Class C shares
($1,065,933 divided by
66,760 shares of beneficial interest) $15.96
========
Net asset value and offering price
of Class Y shares ($83,118,561
divided by 5,113,937 shares of beneficial
interest) $16.25
========
Identified cost of investments $250,854,667
============
<FN>
* Based upon single purchases of less than $50,000. Reduced sales
charges apply for purchases in excess ofthese amounts.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charges.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE><CAPTION>
<S> <C> <C>
INVESTMENT INCOME
DIVIDENDS $(5,471,877(a)
INTEREST 1,315,452
--------------
6,787,329
EXPENSES:
Management fees $2,025,005
Service fees-Class A 346,710
Service and distribution fees-Class B 476,345
Service and distribution fees-Class C 5,831
TrusteesO fees and expenses 21,657
Administrative Services 221,784
Accounting and administrative 49,248
Custodian 591,008
Transfer agent 628,297
Audit and tax services 50,000
Legal 20,597
Printing 65,792
Registration 74,291
Amortization of organization expenses 40,281
Miscellaneous 11,235
----------
Total expenses 4,628,081
Less expenses waived by the investment
adviser and distributor (298,018) 4,330,063
---------- ---------
Net investment income 2,457,266
REALIZED and UNREALIZED GAIN (LOSS)
on INVESTMENTS and FOREIGN CURRENCY
TRANSACTIONS
Realized loss on:
Investments-net (6,647,130)
Foreign currency transactions-net 2,516,764
-----------
Total realized loss on investments and
foreign currency transactions (4,130,366)
-----------
Unrealized appreciation on:
Investments-net 17,048,096
Foreign currency transactions-net 7,594
-----------
Total unrealized appreciation
on investments and foreign currency
transactions 17,055,690
Net gain on investment transactions 12,925,324
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $15,382,590
===========
<FN>
(a)Net of foreign taxes of: $758,742. .
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
FROM OPERATIONS
Net investment income $EEEE41,032 $2,457,266
Net realized gain (loss) on investments and
foreign currency transactions 12,371,111 (4,130,366)
Unrealized appreciation (depreciation) on
investments and foreign currency transactions(1,441,842) 17,055,690
------------ ------------
Increase in net assets from operations 10,970,301 15,382,590
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A 0 (2,225,716)
Class B 0 (615,923)
Class C 0 (12,203)
Class Y 0 (2,045,868)
Net realized gain on investments
Class A (4,777,693) 0
Class B (1,391,363) 0
Class C 0 0
Class Y (1,860,000) 0
Paid-in Capital
Class A (51,433) 0
Class B (14,978) 0
Class C 0 0
Class Y (20,026) 0
------------ ------------
(8,115,493) (4,899,710)
Increase in net assets derived from capital
share transactions 141,104,378 22,364,784
------------ ------------
Total increase in net assets 143,959,186 32,847,664
NET ASSETS
Beginning of the year 97,119,942 241,079,128
------------ ------------
End of the year $241,079,128 $273,926,792
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year $0 $0
============ ============
End of the year $0 $E20,518
============ ============
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
CLASS A
MAY 21 (A)
THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31,
------------ -----------------------
1992 1993 1994 1995
---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF
PERIOD 12.50 $11.80 $14.85 $15.50
----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.11 0.00 0.27
Net Realized and Unrealized Gain
(Loss) on Investments (0.63) 3.37 1.19 0.63
----- ----- ----- -----
Total From Investment Operations (0.62) 3.48 1.19 0.90
----- ----- ----- -----
Less Distributions (d)
Dividends From Net Investment
Income (0.01) (0.11) 0.00 (0.27)
Distributions From Net Realized
Capital Gains 0.00 (0.32) (0.53) 0.00
Distributions From Paid-in Capital (0.07) 0.00 (0.01) 0.00
----- ----- ----- -----
Total Distributions (0.08) (0.43) (0.54) (0.27)
----- ----- ----- -----
Net Asset Value, End of Period $11.80 $14.85 $15.50 $16.13
====== ====== ====== ======
Total Return (%) (5.0)(c) 29.4 8.1 5.8
Ratio of Operating Expenses to
Average
Net Assets (%)(e) 1.50(b) 1.60 1.75 1.75
Ratio of Net Investment Income to
Average
Net Assets (%) 0.10(b) 0.24 0.01 1.24
Portfolio Turnover Rate (%) 62 101 123 119
Net Assets, End of Period (000) $21,731$80,937 $142,917 $136,848
<FN>
(a) Commencement of Operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) See Note 1e.
(e) The ratio of operating expenses
to average net assets without
giving effect to the voluntary
expense limitations described
in Note 4 to the Financial
Statements would have been (%) 2.89(b) 2.16 1.79 1.83
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS-CONTINUED
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
CLASS B CLASS C
------------------------ ---------------
SEPTEMBER 13(A) YEAR YEAR YEAR
THROUGH ENDED ENDED ENDED
DEC. 31 DEC. 31 DEC. 31 DEC. 31
1993 1994 1995 1995
---- ---- ---- ----
NET ASSET VALUE,
Beginning of Period $15.19 $14.81 $15.35 $15.35
------ ------ ------ ------
INCOME FROM INVESTMENT
Operations
Net Investment Income 0.12 0.00 0.19 0.19
Net Realized and
Unrealized Gain (Loss)
on Investments (0.06) 1.08 0.58 0.61
------ ------ ------ ------
Total From Investment
Operations 0.06 1.08 0.77 0.80
------ ------ ------ ------
Less Distributions (d)
Dividends From Net
Investment Income (0.12) 0.00 (0.19) (0.19)
Distributions From Net Realized
Capital Gains (0.32) (0.53) 0.00 0.00
Distributions From Paid-in
Capital 0.00 (0.01) 0.00 0.00
------ ------ ------ ------
Total Distributions (0.44) (0.54) (0.19) (0.19)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.81 $15.35 $15.93 $15.96
====== ====== ====== ======
TOTAL RETURN (%) 0.3(C) 7.3 5.0 5.2
RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS (%)(E) 2.50(B) 2.50 2.50 2.50
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (%) (1.69)(b) (0.74) 0.49 0.49
Portfolio Turnover Rate (%) 101(c) 123 119 119
NET ASSETS, END OF PERIOD (000) $9,176 $41,601 $52,895 $1,066
<FN>
(a) Commencement of Operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) See Note 1e.
(e) The ratio of operating expenses to average
net assets without giving effect to the
voluntary expense limitations described in
Note 4 to the Financial Statements would
have been (%) 3.36(b) 2.54 2.58 2.58
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS-CONTINUED
<TABLE><CAPTION>
<S> <C> <C> <C>
CLASS Y
--------------------------------
SEPTEMBER 9(A) YEAR YEAR
THROUGH ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1993 1994 1995
---- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $15.19 $14.86 $15.64
------ ------ ------
Income From Investment Operations
Net Investment Income 0.13 0.00 0.42
Net Realized and Unrealized Gain (Loss)
on Investments (0.01) 1.32 0.60
------ ------ ------
Total From Investment Operations 0.12 1.32 1.02
Less Distributions (d)
Dividends From Net Investment Income (0.13) 0.00 (0.41)
Distributions From Net Realized
Capital Gains (0.32) (0.53) 0.00
Distributions From Paid-in Capital 0.00 (0.01) 0.00
------ ------ ------
Total Distributions (0.45) (0.54) (0.41)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.86 $15.64 $16.25
====== ====== ======
Total Return (%) 0.7(c) 8.9 6.6
Ratio of Operating Expenses to Average
Net Assets (%)(e) 1.00(b) 1.00 1.00
Ratio of Net Investment Income to Average
Net Assets (%) 0.33(b) 0.76 1.49
Portfolio Turnover Rate (%) 101(c) 123 119
Net Assets, End of Period (000) $7,006 $56,561 $83,119
<FN>
(a) Commencement of Operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) See Note 1e.
(e) The ratio of operating expenses to
average net assets without giving
effect to the voluntary expense
limitations described in Note 4 to
the Financial Statements would have
been (%) 1.35(b) 1.04 1.21
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1.The Fund is a series of New England Funds Trust I, a Massachusetts
business trust (the OTrustO), and is registered under the Investment
Company Act of 1940, as amended, (the O1940 ActO) 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 OFundO).
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
September 9, 1993. Class A shares are sold with a maximum front end
sales charge of 5.75%. Class B shares do not pay a front end sales
charge, but pay a higher ongoing distribution fee than Class A shares
for eight years (at which point they automatically convert to Class A
shares), and are subject to a contingent deferred sales charge if
those shares are redeemed within five years of purchase. Class C
shares do not pay front end or contingent deferred sales charges and
do not convert to any class of shares, but they do pay a higher
ongoing distribution fee than Class A shares. Class Y shares do not
pay a front end sales charge, a contingent deferred sales charge or
distribution fees. They are intended for institutional investors with
a minimum of $1,000,000 to invest. Expenses of the Fund are borne pro-
rata by the holders of 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 of the Fund, if
the Fund were liquidated. In addition, the Trustees approve 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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those
estimates.
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
value.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
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
or when the Fund learns of the dividend, and interest income is
recorded on the accrual basis. In determining net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
C.FOREIGN CURRENCY TRANSLATION.The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and
other assets and liabilities denominated in currencies other than U.S.
dollars are translated into U.S. dollars based upon foreign exchange
rates prevailing at the end of the period. Purchases and sales of
investment securities, income and expenses are translated on the
respective dates of such transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from:
sales of foreign currency, currency gains or losses realized between
the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the FundOs books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY CONTRACTS.The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to
manage the fundOs currency exposure. Contracts to buy generally are
used to acquire exposure to foreign currencies, while contracts to
sell are used to hedge the fundOs investments against currency
fluctuation. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the
unrealized gain or loss reflected in the fundOs Statement of Assets
and Liabilities. The U.S. dollar value of the currencies the fund has
committed to buy or sell (if any) is shown in the schedule of
investments under the caption OForward Foreign Currency Contracts.O
This amount represents the aggregate exposure to each currency each
fund has acquired or hedged through currency contracts at period end.
Losses may arise from changes in the value of the foreign currency or
if the counterparts do not perform under the contractsO terms. The
U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
D.FEDERAL INCOME TAXES.The Fund intends to meet the requirements of
the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its income and
any net realized capital gains, at least annually. Accordingly, no
provision for federal income tax has been made.
E.DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS.Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for the foreign currency component on the sale of
securities for book and tax purposes.
F.REPURCHASE AGREEMENTS.The Fund, through its custodian, receives
delivery of the underlying securities collateralizing repurchase
agreements. It is the FundOs policy that the market value of the
collateral be at least equal to 100% of the repurchase price. The
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 portfolioOs ability to dispose of the underlying
securities.
G.ORGANIZATION EXPENSE.Costs incurred in fiscal 1992 in connection
with the FundOs organization and registration, amounting to
approximately $178,500 in the aggregate, were paid by the Fund and are
being amortized by the Fund based on projected annual average net
assets over 60 months.
2.PURCHASES AND SALES OF SECURITIES (excluding short-term investments)
for the Fund for the year ended December 31, 1995 were $327,514,994
and $273,542,361, respectively.
There were no transactions in forward currency contracts by the Fund
for the year ended December 31, 1995.
3A.MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.During the
year ended December 31, 1995, the Fund incurred management fees
payable to its investment adviser, Draycott Partners, Ltd.
(ODraycottO). Certain officers and directors of the adviser are also
officers or trustees of the Fund. Draycott Partners, Ltd. is a wholly
owned subsidiary of New England Investment Companies, L.P. (ONEICO),
which is a majority owned subsidiary of New England Mutual Life
Insurance Company. The management agreement for the Fund in effect
during the year ended December 31, 1995 provided for fees as set forth
below:
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
$2,025,005(a) 0.800% the first $200 million
0.750% the next $300 million
0.700% the excess over $500 million
(a) Before reduction due to voluntary expense limitation. See Note 4.
Effective January 1, 1996, New England Funds Managment, L.P. became
the adviser for the Fund with the aforementioned adviser being
retained as the FundOs sub-adviser.
B.ACCOUNTING AND ADMINISTRATIVE EXPENSE.New England Funds, L.P. (ONew
England FundsO), the FundOs 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 FundsO 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 year ended December
31, 1995, these expenses amounted to $49,248 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 year ended December
31, 1995 the Fund paid New England Funds $463,295 as compensation for
its services in that capacity.
D.ADMINISTRATIVE SERVICES FEE.New England Funds provides the Fund with
office space, facilities and equipment, services of executive and
other personnel and certain administrative services pursuant to an
Administrative Services Agreement. Under this Agreement the Fund pays
New England Funds a fee at the annual rate of 0.10% of the Class A
shares, Class B and Class C shares average daily net assets and 0.05%
of the Class Y shares average daily net assets. New England Funds
waived $29,418 of its $221,784 fee for the year ended December 31,
1995. See Note 4.
E.SERVICE AND DISTRIBUTION FEES.Pursuant to Rule 12b-1 under the 1940
Act, the Trust has adopted a Service Plan relating to the FundOs Class
A shares (the OClass A PlanO) and Service and Distribution Plans
relating to the FundOs Class B and Class C shares (the OClass B and
Class C PlansO).
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
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 FundOs 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 year ended December
31, 1995, the Fund paid New England Funds $346,710 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 December 31, 1995 is $514,256.
Under the Class B and Class C Plans, the Fund pays New England Funds a
monthly service fee at the annual rate of up to 0.25% of the average
daily net assets attributable to the FundOs Class B and Class C
shares, as compensation for services provided and expenses (including
certain payments to securities dealers, who may be affiliated with New
England Funds) incurred by New England Funds in providing personal
services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts. For the year ended December 31,
1995, the Fund paid New England Funds $119,086 and $1,458 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 FundOs 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 year ended December 31, 1995, the Fund paid New England Funds
$357,259 and $4,373 in distribution fees under the Class B and Class C
plans, respectively.
Commissions (including contingent deferred sales charges) on Fund
shares paid to New England Funds by investors of shares of the Fund
during the year ended December 31, 1995 amounted to $802,989.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
F.TRUSTEES FEES AND EXPENSES.The Fund does not pay any compensation
directly to its officers or trustees who are directors, officers or
employees of Draycott, New England Funds, NEIC or their affiliates,
other than registered investment companies. Each other trustee was
compensated by the Fund as follows:
Annual Retainer $2,400
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Retainer $125/year
A deferred compensation plan is available to the trustees on a
voluntary basis. Each participating trustee will receive an amount
equal to the value that such deferred compensation would have had, had
it been invested in the Fund on the normal payment date.
4. EXPENSE LIMITATIONS.Commencing May 21, 1992, Draycott and New
England Funds had voluntarily agreed to reduce their fees and, if
necessary, to assume expenses of the Fund in order to limit the FundOs
expenses to an annual rate of 1.50% of the FundOs average daily net
assets. On October 1, 1993, this limitation was changed to 1.75% of
the FundOs Class A average net assets, 2.50% of Classes B and C
average net assets and 1.00% of Class Y average net assets, until
further notice to the Fund. As a result of the FundOs expenses
exceeding the voluntary expense limitation during the year ended
December 31, 1995, Draycott waived $268,600 of its $2,025,005
management fee and New England Funds waived $29,418 of its $221,784
administrative services fee.
5.CONCENTRATION OF CREDIT.The Fund had the following geographic
concentration in excess of 10% of its total net assets at December 31,
1995: Japan 44% and Great Britain, 23%. The Fund pursues its
objectives by investing in foreign securities. There are certain risks
involved in investing in foreign securities which are in addition to
the usual risks inherent in domestic investments. These risks include
those resulting from future adverse political or economic developments
and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions.
6.CAPITAL SHARES.At December 31, 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:
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
<TABLE>
<S> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------------ -----------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 8,028,381 $127,448,427 2,215,430 $34,501,158
Shares issued in
connection with the
reinvestment of:Dividends
from net investmentincome 0 0 132,647 2,128,983
Distributions from net
realized gain 301,199 4,629,426 0 0
---------- ------------ ---------- -----------
8,329,580 132,077,853 2,348,077 36,630,141
Shares repurchased (4,560,453) (73,923,383)(3,084,715) (48,156,416)
----------- ------------ ---------- -----------
Net increase
(decrease) 3,769,127 $58,154,470 (736,638) ($11,526,275)
=========== =========== ========= ============
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------------ -----------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 2,145,234 $33,992,222 1,152,458 $17,743,605
Shares issued in
connection with
the reinvestment of:
Dividends from net
investment income 0 0 35,549 563,445
Distributions from net
realized gain 84,864 1,292,476 0 0
--------- ------------ ---------- -----------
2,230,098 35,284,698 1,188,007 18,307,050
Shares repurchased (140,211) (2,223,403) (577,306) (8,944,580)
--------- ------------ ---------- -----------
Net increase 2,089,887 $33,061,295 610,701 $9,362,470
========= =========== ======== ===========
< /TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1995
-----------------
CLASS C SHARES AMOUNT
------ -------
Shares sold 74,361 $1,142,301
Shares issued in connection with
the reinvestment of:
Dividends from net investment income 730 11,593
------- ---------
75,091 1,153,894
Shares repurchased (8,331) (130,582)
------- ---------
Net increase 66,760 $1,023,312
======= =========
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
--------------------- -----------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
------ ------ ------ -------
Shares sold 3,116,858 $49,510,853 2,118,793 $33,408,749
Shares issued in
connection with
the reinvestment of:
Dividends from net
investmentincome 0 0 126,522 2,045,868
Distributions from net
realized gain 121,214 1,880,023 0 0
---------- ---------- --------- ----------
3,238,072 51,390,876 2,245,315 35,454,617
Shares repurchased (92,855) (1,502,263) (748,198) (11,949,340)
---------- ---------- --------- ----------
Net increase 3,145,217 $49,888,613 1,497,117 $23,505,277
========== ========== ========= ===========
Increase derived from
capital shares
transactions 9,004,231 $141,104,378 1,437,940 $22,364,784
========== ========== ========= ===========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of NEW ENGLAND INTERNATIONAL
EQUITY FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio composition, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
New England International Equity Fund (the OFundO) at December 31,
1995, the results of its operations for the year then ended, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and the financial highlights
(hereafter referred to as Ofinancial statementsO) are the
responsibility of the FundOs management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities owned at
December 31, 1995 by correspondence with the custodian and brokers and
the application of alternative auditing procedures where confirmations
from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1996
<PAGE>
SHAREHOLDER MEETING
At a special shareholdersO meeting held on December 28, 1995, shareholders of
the International Equity Fund voted for the following proposals:
<TABLE>
<S> <C> <C> <C> <C> <C>
VOTED FOR VOTED ABSTAINED BROKER
AGAINST VOTES NON-VOTES TOTAL VOTES
1. To approve new
investment advisory
arrangement to be
effective upon
the merger of New
England Mutual Life
Insurance Company
into Metropolitan
Life Insurance
Company, such
arrangement to be
substantially identical
to the investment
advisory arrangements
in effect for the Fund
immediately prior
to such merger. 10,080,669.335 117,647.629 195,622.612 10,393,939.576
============== =========== ===========
2. To approve a new
Advisory Agreement
between the Fund and
New England Funds
Management, L.P.
(ONEFMO) 9,939,566.000 150,273.715 204,670.861 99,429.000 10,393,939.576
============= =========== =========== ==========
3. To approve a related
Sub-Advisory
Agreement between
NEFM and Draycott
Partners, Ltd.
(ODraycottO), the
FundOs current
investment adviser,
to be effective
upon the sale of
Draycott to Cursitor
Holdings Ltd. U.KRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OSee accompanying notes to financial statementsO) are
omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points, leaders and similar graphic symbols are omitted.
(7) Page numbering is different.
</TABLE>
