[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
ANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
GROWTH FUND
[ARTWORK APPEARS HERE]
DECEMBER 31, 1995
<PAGE>
DEAR SHAREHOLDER,
ItOs a real pleasure to present to you the 1995 Annual Report for New
England Growth Fund, containing your portfolio managerOs commentary
and complete financial information.
FAVORABLE ECONOMIC CONDITIONS IN 1995
In 1995 subdued economic growth with little or no inflation created a
very favorable backdrop for the bond and stock markets. Long term
interest rates dipped on the positive inflation news, with the yield
on the 30-year Treasury bond falling to a low of 5.95% at year end.
The stock market, fueled by lower interest rates and solid corporate
earnings growth, advanced 37.6%, as measured by the Standard & PoorOs
500 Index,* for its best showing since 1958. In July and in
December, the Federal Reserve Board lowered short term rates,
signaling its belief that the economy was indeed on a path towards
slow, non-inflationary growth.
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.**
* Standard & PoorOs 500 is an unmanaged index representing 500
major companies, the majority of which are listed on the New York
Stock Exchange.
** 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
Looking ahead, we believe interest rates are likely to remain flat as
the economy continues on its slow, steady, non-inflationary growth
path. While this scenario is extremely positive for the long term, it
is unlikely that 1996 will see a repeat of last yearOs stellar
performance. At this time itOs worth reiterating that long-term
investors should not focus on one yearOs performance. Instead, we
recommend that you review your asset allocation program with your
financial adviser, then remain committed to that program to carry out
its objectives.
We believe you will find your portfolio managerOs commentary
informative. If you have any questions or comments, please contact
your financial representative 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 GROWTH 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 $10,0000 INVESTMENT IN NEW ENGLAND GROWTH FUND
COMPARED TO STANDARD & POOROS 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
& PoorOs Index(3). The data points from the graph are as follows:]
New England Growth Fund - Net Asset Value(1)
YEAR AMOUNT
- ---- -------
1995 $99,015
1994 $71,719
1993 $77,158
1992 $69,331
1991 $74,254
1990 $47,380
1989 $45,012
1988 $45,012
1988 $36,862
1987 $36,335
1987 $30,670
1985 $25,865
1984 $19,172
1982 $18,418
1981 $10,314
12/31/80 $10,000
New England Growth Fund - With Maximum Sales Charge(2)
Year Amount
- ----- --------
1995 $92,579
1994 $67,057
1993 $72,143
1992 $64,824
1991 $69,428
1990 $44,300
1989 $42,087
1988 $23,087
1988 $34,466
1987 $33,974
1987 $28,677
1985 $24,184
1984 $17,926
1982 $17,221
1981 $9,644
12/31/80 $9,350
S&P 500(3)
Year Amount
1995 $78,881
1994 $57,393
1993 $56,623
1992 $51,448
1991 $47,809
1990 $36,680
1989 $37,862
1988 $37,862
1988 $28,772
1987 $24,697
1987 $23,474
1985 $19,790
1984 $14,153
1982 $11,557
1981 $9,512
12/31/80 $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. All Index and Fund performance assumes reinvested
distributions.
<PAGE>
NEW ENGLAND GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS 12/31/95
<TABLE><CAPTION>
<S><C> <C> <C> <C>
CLASS A 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 38.06% 15.88% 14.37%
With Max. Sales Charge(2) 29.04 14.32 13.60
Lipper Growth Average(4) 30.79 16.37 13.41
<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.
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 & PoorOs 500 Index" (S&P 500) is an unmanaged index
representing the performance of 500 major companies, most of
which are listed on the New York Stock Exchange. The S&P 500
performance has not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable
to mutual fund investments.
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.
</TABLE>
<PAGE>
NEW ENGLAND GROWTH FUND
[PHOTO]
NEW ENGLAND GROWTH FUND
Portfolio Manager: G. Kenneth Heebner
Capital Growth Management
In 1995, the economic environment was highly favorable to the stock
market, and particularly for the growth stocks your Fund invests in.
Among the key factors that helped performance were low inflation and
moderating interest rates, along with low labor and capital costs and
high productivity D a combination that permitted many companies to
enjoy increased revenues, expanding profit margins and earnings
growth.
How Your Fund Performed
Taking advantage of these positive trends, New England Growth Fund
rewarded shareholders with strong performance in 1995. Total return
on Class A shares at net asset value1 was 38.06% for the 12 months
ended December 31, 1995. The Fund outperformed the overall market, as
measured by the Standard & PoorOs 500 Index2, which had a total
return of 37.44% for the period.
1 Class B and Class C shares approved by shareholders but not
registered on a state or federal level. There is no effective
date targeted yet.
2 Most of the stocks in the Standard & PoorOs 500 Index, an
unmanaged index, are listed on the New York Stock Exchange.
How Your Fund Was Managed
The Fund delivered these strong returns in 1995 by staying fully
invested in a rising stock market. Most holdings rose in price, and
the Fund benefitted significantly from its substantial positions in
airline, bank and technology stocks.
Holdings in steel, chemical and copper stocks were sold in the first
quarter, in anticipation of a slow-growth economy. A large position
in technology stocks was
<PAGE>
NEW ENGLAND GROWTH FUND
taken early in the year. Most of these issues were sold during the second half
of the year.
Keeping Focused on Growth
Over the last two years, many investors have come to appreciate the difficulty
of trying to time moves in and out of the market. In early 1995, few market
observers anticipated the long string of record highs that we witnessed last
year. Fund Manager Ken HeebnerOs investment approach D concentrating on a
relatively small number of holdings that he believes can deliver earnings in
excess of the consensus view D has delivered positive results for shareholders
over the years. Although past performance does not guarantee future results,
the FundOs long-term record demonstrates that the proven way to take advantage
of the marketOs potential for growth is to stay invested in the market.
NET ASSET VALUE ANNUAL TOTAL RETURNS %
12/31/86-12/31/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
N. E.
Growth
Fund 18.58% 18.47% 1.45% 22.11% 5.10% 56.72% -6.63% 11.29% -7.05% 38.06%
Lipper
Growth
Avg(1) 13.04% 1.10% 13.96% 25.44% -5.48% 36.09% 7.79% 10.61% -2.17% 30.79%
S&P
500(2) 18.62% 5.21% 16.50% 31.59% -3.12% 30.34% 7.61% 10.06% 1.36% 37.44%
<FN>
1 The Lipper Growth Fund Average comprises the performance of 542 growth
funds as measured by Lipper Analytical Services, an independent mutual fund
ranking service.
2 Most of the common stocks in the unmanaged Standard & PoorOs 500 Index are
listed on the New York Stock Exchange.
</TABLE>
<PAGE>
YOUR FUND'S TEN LARGEST INVESTMENTS*
PERCENTAGE
COMPANY OF ASSETS
- ----------------------------------------------------------------------
1. CITICORP 6.7%
Commercial banking, New York
- ----------------------------------------------------------------------
2. AMERICAN INTERNATIONAL GROUP, INC. 6.5%
Major international insurance holding company
- ----------------------------------------------------------------------
3. CHEMICAL BANKING CORP. 6.4%
Commercial banking, New York
- ----------------------------------------------------------------------
4. ELI LILLY & CO. 5.8%
Pharmaceutical company
- ----------------------------------------------------------------------
5. BOEING CO. 5.7%
Aerospace manufacturing company
- ----------------------------------------------------------------------
6. MERCK & CO. INC. 5.7%
Pharmaceutical company
- ----------------------------------------------------------------------
7. ALLSTATE CORP. 5.5%
Major insurance company
- ----------------------------------------------------------------------
8. PHILIP MORRIS COMPANY, INC. 5.5%
Cigarette and food manufacturer
- ----------------------------------------------------------------------
9. BURLINGTON NORTHERN COMPANY 5.2%
Railroad and pipeline producers
- ----------------------------------------------------------------------
10. UAL CORP. 5.1%
Holding company for United Airlines
- ----------------------------------------------------------------------
* Portfolio holdings may vary.
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
GROWTH FUND
DECEMBER 31, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1995
COMMON STOCKS-98.6% OF TOTAL NET ASSETS
<TABLE><CAPTION>
<C> <S> <C>
SHARES VALUE (A)
- ----------------------------------------------------------------------
AEROSPACE-5.7%
874,000 Boeing Co. $68,499,750
--------------
AEROSPACE/DEFENSE-1.6%
250,000 Lockheed Martin Corp. 19,750,000
--------------
AIRLINES-9.8%
143,000 AMR Corp. (c) 10,617,750
900,000 Northwest Airlines Corp. (c) 45,900,000
345,000 UAL Corp. (c) 61,582,500
--------------
118,100,250
--------------
BANKS-MONEY CENTER-13.1%
1,316,000 Chemical Banking Corp. 77,315,000
1,198,300 Citicorp 80,585,675
--------------
157,900,675
--------------
BEVERAGE & TOBACCO-4.5%
975,000 Pepsico Inc. 54,478,125
--------------
CHEMICALS-2.3%
515,000 Air Products & Chemicals, Inc. 27,166,250
--------------
COMPUTER SOFTWARE & SERVICES-4.6%
644,000 Computer Associates International, Inc. 36,627,500
275,000 Computer Science Corp. (c) 19,318,750
--------------
55,946,250
--------------
DRUGS-13.7%
1,250,000 Lilly Eli & Co. 70,312,500
1,034,000 Merck & Co. Inc. 67,985,500
410,000 Pfizer Inc. 25,830,000
--------------
164,128,000
--------------
FINANCIAL SERVICES-1.8%
320,000 First Data Corp. 21,400,000
--------------
FOOD-RETAILERS/WHOLESALERS-5.5%
727,000 Philip Morris Companies, Inc. 65,793,500
--------------
FREIGHT TRANSPORTATION-5.2%
800,000 Burlington Northern Santa Fe Corporation.. 62,400,000
--------------
HOME PRODUCTS & COSMETICS-3.9%
560,000 Procter & Gamble Co.. 46,480,000
--------------
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES VALUE (A)
- ----------------------------------------------------------------------
INSURANCE-12.1%
1,620,000 Allstate Corp $66,622,500
844,800 American International Group, Inc. 78,144,000
---------------
144,766,500
---------------
MACHINERY-1.8%
610,000 Deere & Co. 21,502,500
---------------
MISCELLANEOUS-5.1%
647,000 United Technologies Corp. 61,384,125
---------------
RETAIL-7.9%
1,085,000 May Department Stores Co. 45,841,250
1,245,000 Sears Roebuck & Company 48,555,000
---------------
94,396,250
---------------
Total Common Stocks
(Identified Cost $1,019,948,807) 1,184,092,175
---------------
SHORT-TERM INVESTMENTS-0.7%
FACE
AMOUNT
- ----------------------------------------------------------------------
$8,435,000 Chevron Oil Finance Co. 5.750%, 1/02/96 8,435,000
---------------
Total Short-Term Investments
(Identified Cost $8,435,000). 8,435,000
---------------
Total Investments-99.3%
(Identified Cost $1,028,383,807)(b) 1,192,527,175
Cash, receivables and other assets. 23,677,756
Liabilities (15,094,540)
---------------
Total Net Assets-100% $1,201,110,391
===============
<FN>
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation
on investments based on cost of $1,029,449,677 for federal
income tax purposes was as follows: Aggregate gross
unrealized appreciation for all investments in which
there is an excess of value over tax cost $170,308,003
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (7,230,505)
---------------
Net unrealized appreciation $163,077,498
===============
(c) Non-income producing security.
</TABLE>
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
December 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value $1,192,527,175
Cash 2,199
Receivable for:
Fund shares sold 827,291
Securities sold 20,882,182
Dividends and interest 1,961,084
Prepaid registration expense 5,000
---------------
1,216,204,931
LIABILITIES
Payable for:
Securities purchased $12,441,260
Fund shares redeemed 1,283,726
Dividends declared 367,516
Accrued expenses:
Management fees 698,816
Deferred trustees' fees 62,524
Accounting and administrative 4,622
Other expenses 236,076
-----------
15,094,540
---------------
$1,201,110,391
===============
NET ASSETS
Net Assets consist of:
Capital paid in $1,004,414,585
Accumulated net realized gains.. 32,552,438
Unrealized appreciation on investments 164,143,368
---------------
NET ASSETS $1,201,110,391
===============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($1,201,110,391 divided by 113,880,299
shares of beneficial interest) $10.55
===============
Offering price per share (100/93.50 of $10.55) $11.28*
===============
Identified cost of investments $1,028,383,807
===============
<FN>
* B
a
s
e
d
u
p
o
n
s
i
n
g
l
e
p
u
r
c
h
a
s
e
s
o
f
l
e
s
s
t
h
a
n
$
2
5
,
0
0
0
.
Reduced sales charges apply for purchases in excess of these
amounts.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $17,982,371(a)
Interest. 209,233
----------------
18,191,604
Expenses
Management fees $7,631,203
Service fees 2,800,465
Trustees' fees and expenses. 24,827
Accounting and administrative 50,923
Custodian 174,808
Transfer agent 2,447,747
Audit and tax services 41,000
Legal 19,747
Printing 196,251
Registration 22,857
Miscellaneous 44,003
----------
Total expenses 13,453,831
-----------------
Net investment income 4,737,773
-----------------
REALIZED and UNREALIZED GAIN on INVESTMENTS
Realized gain on Investments-net 197,449,600
Unrealized appreciation on Investments-net 150,392,410
-----------------
Net gain on investment transactions 347,842,010
-----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $352,579,783
=================
<FN>
(a) Net of foreign taxes of: $40,949.
</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 $11,636,622 $4,737,773
Net realized gain on investments 69,441,182 197,449,600
Unrealized appreciation (depreciation)
on investments. (160,094,787) 150,392,410
--------------- ---------------
Increase (decrease) in net
assets from operations (79,016,983) 352,579,783
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (11,691,898 (5,211,996)
Net realized gain on investments (75,068,482) (165,500,915)
--------------- ---------------
(86,760,380) (170,712,911)
--------------- ---------------
Proceeds from sale of shares 103,348,947 83,764,307
Net asset value of shares issued in
connection with the
reinvestment of:
Dividends from net investment income 11,394,237 5,040,619
Distributions from net realized gain 73,363,874 162,025,252
--------------- ---------------
188,107,058 250,830,178
Cost of shares redeemed (234,414,542) (220,016,896)
--------------- ---------------
Increase (decrease) in net assets
derived from capital share
transactions (46,307,484) 30,813,282
--------------- ---------------
Total increase (decrease)
in net assets (212,084,847) 212,680,154
NET ASSETS
Beginning of the year 1,200,515,084 988,430,237
--------------- ---------------
End of the year ..$988,430,237 $1,201,110,391
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year. $842,903 $757,268
=============== ===============
End of the year $757,268 $0
=============== ===============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares 10,029,304 8,243,398
Issued in connection with the
reinvestment of:
Dividends from net investment income 1,268,865 476,462
Distributions from net realized gain 8,167,520 15,260,562
--------------- ---------------
19,465,689 23,980,422
Redeemed (23,054,096) (21,472,861)
--------------- ---------------
Net change (3,588,407) 2,507,561
=============== ===============
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
Net Asset Value,
Beginning of Year $8.85 $11.19 $10.08 $10.44 $8.87
------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income 0.10 0.09 0.02 0.11 0.05
Net Realized and
Unrealized Gain (Loss)
on Investments 4.92 (0.83) 1.12 (0.84) 3.30
------- ------- ------- ------- -------
Total From Investment
Operations 5.02 (0.74) 1.14 (0.73) 3.35
------- ------- ------- ------- -------
Less Distributions
Dividends From Net
Investment Income (0.10) (0.09) (0.01) (0.11) (0.05)
Distributions From
Net Realized Capital
Gains (2.57) (0.28) (0.77) (0.73) (1.62)
Distributions From
Paid-in Capital. (0.01) 0.00 0.00 0.00 0.00
------- ------- ------- ------- -------
Total Distributions (2.68) (0.37) (0.78) (0.84) (1.67)
------- ------- ------- ------- -------
Net Asset Value,
End of Year $11.19 $10.08 $10.44 $8.87 $10.55
======= ======= ======= ======= =======
Total Return (%) 56.7 (6.6) 11.3 (7.1) 38.1
Ratio of Operating
Expenses to Average
Net Assets (%) 1.14 1.15 1.18 1.19 1.20
Ratio of Net Investment
Income to Average
Net Assets (%) 0.89 0.89 0.16 1.05 0.42
Portfolio Turnover Rate (%)186 218 145 141 235
Net Assets,
End of Year (000,000) $997 $1,174 $1,201 $988 $1,201
</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 "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.
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
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
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
is at all times at least equal to the repurchase price. Repurchase
agreements could involve certain risks in the event of default or
insolvency of the other party including possible delays or
restrictions upon the Fund's ability to dispose of the underlying
securities.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term
investments) for the Fund for the year ended December 31, 1995 were
$2,601,149,006 and $2,748,985,229 respectively.
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, 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 year ended
December 31, 1995 provided for fees as set forth below:
FEES EARNED ANNUAL PERCENTAGE RATE ANNUAL NET ASSET VALUE LEVELS
- ----------- ---------------------- -----------------------------
$7,631,203 0.750% the first $200 million
0.700% the next $300 million
0.650% the excess over $500 million
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 year
ended December 31, 1995 these expenses amounted to $50,923 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 $1,832,529 as compensation
for its services in that capacity.
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS-Continued
December 31, 1995
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 year ended December 31, 1995, the Fund paid New England Funds
$2,800,465 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 December 31, 1995
is
$2,030,882.
Commissions on Fund shares paid to New England Funds by investors in
shares of the Fund during the year ended December 31, 1995 amounted to
$1,911,193.
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:
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.
<PAGE>
To the Board of Trustees and Shareholders of NEW ENGLAND GROWTH FUND
In our opinion, the accompanying statement of assets & 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 Growth Fund ("the Fund") 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 financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's
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 6, 1996
<PAGE>
SHAREHOLDER MEETING
At a special shareholders' meeting held on December 28, 1995, shareholders of
the Growth Fund voted for the following proposals:
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
ABSTAINED BROKER NON-
VOTED FOR VOTED AGAINST VOTES VOTES TOTAL VOTES
--------- ------------- --------- ----------- -----------
1. To approve new
investment advisory
arrangements to be
effective upon the
merger of New
England Mutual Life
Insurance Company
into Metropolitan Life
Insurance Company,
such arrangements
to be substantially
identical to the
investment advisory
arrangements in
effect for the Fund
immediately prior to
such merger. 61,690,132.276 2,157,675.958 3,158,591.057 67,006,399.291
============== ============= =============
2. To approve
authorization to
issue multiple
classes of shares of
the Fund. 56,251,804.672 3,750,177.273 3,423,855.346 3,580,562.000 67,006,399.291
============== ============= ============= ==============
</TABLE>
<PAGE>
NEW ENGLAND FUNDS
STOCK FUNDS
Growth Fund of Israel
International Equity Fund
Star Worldwide 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
Municipal 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 FundOs 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>
Bulk Rate
U.S. Postage
Paid
Brockton, MA
Permit No. 770
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
399 Boylston Street
Boston, Massachusetts
02116
[LOGO]
QUALITY
TESTED SERVICE
1996
DALBAR
HONORS COMMITMENT TO:
INVESTORS
GF56
[RECYCLE LOGO] PRINTED ON RECYCLED PAPER
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
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.
