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NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
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SEMIANNUAL REPORT AND PERFORMANCE UPDATE
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NEW ENGLAND
BALANCED FUND
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JUNE 30, 1996
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July 25, 1996
DEAR SHAREHOLDER,
New England Funds welcomes the opportunity to present you with the 1996
Semiannual Report for New England Balanced Fund, containing your portfolio
manager commentary and complete financial information.
ECONOMIC GROWTH IN THE FIRST HALF OF 1996
Moderate growth with low inflation was the economic story during the first
half of 1996. U.S. Gross Domestic Product (GDP), a bellwether of economic
growth, remained strong at 2.3% through June, just shy of what most economists
consider optimal growth. As a result, the Federal Reserve Board opted not to
tinker with interest rates through the first half of the year, save for a
quarter-point ease in short-term rates in late January. The relatively calm
economic waters had a stimulating effect on the domestic equity market, boosting
stocks 537 points to 5,654 at the end of June, as measured by the Dow Jones
Industrial Average. Bond yields did not fare as well, rising to 7.00% at the end
of June from 6.65% earlier in the year. Money market yields remained stable,
falling back only slightly during the past six months.
THE BENEFITS OF MAINTAINING A LONG-TERM FOCUS
But the market volatility of the first three weeks in July claimed 5.5% of
the Dow Jones Industrial Average's first-half gains. Again, we are reminded that
no bull market lasts forever. Long-term financial goals are key in times like
these and it's important to anticipate this type of market volatility and remain
committed to your financial plan.
It's also a good idea to ask your financial representative for help. A
financial representative can guide you through volatile markets and help you
meet your long-term financial goals. A recent study by Dalbar, Inc., a mutual
fund monitoring and analytical service, shows that, on average, mutual fund
investors who bought and held shares, with the assistance of a financial
representative, enjoyed the benefits of a long-term commitment. Consequently,
they benefitted from higher returns than direct investors and others who bought
and sold, although this does not occur in every case.
CELEBRATING THE BIRTHDAYS OF THREE NEW ENGLAND FUNDS
During the past two months, we've celebrated the birthdays of three of our most
popular funds: New England Growth Opportunities Fund; New England Strategic
Income Fund and New England Star Advisers Fund. Demonstrating the remarkable
scope and breadth of our funds, the Growth Opportunities Fund celebrated its
65th birthday in May while the fast-growing Strategic Income and Star Advisers
Funds marked their first and second birthdays, respectively. We're proud of all
of our funds, but take special pride in recognizing that, whether six months or
65-years-old, all New England Funds are designed to help investors achieve their
goals.
NEW ENGLAND FUNDS: THE PLACE "WHERE THE BEST MINDS MEET"(TM)
The longevity of our more seasoned funds and the potential for growth of our
newer ones illustrates the ongoing progress of New England Funds. Our unique
multiple-adviser approach brings together some of the best minds in the
investment business. The ability to attract top-notch investment advisers and
our multiple-adviser approach to fund management are the cornerstones of New
England Funds' investment philosophy and the essence of our corporate logo,
Where The Best Minds Meet(TM).
OUTLOOK FOR THE REST OF 1996
Going forward, we anticipate that the economy will continue to grow
moderately and that inflationary pressures will not be excessive. While we
estimate the GDP may rise somewhat from its current level of 2.3%, the Federal
Reserve should be reluctant to tighten the money supply by raising short-term
interest rates. We also believe that the equity markets will continue to be
volatile through the rest of the year.
We believe that you will find your portfolio manager commentary informative.
If you have any questions or comments, please contact your financial
representative or New England Funds directly at 800-225-5478.
Sincerely,
/S/Henry L.P. Schmelzer
Henry L.P. Schmelzer, President
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NEW ENGLAND BALANCED FUND
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INVESTMENT RESULTS THROUGH JUNE 30, 1996
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 chart appears in the form of a line graph here illustrating the growth of a
$10,000 investment in New England Balanced Fund Class A Shares since 6/30/86
compared to the S&P 500 Index blend of the S&P 500 and the Lehman Intermediate
Government/Corporate Indices. The data points to this chart are as follows:]
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A $10,000 INVESTMENT IN CLASS A SHARES
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COMPARED TO STANDARD & POOR'S 500 INDEX*(4) AND A BLEND OF STANDARD & POOR'S 500
AND LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDICES(5)
Balanced Balanced S&P/Lehman
Year NAV POP S&P 500 Blend*
- ------- ------- ------- ------- -------
6/30/86 $10,000 $9,425 $10,000 $10,000
1987 $11,261 $10,613 $12,509 $11,826
1988 $10,594 $9,985 $11,646 $11,617
1989 $11,713 $11,040 $14,035 $13,582
1990 $11,708 $11,035 $16,337 $15,401
1991 $12,366 $11,655 $17,544 $16,709
1992 $14,288 $13,467 $19,907 $18,941
1993 $16,551 $15,600 $22,611 $21,306
1994 $17,156 $16,169 $23,011 $21,531
1995 $20,113 $18,957 $28,992 $25,950
1996 $22,778 $21,468 $36,510 $30,778
*blend of 65% S&P and 35% Lehman Intmdt G/C
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.
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AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96
CLASS A (Inception) 1 YEAR 3 YEAR 5 YEAR 10 YEAR
Net Asset Value(1) 13.25% 11.23% 12.99% 8.58%
With Max. Sales Charge(2) 6.71 11.66 11.66 7.94
Lipper Balanced Average(6) 15.52 10.51 11.72 10.34
CLASS B (Inception 9/13/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 12.41% 10.22%
With CDSC(3) 8.41 9.06
Lipper Balanced Average(6) 15.52 n/a
CLASS C (Inception 12/30/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 12.32% 19.09%
Lipper Balanced Average(6) 15.52 n/a
CLASS Y (Inception 3/10/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 13.77% 11.50%
Lipper Balanced Average(6) 15.52 n/a
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These returns represent past performance. Investment return and principal
value will fluctuate so that shares, upon redemption, may be worth more or
less than original cost. The Fund was changed from an equity income fund to
a balanced fund on March 1, 1990. Results for periods prior to that date
reflect former investment policies and are not necessarily representative of
results that would have been achieved had the Fund's current investment
policies then been in effect.
NOTES TO CHARTS AND PERFORMANCE UPDATE
(1) Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
(2) With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at the time of
purchase of Class A shares.
(3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum
4% sales charge is applied to a redemption of Class B shares. The sales
charge will decrease over time, declining to zero five years after the
purchase of shares.
(4) Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing the
performance of 500 major companies, most of which are listed on the New York
Stock Exchange. The S&P 500 performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments.
(5) Represented by a 65% weighting in the Standard & Poor's 500 Index (S&P 500)
and a 35% weighting in the Lehman Intermediate Government/Corporate Bond
Index. Indices are rebalanced to 65%/35% at the end of each year. Lehman
Intermediate Government/Corporate Bond Index is an unmanaged index of
investment grade bonds, issued by the U.S. government and U.S. corporations,
having maturities between one and ten years. The indices' performance has
not been adjusted for ongoing management, distribution and operating
expenses and sales charges applicable to mutual fund investments.
(6) Lipper Average is an average of the total return performance (calculated on
the basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund ranking
service.
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[Photo of
Doug Ramos]
[Photo of
Meri Anne Beck]
NEW ENGLAND BALANCED FUND
Portfolio Managers: Doug Ramos, Meri Anne Beck
Loomis, Sayles & Co., L.P.
At the outset of 1996, most investors were expecting economic growth to start
slowly and accelerate as the year progressed. Some adventurous souls even
discussed the possibility of a recession. At the time this all seemed very
reasonable; economic growth had slowed dramatically in the fourth quarter of
1995, the East Coast was struck by a severe blizzard, and the federal government
partially shut down -- all pointing to a weak first quarter.
However, the economic picture began to change in February and March.
Unexpectedly strong reports on employment and light vehicle sales suggested that
the economy was not as weak as expected. Fixed-income investors started
questioning the prospect of further Federal Reserve easing. Stock investors
became concerned that the Fed would raise interest rates to rein in economic
growth and keep inflation from gaining momentum. Rising interest rates halted
the stock market rally that began on January 11.
These developments produced mixed results for New England Balanced Fund in the
first six months of 1996.
How Your Fund Performed
In this environment, bond market performance was negative. As measured by the
Lehman Government Corporate Index,5 bonds returned -1.8% for the first six
months of the year. While the initial rally in stocks was stopped in February by
the rise in interest rates, renewed economic growth and the prospects for
stronger earnings growth in the second half of the year helped stocks trade
marginally higher in May and June.
For the first two quarters of 1996, stocks, as measured by the Standard & Poor's
Composite Index of 500 Stocks (S&P 500)(4), produced a total return of 10.1%.
Fortunately, on average, 61% of the Fund's assets were invested in common stocks
during this period. Overall, your Fund returned 5.3% during the first six months
of the year for Class A shares (without taking sales loads into account).
How We Managed Your Fund
The Fund's purchase of corporate bonds in the consumer, insurance, finance and
technology sectors was beneficial as spreads tightened on good credit and
financial news. Individual bonds, such as Federated Department Stores and La
Quinta Inns, were positive holdings in an improving consumer sector. Sears
Roebuck and Delta Airlines received ratings upgrades, causing spreads to narrow
versus Treasury bonds. Bankers Trust lagged because of a pending lawsuit
regarding derivative usage, but performance improved after a settlement was
reached.
An intermediate maturity and an emphasis on current or higher coupon bonds were
both beneficial on a current income and price performance basis in an
environment of declining bond prices. Because corporate bond spreads have
historically been narrow, we continued to purchase high quality, discount coupon
mortgage securities.
The equity markets continue to exhibit a positive bias toward
large-capitalization growth stocks, while low P/E ("value") and
mid-capitalization stocks continue to lag. Perhaps reversing a long-term trend,
small capitalization stocks are staging an impressive comeback. However, the
Fund's mid- to large-capitalization bias continues to hinder performance
compared with the S&P 500.
The Fund's financial sector equity holdings did very well, especially in the
first quarter. In the banking industry, holdings in Chase Manhattan, NationsBank
and First Interstate -- now part of Wells Fargo -- performed very well.
Significant positive returns were also recorded by Green Tree Financial and Ace
Ltd., an insurance company.
In the basic materials sector, chemical holdings in DuPont and Praxair did well.
Energy was the best performing sector, completely reversing last year's results,
with El Paso Natural Gas and Ultramar providing handsome returns. Finally,
technology performed well with strong returns generated by Intel Corporation,
EMC Corporation and IBM, which was recently sold from the portfolio. The one
poor performer in the portfolio was the utility sector, which was hurt by the
rise in interest rates.
Looking Ahead
In anticipation of continued potential for economic growth through the end of
the year, as well as continued signs of an increase in the rate of corporate
earnings growth, we are increasing your Fund's weighting in stocks to 65%. We
continue to invest in stocks with below average P/E ratios and above average
long-term growth potential. Stock selection remains a critical element in
determining performance for "value" portfolios. We believe that the market's
current bias toward large-capitalization growth stocks will reverse itself,
though it may take an acceleration in earnings growth rates.
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YOUR FUND'S ASSET DIVERSIFICATION 6/30/96*
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STOCKS 60.8%
BONDS 35.7%
CASH 2.9%
* Portfolio holdings and asset allocations will vary.
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YOUR FUND'S TEN LARGEST STOCK HOLDINGS 6/30/96*
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PERCENTAGE OF
COMPANY NET ASSETS
1. INTEL CORP. 1.47%
Semiconductor memory circuits
2. FEDERAL EXPRESS CORP. 1.41%
Air-van package delivery service
3. CARNIVAL CORP. 1.40%
Cruise ships, hotel, casino
4. KROGER CO. 1.38%
Supermarket/convenience stores
5. MELVILLE CORP. 1.36%
Footwear, apparel health stores
*Portfolio holdings and asset allocations will vary.
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[LOGO]
NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
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PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
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NEW ENGLAND
BALANCED FUND
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JUNE 30, 1996
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PORTFOLIO COMPOSITION
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Investments as of June 30, 1996
(unaudited)
COMMON STOCK -- 60.8% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE (a)
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AEROSPACE--3.4%
44,100 Lockheed Martin Corp. ............................. $ 3,704,400
60,000 Northrop Grumman Corp. ............................ 4,087,500
58,600 Raytheon Co. ..................................... 3,025,225
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10,817,125
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AUTOMOTIVE & RELATED--2.3%
60,214 Chrysler Corp. .................................... 3,733,268
67,000 General Motors Corp. .............................. 3,509,125
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7,242,393
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BANKS--4.4%
57,100 Chase Manhattan Corp. ............................ 4,032,687
51,200 NationsBank Corp. ................................ 4,230,400
105,500 Norwest Corp. .................................... 3,679,313
9,066 Wells Fargo & Co. ................................ 2,165,641
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14,108,041
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CHEMICALS--3.7%
53,000 E.I. Du Pont de Nemours & Co. .................... 4,193,625
87,500 PPG Industries, Inc. ............................. 4,265,625
76,700 Praxair, Inc. .................................... 3,240,575
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11,699,825
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COMPUTERS & BUSINESS EQUIPMENT--1.2%
204,200 EMC Corp. (c) .................................... 3,803,225
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CONGLOMERATES--2.3%
74,500 Allied Signal, Inc. .............................. 4,255,812
100,000 Philips Electronics N.V. ......................... 3,262,500
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7,518,312
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ELECTRIC UTILITIES--1.1%
200,100 Edison International ............................. 3,526,763
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ELECTRONIC COMPONENTS--2.1%
63,900 Intel Corp. ...................................... 4,692,656
39,000 Texas Instruments, Inc. .......................... 1,945,125
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6,637,781
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FINANCIAL SERVICES--3.5%
43,000 Federal Home Loan Mortgage Corp. ................. 3,676,500
122,000 Federal National Mortgage Association ............ 4,087,000
111,100 Green Tree Financial Corp. ....................... 3,471,875
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11,235,375
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FOOD--AGRIBUSINESS--1.3%
127,300 Panenergy Corp. .................................. 4,184,988
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FOOD & BEVERAGES--1.2%
138,300 IBP, Inc. ........................................ 3,820,538
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FREIGHT TRANSPORTATION--4.0%
49,600 Burlington Northern Santa Fe ..................... 4,011,400
190,900 Canadian Pacific, Ltd. ........................... 4,199,800
55,200 Federal Express Corp. (c) ........................ 4,526,400
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12,737,600
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GAS & PIPELINE UTILITIES--0.7%
55,900 El Paso Natural Gas Co. .......................... 2,152,150
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HEALTH CARE--DRUGS--1.1%
136,400 Glaxo Wellcome PLC (ADR) (d) ...................... 3,648,700
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HEALTH CARE--SERVICES--0.8%
224,500 Bevery Enterprises, Inc. ......................... 2,694,000
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HOUSEHOLD PRODUCTS--1.4%
72,000 Premark International, Inc. ...................... 1,332,000
72,000 Tupperware Corp. ................................. 3,042,000
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4,374,000
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HOUSING & BUILDING MATERIALS--3.6%
65,500 Armstrong World Industries, Inc. ................. 3,774,438
98,300 Black & Decker Corp. ............................. 3,796,837
131,000 Masco Corp. ...................................... 3,962,750
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11,534,025
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INSURANCE--5.0%
89,800 ACE, Ltd. ........................................ 4,220,600
69,400 Chubb Corp. ...................................... 3,461,325
163,100 Everest Reinsurance Holdings, Inc. ............... 4,220,212
95,500 Providian Corp. .................................. 4,094,563
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15,996,700
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LEISURE TIME--2.7%
152,200 American Greetings Corp. ......................... 4,166,475
155,400 Carnival Corp. ................................... 4,487,175
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8,653,650
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OIL--2.4%
117,900 Repsol S.A. (ADR) (d) ............................. 4,097,025
129,200 Ultramar Corp. ................................... 3,746,800
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7,843,825
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PACKAGING--1.3%
94,500 Crown Cork and Seal Co., Inc. .................... 4,252,500
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RETAIL--FOOD & DRUG--4.0%
183,100 Eckerd Corp. (c) ................................. 4,142,637
111,600 Kroger Co. (c) ................................... 4,408,200
107,500 Melville Corp. ................................... 4,353,750
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12,904,587
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TELECOMMUNICATION--3.7%
125,100 DSC Communications Corp. (c) ..................... 3,768,637
87,300 GTE Corp. ........................................ 3,906,675
123,000 Pacific Telesis Group ............................ 4,151,250
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11,826,562
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TOBACCO--3.6%
46,200 Loews Corp. ...................................... 3,644,025
37,200 Philip Morris Companies, Inc. .................... 3,868,800
114,300 UST, Inc. ........................................ 3,914,775
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11,427,600
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Total Common Stock (Identified Cost $160,040,866) 194,640,265
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BONDS AND NOTES -- 35.7%
FACE
AMOUNT
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AEROSPACE--1.0%
$3,265,000 Lockheed Martin Corp. 6.550%, 5/15/99 ............. 3,259,613
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BANKS--3.4%
2,400,000 Bankers Trust New York Corp. 8.125%, 4/01/02 ...... 2,502,504
1,140,000 Chase Manhattan Corp. 10.000%, 6/15/99 ............ 1,238,040
1,100,000 Export, Import Bank of Japan 9.500%, 6/29/00 ...... 1,195,563
600,000 First Interstate Bancorp 12.750%, 5/01/97 ......... 631,308
600,000 First National Tennessee Corp. 10.375%, 6/01/99 ... 647,682
1,200,000 Household Bank 6.250%, 4/01/99 .................... 1,187,976
3,430,000 Mellon Bank 7.000%, 3/15/06 ....................... 3,343,118
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10,746,191
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CABLE & MEDIA--1.0%
3,270,000 TCI Communications, Inc. 7.250%, 6/15/99 .......... 3,277,619
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ENERGY--2.2%
3,700,000 Coastal Corp. 8.125%, 9/15/02 ..................... 3,857,583
2,975,000 Standard Oil Co. 9.000%, 6/01/19 .................. 3,111,463
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6,969,046
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FINANCE--5.2%
2,000,000 American General Corp. 9.625%, 7/15/00 ............ 2,183,220
1,000,000 Avalon Properties, Inc. 7.375%, 9/15/02 ........... 984,710
1,000,000 General Motors Acceptance Corp. 5.500%, 12/15/01 .. 924,190
1,650,000 Hertz Corp. 9.000%, 7/24/00 ....................... 1,761,688
1,700,000 Household International 5.250%, 10/15/98 .......... 1,647,113
1,430,000 International Lease Finance Corp. 8.040%, 12/01/97 1,464,320
2,000,000 International Lease Finance Corp. 8.125%, 1/15/98 . 2,052,180
940,000 International Lease Finance Corp. 6.350%, 11/07/01 911,979
2,425,000 Secured Finance 9.050%, 12/15/04 .................. 2,670,386
2,100,000 World Omni Automobile Lease Finance Corp. 6.550%,
6/25/02 ......................................... 2,093,280
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16,693,066
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GOVERNMENT AGENCY--1.8%
2,575,000 Federal Home Loan Bank 3.508%, 11/23/98 (e) ....... 2,399,333
750,000 Federal Home Loan Mortgage Corp. 7.750%, 10/15/98 . 764,295
2,100,000 Federal Home Loan Mortgage Corp. 7.500%, 7/15/20 .. 2,113,776
500,000 Federal Home Loan Mortgage Corp. 8.000%, 7/15/21 .. 504,685
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5,782,089
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HEALTH CARE--1.3%
1,775,000 Columbia/HCA Healthcare Co. 8.020%, 8/05/02 ....... 1,854,591
3,050,000 Hospital Corp. of America, Zero Coupon, 6/01/00 ... 2,341,516
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4,196,107
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INDUSTRIALS--1.0%
2,000,000 Tektronix Inc. 7.625%, 8/15/02 .................... 2,012,800
1,200,000 Williams Holdings Co. 6.250%, 2/01/06 ............. 1,102,704
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3,115,504
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INSURANCE--0.7%
1,095,000 Progressive Corp. 10.000%, 12/15/00 ............... 1,210,391
1,000,000 USF&G Corp. 8.375%, 6/15/01 ....................... 1,051,270
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2,261,661
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LEISURE & LODGING--2.1%
1,750,000 Carnival Cruise Lines, Inc. 7.050%, 5/15/05 ....... 1,708,490
3,000,000 La Quinta Inns, Inc. 7.400%, 9/15/05 .............. 2,850,000
2,000,000 Royal Caribbean Cruise Lines 8.125%, 7/28/04 ...... 2,015,880
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6,574,370
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MEDIA & ENTERTAINMENT--0.6%
1,710,000 Time Warner Entertainment Co. 8.875%, 10/01/12 .... 1,784,624
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MORTGAGE--2.5%
3,802,000 Federal Home Loan Mortgage Association 6.500%,
7/15/10 ......................................... 3,627,982
3,868,058 Federal Home Loan Mortgage Association 6.000%,
8/15/22 ......................................... 3,324,093
1,000,000 Federal Home Loan Mortgage Association 6.500%,
3/15/23 ......................................... 906,250
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7,858,325
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MORTGAGE BACKED--4.7%
1,165,000 Federal National Mortgage Association, Zero Coupon,
10/10/01 ........................................ 1,142,970
1,000,000 Federal National Mortgage Association 8.050%,
5/20/04 ......................................... 1,001,960
317,686 Federal National Mortgage Association 7.500%,
6/01/15 ......................................... 317,324
3,000,000 Federal National Mortgage Association 6.000%,
2/25/24 ......................................... 2,480,100
2,065,000 General Electric Capital Mortgage Services, Inc.
10.000%, 3/25/24 (e) ............................ 2,168,250
67,249 Mortgage Securities III Trust 9.000%, 4/01/10 ..... 69,087
3,000,000 Paine Webber CMO Trust 9.000%, 10/20/03 ........... 3,077,790
575,000 Westam Mortgage Financial Corp. 8.950%, 8/01/18 ... 613,628
4,000,000 Westam Mortgage Financial Corp. 9.400%, 12/01/18 .. 4,318,720
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15,189,829
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PAPER--0.3%
500,000 Westvaco Corp. 9.650%, 3/01/02 .................... 550,825
500,000 Westvaco Corp. 10.300%, 1/15/19 ................... 534,045
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1,084,870
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RAILROADS & EQUIPMENT--0.3%
1,000,000 CSX, Inc. 6.800%, 6/01/09 ......................... 961,140
------------
RETAIL--1.2%
3,390,000 Federated Department Stores, Inc. 8.500%, 6/15/03 . 3,402,001
500,000 Sears Roebuck & Co. 9.300%, 4/15/98 ............... 524,685
------------
3,926,686
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SECURITIES--1.9%
1,500,000 Donaldson Lufkin & Jenrette, Inc. 6.875%, 11/01/05 1,421,550
1,500,000 Lehman Brothers Holdings, Inc. 8.875%, 11/01/98 ... 1,562,850
3,150,000 Smith Barney Holdings, Inc. 5.500%, 1/15/99 ....... 3,067,060
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6,051,460
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TECHNOLOGY--1.5%
3,410,000 Digital Equipment Corp. 8.625%, 11/01/12 .......... 3,435,814
1,300,000 Southern Bell Telephone & Telegraph Co. 7.625%,
3/15/13 ......................................... 1,285,037
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4,720,851
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TELECOMMUNICATION--0.2%
500,000 Central Telephone Co. 9.280%, 11/27/00 ............ 543,495
------------
TRANSPORTATION--1.5%
2,000,000 American Airlines 10.180%, 1/02/13 ................ 2,289,940
1,000,000 Delta Air Lines, Inc. 7.790%, 12/01/98 ............ 1,017,700
500,000 Delta Air Lines, Inc. 9.530%, 11/17/99 ............ 530,670
600,000 Delta Air Lines, Inc. 9.200%, 9/23/14 ............. 657,912
350,000 U.S. Air, Inc. 10.700%, 1/15/07 ................... 360,703
------------
4,856,925
------------
UTILITIES--0.4%
1,250,000 Detroit Edison Co. 6.340%, 3/15/00 ................ 1,225,425
------------
YANKEE/SUPRANATIONAL--0.9%
600,000 Hydro Quebec 6.520%, 2/23/06 ...................... 562,746
2,450,000 SKF AB 7.625%, 7/15/03 ............................ 2,457,815
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3,020,561
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Total Bonds and Notes (Identified Cost
$114,165,788) ................................... 114,099,457
------------
SHORT TERM INVESTMENT -- 2.9%
9,215,000 Associates Corp. of North America 5.450% 7/01/96 .. 9,215,000
------------
Total Short Term Investment (Identified Cost
$9,215,000) ..................................... 9,215,000
------------
Total Investments--99.4% (Identified Cost
$283,421,654) (b) ............................... 317,954,722
Other assets less liabilities .................... 2,058,059
------------
Total Net Assets--100% ............................ $320,012,781
============
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1996 the net unrealized
appreciation on investments based on cost of $283,421,654
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 ......... $38,369,632
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ......... (3,836,564)
-----------
Net unrealized appreciation ................................ $34,533,068
===========
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued
by a U.S. bank representing the right to receive securities
of the foreign issuer described. The values of ADRs are
significantly influenced by trading on exchanges not located
in the United States or Canada.
(e) Floating rate notes are instruments whose interest rates vary
with changes in a designated base rate on a specific date.
These notes reset quarterly based upon a specific index.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1996
(unaudited)
ASSETS
Investments at value .............................. $317,954,722
Cash .............................................. 472
Receivable for:
Fund shares sold ................................ 404,653
Securities sold ................................. 580,378
Dividends and interest .......................... 2,041,237
Foreign taxes ................................... 3,829
Prepaid registration expense ...................... 9,000
------------
320,994,291
LIABILITIES
Payable for:
Securities purchased ............................ $201,762
Fund shares redeemed ............................ 420,996
Withholding taxes ............................... 2,527
Dividends declared .............................. 37,683
Accrued expenses:
Management fees ................................. 190,848
Deferred trustees' fees ......................... 51,280
Accounting and administrative ................... 3,530
Other expenses .................................. 72,884
--------
981,510
------------
NET ASSETS .......................................... $320,012,781
============
Net Assets consist of:
Capital paid in ................................. $270,941,105
Undistributed net investment income ............. 36,050
Accumulated net realized gains .................. 14,502,558
Unrealized appreciation on investments .......... 34,533,068
------------
NET ASSETS .......................................... $320,012,781
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A
shares ($202,343,495 divided by 15,012,025 shares
of beneficial interest) ...... .................... $13.48
======
Offering price per share (100/94.25 of $13.48) ...... $14.30*
======
Net asset value and offering price of Class B shares
($48,483,396 divided by 3,615,100 shares of
beneficial interest) .............................. $13.41**
======
Net asset value and offering price of Class C shares
($1,818,897 divided by 135,924 shares of
beneficial interest) .............................. $13.38
======
Net asset value and offering price of Class Y shares
($67,366,993 divided by 4,994,695 shares of
beneficial interest) .............................. $13.49
======
Identified cost of investments ...................... $283,421,654
============
*Based upon single purchases of less than $50,000.
Reduced sales charges apply for purchases in excess of this amount.
**Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996
(unaudited)
INVESTMENT INCOME
Dividends .................................. $ 2,135,394(a)
Interest ................................... 4,583,468
-----------
6,718,862
Expenses
Management fees .......................... $1,130,461
Service fees--Class A .................... 249,501
Service and distribution fees--Class B ... 221,887
Service and distribution fees--Class C ... 5,288
Trustees' fees and expenses .............. 12,089
Accounting and administrative ............ 24,762
Custodian ................................ 49,794
Transfer agent ........................... 298,138
Audit and tax services ................... 23,000
Legal .................................... 9,394
Printing ................................. 26,590
Registration ............................. 39,471
Miscellaneous ............................ 2,203
----------
Total expenses ............................. 2,092,578
-----------
Net investment income ...................... 4,626,284
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on Investments--net .......... 8,630,658
Unrealized depreciation on Investments--net (713,049)
-----------
Net gain on investment transactions ........ 7,917,609
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ... $12,543,893
===========
(a) Net of foreign taxes of: $38,893.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(unaudited)
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ -------------
FROM OPERATIONS
Net investment income ...................... $ 8,602,825 $ 4,626,284
Net realized gain on investments ........... 19,279,791 8,630,658
Unrealized appreciation (depreciation) on
investments .............................. 31,334,849 (713,049)
------------ ------------
Increase in net assets from operations ..... 59,217,465 12,543,893
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A .................................. (5,712,466) (3,142,015)
Class B .................................. (810,141) (565,464)
Class C .................................. (10,773) (14,139)
Class Y .................................. (1,783,679) (1,166,225)
Net realized gain on investments
Class A .................................. (8,998,651) 0
Class B .................................. (1,694,413) 0
Class C .................................. (23,154) 0
Class Y .................................. (2,594,417) 0
------------ ------------
(21,627,694) (4,887,843)
------------ ------------
Increase in net assets derived from capital
share transactions ....................... 40,291,424 15,352,981
------------ ------------
Total increase in net assets ............... 77,881,195 23,009,031
NET ASSETS
Beginning of the period .................... 219,122,555 297,003,750
------------ ------------
End of the period .......................... $297,003,750 $320,012,781
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................... $ 0 $ 297,609
============ ============
End of the period .......................... $ 297,609 $ 36,050
============ ============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
CLASS A
---------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $ 8.11 $10.15 $11.16 $12.13 $11.27 $13.14
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............................ 0.30 0.30 0.31 0.33 0.42 0.20
Net Realized and Unrealized Gain (Loss)
on Investments ................................. 2.05 1.10 1.26 (0.65) 2.49 0.35
------ ------ ------ ------ ------ ------
Total From Investment Operations ................. 2.35 1.40 1.57 (0.32) 2.91 0.55
------ ------ ------ ------ ------ ------
Less Distributions
Dividends From Net Investment Income ............. (0.30) (0.30) (0.31) (0.33) (0.40) (0.21)
Distributions From Net Realized Capital
Gains .......................................... 0.00 (0.09) (0.29) (0.21) (0.64) 0.00
Distributions From Paid-in Capital ............... (0.01) 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total Distributions .............................. (0.31) (0.39) (0.60) (0.54) (1.04) (0.21)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................... $10.15 $11.16 $12.13 $11.27 $13.14 $13.48
====== ====== ====== ====== ====== ======
Total Return (%) (b) ............................. 29.2 13.9 14.2 (2.7) 26.3 4.2
Ratio of Operating Expenses to
Average Net Assets (%) ......................... 1.53 1.48 1.40 1.40 1.36 1.34(a)
Ratio of Net Investment Income to
Average Net Assets (%) ......................... 3.18 2.84 2.66 2.91 3.37 3.00(a)
Portfolio Turnover Rate (%) ...................... 51 38 50 36 54 71(a)
Average Commission Rate (c) ...................... -- -- -- -- -- $ 0.0103
Net Assets, End of Period (000) .................. $67,467 $90,527 $158,308 $158,332 $196,514 $202,343
<FN>
(a) Computed on an annualized basis.
(b) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized.
(c) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share
for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares
traded on a principal basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------- ------------------------------
SEPTEMBER 13(a) SIX MONTHS SIX MONTHS
THROUGH YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1995 1996
---------------- ------------- ------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . $12.16 $12.11 $11.24 $13.08 $11.24 $13.05
------ ------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income ................ 0.16 0.26 0.34 0.15 0.35 0.18
Net Realized and Unrealized Gain
(Loss) on Investments .............. 0.24 (0.66) 2.46 0.35 2.44 0.32
------ ------ ------ ------ ------ ------
Total From Investment
Operations ......................... 0.40 (0.40) 2.80 0.50 2.79 0.50
------ ------ ------ ------ ------ ------
Less Distributions
Dividends From Net
Investment Income .................. (0.16) (0.26) (0.32) (0.17) (0.34) (0.17)
Distributions From Net
Realized Capital Gains ............. (0.29) (0.21) (0.64) 0.00 (0.64) 0.00
------ ------ ------ ------ ------ ------
Total Distributions .................. (0.45) (0.47) (0.96) (0.17) (0.98) (0.17)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ....... $12.11 $11.24 $13.08 $13.41 $13.05 $13.38
====== ====== ====== ====== ====== ======
Total Return (%) (c) ................. 3.3 (3.4) 25.3 3.8 25.2 3.8
Ratio of Operating Expenses to Average
Net Assets (%) 2.36(b) 2.15 2.11 2.09(b) 2.11 2.09(b)
Ratio of Net Investment
Income to Average Net
Assets (%) ......................... 1.92(b) 2.62 2.25(b) 2.62 2.25(b)
Portfolio Turnover Rate (%) 50 36 54 71(b) 54 71(b)
Average Commission Rate (d) .......... -- -- -- $0.0103 -- $0.0103
Net Assets, End of Period (000) ...... $4,691 $21,607 $40,361 $48,483 $718 $1,819
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A contingent deferred sales charge in the case of Class B shares is not reflected in total return calculations. Periods less
than one year are not annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share
for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares
traded on a principal basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLASS Y
---------------------------------------------------------
MARCH 8(a) SIX MONTHS
THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
---------------- ---------------- ---------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $12.20 $11.27 $13.15
------ ------ ------
Income From Investment Operations
Net Investment Income ..................................... 0.38 0.46 0.22
Net Realized and Unrealized Gain (Loss) on Investments .... (0.72) 2.51 0.36
------ ------ ------
Total From Investment Operations .......................... (0.34) 2.97 0.58
------ ------ ------
Less Distributions
Dividends From Net Investment Income ...................... (0.38) (0.45) (0.24)
Distributions From Net Realized Capital Gains ............. (0.21) (0.64) 0.00
------ ------ ------
Total Distributions ....................................... (0.59) (1.09) (0.24)
------ ------ ------
Net Asset Value, End of Period ............................ $11.27 $13.15 $13.49
====== ====== ======
Total Return (%) (c) ...................................... (2.8) 26.8 4.4
Ratio of Operating Expenses to Average Net Assets (%) ..... 0.99(b) 1.11 0.89(b)
Ratio of Net Investment Income to Average Net Assets (%) .. 3.69(b) 3.62 3.45(b)
Portfolio Turnover Rate (%) ............................... 36 54 71(b)
Average Commission Rate (d) ............................... -- -- $0.0103
Net Assets, End of Period (000) ........................... $39,183 $59,411 $67,367
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Periods less than one year are not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate
per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs,
or spreads on shares traded on a principal basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1996
(unaudited)
1. The Fund is a Series of New England Funds Trust I, a Massachusetts business
trust (the "Trust"), and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (each such series of shares a
"Fund").
The Fund offers Class A, Class B, Class C and Class Y shares. The Fund
commenced its public offering of Class B shares on September 13, 1993, of
Class C shares on December 30, 1994 and of its Class Y shares on March 8,
1994. Class A shares are sold with a maximum front end sales charge of 5.75%.
Class B shares do not pay front end sales charge, but pay a higher ongoing
distribution fee than Class A shares 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 a front end or contingent deferred sales
charge and do not convert to any other class of shares, but they do pay a
higher ongoing distribution fee than Class A shares. Class Y shares do not pay
a front end sales charge, a contingent deferred sales charge or distribution
fees. They are intended for institutional investors with a minimum of
$1,000,000 to invest. Expenses of the Fund are borne pro-rata by the holders
of each class of shares, except that each class bears expenses unique to that
class (including the Rule 12b-1 service and distribution fees applicable to
such class), and votes as a class only with respect to its own Rule 12b-1
plan. Shares of each class would receive their pro-rata share of the net
assets 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. Debt securities (other
than short-term obligations with a remaining maturity of less than sixty days)
are valued on the basis of valuations furnished by a pricing service, selected
by the Fund's adviser as authorized by the Board of Trustees, which service
determines valuations for normal, institutional-size trading units of such
securities using market information, transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders. Short-term obligations with a remaining maturity of
less than sixty days are stated at amortized cost, which approximates value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Interest income for the Fund is increased by
the accretion of discount. In determining net gain or loss on securities sold,
the cost of securities has been determined on the identified cost basis.
C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The timing and characterization of
certain income and capital gains distributions are determined in accordance
with federal tax regulations which may differ from generally accepted
accounting principles. Permanent book and tax differences are primarily due to
differing treatments for mortgage backed securities, real estate limited
partnership investments and market discount transactions.
E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to
100% of the repurchase price. The Fund's subadviser is responsible for
determining that the value of the collateral is at all times at least equal to
the repurchase price. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for
the Fund for the six months ended June 30, 1996 were as follows:
PURCHASES SALES
------------------------------------- --------------------------------
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
------------------- ---------------- --------------- ---------------
$10,481,242 $109,346,641 $21,050,949 $86,582,297
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
The Fund pays management fees to its investment adviser, New England Funds
Management L.P. ("NEFM") at the annual rate of 0.75% of the first $200 million
of the Fund's average daily net assets, 0.70% of the next $300 million and
0.60% of such assets in excess of $500 million. NEFM pays the Fund's
investment subadviser, Loomis Sayles & Company, L.P. at the rate of 0.535% of
the first $200 million of the Fund's average daily net assets, 0.350% of the
next $300 million and 0.300% of such assets in excess of $500 million. Certain
officers and directors of NEFM and Loomis Sayles & Company, L.P. are also
officers or trustees of the Fund. NEFM and Loomis Sayles & Company, L.P. are
wholly owned subsidiaries of New England Investment Companies, L.P., ("NEIC")
which is a subsidiary of New England Mutual Life Insurance Company. Fees
earned by NEFM and Loomis Sayles & Company, L.P. under the management
agreement in effect during the six months ended June 30, 1996 are as follows:
FEES EARNED
- -----------
$406,104 New England Funds Management, L.P.
$724,357 Loomis Sayles & Company, L.P.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New
England Funds"), the Fund's distributor, is a wholly owned subsidiary of NEIC
and performs certain accounting and administrative services for the Fund. The
Fund reimburses New England Funds for all or part of New England Funds'
expenses of providing these services which include the following: (i) expenses
for personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the Fund,
(ii) expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and notices,
proxy solicitation material furnished to shareholders of the Fund or
regulatory authorities and reports and questionnaires for SEC compliance, and
(iii) registration, filing and other fees in connection with requirements of
regulatory authorities. For the six months ended June 30, 1996 these expenses
amounted to $24,762 and are shown separately in the financial statements as
accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds, L.P. ("New England Funds") is the
transfer and shareholder servicing agent for the Fund. For the six months
ended June 30, 1996, the Fund paid New England Funds $225,638 as compensation
for its services in that capacity.
D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act,
the Trust has adopted a Service Plan relating to the Fund's Class A Shares
(the "Class A Plan") and Service and Distribution Plans relating to the Fund's
Class B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, the Fund pays New England Funds a monthly service fee
at the annual rate of up to 0.25% of the average daily net assets attributable
to the Fund's Class A shares, as reimbursement for expenses (including certain
payments to securities dealers, who may be affiliated with New England Funds)
incurred by the New England Funds in providing personal services to investors
in Class A shares and/or the maintenance of shareholder accounts. For the six
months ended June 30, 1996, the Fund paid New England Funds $249,501 in fees
under the Class A Plan. If the expenses of New England Funds that are
otherwise reimbursable under the Class A Plan incurred in any year exceed the
amounts payable by the Fund under the Class A Plan, the unreimbursed amount
(together with unreimbursed amounts from prior years) may be carried forward
for reimbursement in future years in which the Class A Plan remains in effect.
The amount of unreimbursed expenses carried forward at June 30, 1996 is
$2,041,399.
Under the Class B and Class C Plans, the Fund pays New England Funds monthly
service fees at the annual rate of up to 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses (including certain payments to securities
dealers, who may be affiliated with New England Funds) incurred by New England
Funds in providing personal services to investors in Class B and Class C
shares and/or the maintenance of shareholder accounts. For the six months
ended June 30, 1996, the Fund paid New England Funds $55,472 and $1,322 in
service fees under the Class B and Class C plans, respectively.
Also under the Class B and Class C Plan, the Fund pays New England Funds a
monthly distribution fee at the annual rate of up to 0.75% of the average
daily net assets attributable to the Fund's Class B and Class C shares, as
compensation for services provided and expenses (including certain payments to
securities dealers, who may be affiliated with New England Funds) incurred by
New England Funds in connection with the marketing or sale of Class B and
Class C shares. For the six months ended June 30, 1996, the Fund paid New
England Funds $166,415 and $3,966 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 in shares of the Fund during the six months
ended June 30, 1996 amounted to $421,910.
E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation
directly to its officers or trustees who are directors, officers or employees
of Loomis-Sayles, New England Funds, NEIC or their affiliates, other than
registered investment companies. Each other trustee is compensated by the Fund
as follows:
Annual Retainer $2,263
Meeting Fee $114/meeting
Committee Meeting Fee $68/meeting
Committee Chairman Retainer $140/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. CAPITAL SHARES. At June 30, 1996 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>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
---------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 2,351,242 $ 29,575,711 1,184,186 $ 15,870,741
Shares issued in connection with the reinvestment of:
Dividends from net investment income ............. 431,380 5,458,656 224,735 3,007,379
Distributions from net realized gain ............. 676,500 8,677,748 0 0
--------- ------------ --------- ------------
3,459,122 43,712,115 1,408,921 18,878,120
Shares repurchased ................................. (2,555,776) (31,998,569) (1,349,932) (18,072,947)
--------- ------------ --------- ------------
Net increase ....................................... 903,346 11,713,546 58,989 805,173
--------- ------------ --------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
---------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 1,299,583 16,346,011 678,581 9,050,853
Shares issued in connection with the reinvestment of:
Dividends from net investment income ............. 60,310 762,503 40,199 535,345
Distributions from net realized gain ............. 127,576 1,630,289 0 0
--------- ------------ --------- ------------
1,487,469 18,738,803 718,780 9,586,198
Shares repurchased ................................. (325,054) (4,030,921) (189,057) (2,523,032)
--------- ------------ --------- ------------
Net increase ....................................... 1,162,415 14,707,882 529,723 7,063,166
--------- ------------ --------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
---------------------------- ----------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 62,310 785,919 86,717 1,156,258
Shares issued in connection with the reinvestment of:
Dividends from net investment income ............. 760 9,669 969 12,878
Distributions from net realized gain ............. 1,599 20,420 0 0
--------- ------------ --------- ------------
64,669 816,008 87,686 1,169,136
Shares repurchased ................................. (9,679) (122,769) (6,752) (89,955)
--------- ------------ --------- ------------
Net increase ....................................... 54,990 693,239 80,934 1,079,181
--------- ------------ --------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
---------------------------- ----------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
- ------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 1,420,697 $ 17,832,342 749,617 $ 10,069,733
Shares issued in connection with the reinvestment of:
Dividends from net investment income ............. 140,440 1,780,695 87,089 1,166,225
Distributions from net realized gain ............. 202,067 2,594,422 0 0
--------- ------------ --------- ------------
1,763,204 22,207,459 836,706 11,235,958
Shares repurchased ................................. (723,075) (9,030,702) (359,313) (4,830,497)
--------- ------------ --------- ------------
Net increase ....................................... 1,040,129 13,176,757 477,393 6,405,461
--------- ------------ --------- ------------
Increase derived from capital share transactions ... 3,160,880 $ 40,291,424 1,147,039 $ 15,352,981
========= ============ ========= ============
</TABLE>
<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
retirememt 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
Years Growth of Monthly Investments
0 $0
5 $3,661
10 $9,040
15 $16,943
20 $28,555
25 $45,618
Monthly investments of $100
Years Growth of Monthly Investments
0 $0
5 $7,322
10 $18,079
15 $33,886
20 $57,111
25 $91,236
Monthly investments of $200
Years Growth of Monthly Investments
0 $0
5 $14,643
10 $36,158
15 $67,772
20 $114,222
25 $182,472
Monthly investments of $500
Years Growth of Monthly Investments
0 $0
5 $36,608
10 $90,396
15 $169,429
20 $285,555
25 $456,181
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.
<PAGE>
- -----------------------------------------------------------------------------
NEW ENGLAND FUNDS
- -----------------------------------------------------------------------------
STOCK FUNDS
Growth Fund
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
INTERNATIONAL STOCK FUNDS
Growth Fund of Israel
International Equity Fund
Star Worldwide 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.
VISIT OUR WORLD WIDE WEB SITE AT HTTP://WWW.MUTUALFUNDS.COM
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>
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NEW ENGLAND FUNDS BULK RATE
Where The Best Minds Meet(TM) U.S. POSTAGE
PAID
BROCKTON, MA
PERMIT NO. 770
--------------
- ---------------------
399 Boylston Street
Boston, Massachusetts
02116
- ---------------------
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