[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
Where the Best Minds Meet(TM)
- ------------------------------------
Annual Report and Performance Update
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NEW ENGLAND GOVERNMENT SECURITIES FUND
- -----------------
December 31, 1995
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<PAGE>
January 31, 1996
DEAR SHAREHOLDER,
It's a real pleasure to present to you the 1995 Annual Report for New
England Government Securities Fund, containing your portfolio manager's
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 & Poor's 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 industry's most respected managers, Dan Fuss was named
1995's "Bond Fund Manager of the Year" by Morningstartrademark for his past
record of accomplishment in fund management at Loomis Sayles.**
* Standard & Poor's 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 "providing the highest
tier of service excellence in the mutual fund industry."
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 year's stellar performance. At this time it's
worth reiterating that long-term investors should not focus on one year's
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 manager's 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>
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New England Government Securities Fund
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INVESTMENT RESULTS THROUGH DECEMBER 31, 1995
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities
index measures the performance of a theoretical portfolio. Unlike a fund,
the index is unmanaged; there are no expenses that affect the results.
In addition, few investors could purchase all of the securities necessary
to match the index. And if they could, they would incur transaction costs
and other expenses.
A $10,000 INVESTMENT IN CLASS A SHARES
COMPARED TO THE LEHMAN GOVERNMENT BOND INDEX(4) AND THE COST OF LIVING(5)
A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Lehman Government Bond Index
(4) and
the Cost of Living (5). The data points from the graph are as follows:
<TABLE>
<CAPTION>
NEW ENGLAND GOVERNMENT SECURITIES FUND - NET ASSET VALUE(1)
Year Amount
- ---- ------
<S> <C>
1995 $21,602
1994 $17,997
1993 $19,044
1992 $17,472
1991 $16,359
1990 $14,243
1989 $13,483
1988 $12,975
1987 $11,251
1986 $11,229
9/16/85 $10,000
NEW ENGLAND GOVERNMENT SECURITIES FUND - WITH MAXIMUM SALES CHARGE(2)
Year Amount
- ---- ------
<S> <C>
1995 $20,630
1994 $17,187
1993 $18,187
1992 $16,686
1991 $15,623
1990 $13,602
1989 $12,876
1988 $11,436
1987 $10,745
1986 $10,724
9/16/85 $10,000
LEHMAN GOVERNMENT BOND INDEX(4)
Year Amount
- ---- ------
<S> <C>
1995 $24,511
1994 $20,714
1993 $21,437
1992 $19,372
1991 $18,066
1990 $15,664
1989 $14,408
1988 $12,613
1987 $11,784
1986 $11,531
9/16/85 $10,000
COST OF LIVING(5)
Year Amount
- ---- ------
<S> <C>
1995 $14,055
1994 $13,697
1993 $13,340
1992 $12,983
1991 $12,617
1990 $12,242
1989 $11,537
1988 $11,025
1987 $10,558
1986 $10,110
9/16/85 $10,000
This illustration represents past performance of Class A shares and cannot
predict future results. Investment return and principal value may vary,
resulting in a gain or loss on the sale of shares. Class B and Class Y share
performance will be greater or less than that shown based on differences in
inception date, fees and sales charges. All Index and Fund performance assumes
reinvested distributions.
<PAGE>
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New England Government Securities Fund
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AVERAGE ANNUAL TOTAL RETURNS 12/31/95
</TABLE>
<TABLE><CAPTION>
<S> <C> <C> <C>
CLASS A (INCEPTION 9/16/85) 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 20.03% 8.69% 8.01%
With Max. Sales Charge(2) 14.65 7.68 7.51
Lipper General Gov't. Average(6) 17.34 8.38 8.18
CLASS B (INCEPTION 9/23/93) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 19.24% 4.49%
With CDSC(3) 15.24 3.29
Lehman Gov't. Bond Index(4) 18.33 5.98
Lipper General Gov't. Average(6) 17.34 4.99
CLASS Y (INCEPTION 3/31/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 20.31% 9.80%
Lehman Gov't. Bond Index(4) 18.33 9.69
<FN>
These returns represent past performance. Investment return and principal
value will fluctuate so that shares, upon redemption, may be worth more or
less than original cost. Class Y shares are available only to certain
institutional investors. Share price and return may vary.
NOTES TO CHARTS AND PERFORMANCE UPDATE
1 Net Asset Value (NAV) performance assumes reinvestment of all
distributions and does not reflect the payment of a
sales charge at the time of purchase.
2 With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 4.50% 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 Lehman Government Bond Index is an unmanaged index of bonds issued by
the U.S. government and its agencies having maturities between one and
ten years. The Index performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges
applicable to mutual fund investments.
5 Cost of Living is based on the Consumer Price Index, a widely recognized
measure of the cost of goods and services in the United States,
calculated
by the U.S. Bureau of Labor Statistics.
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.
</TABLE>
<PAGE>
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New England Government Securities Fund
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[PHOTO]
NEW ENGLAND GOVERNMENT
SECURITIES FUND
Portfolio Manager: Eric Gutterson,
Back Bay Advisors, L.P.
THE MARKET
The bond market rallied strongly in 1995, offering fixed income investors
handsome returns after a disappointing 1994. Slow economic growth, low
inflation and an accommodative Federal Reserve Board fueled the
spectacular comeback. American business, consumers and the federal government
each played a dynamic role.
Among corporations, increased productivity added value without increasing
inflation, thanks in large part to growing computerization.
Consumers, especially the baby boom generation, began to spend less and save
more, creating an ample, inexpensive source of long-term capital to fund
non-inflationary economic growth. Lower consumer spending also
contributed to the low inflationary environment.
The federal government's initial moves toward a balanced budget were
encouraging to overseas investors who were strong supporters of the U.S.
market all year. Additionally, interest rate cuts by the Federal Reserve
helped maintain slow, steady non-inflationary economic growth.
<PAGE>
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New England Government Securities Fund
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HOW YOUR FUND PERFORMED
Shareholders in New England Government Securities Fund participated in the
rise of the bond market in 1995. The Fund had a total return of 20.03% on
net asset value for Class A shares, compared to 18.33% for the Lehman
Government Bond Index.4 We increased dividends twice during the year, first
in January and again in October.
YOUR FUND'S INVESTMENT STRATEGY
Beginning in January 1995, we managed the Fund with the belief that interest
rates would decline in 1995 and produce a market rally. This led us to
overweight non-callable Treasuries and maintain a portfolio duration longer
than that of comparable mutual funds.*
As we expected, rates did decline and direct U.S. Treasury obligations
performed well throughout the year. We increased the Fund's position in
these securities substantially during the first quarter, and made no
reductions until the fall.
Simultaneously, we de-emphasized callable agency obligations and
mortgage-backed instruments which tend to underperform when the market
rallies strongly.
We ended 1994 with a duration of 5 years, then in the first quarter of 1995,
assumed a more bullish posture by extending it to a total of 8 years. In
anticipation of
* Non-callable bonds cannot be "called in" by the issuer when rates drop.
Duration is a commonly used measure of the Fund's sensitivity to interest
rate changes. The longer the duration, the more the Fund's price will
fluctuate as interest rates move.
<PAGE>
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New England Government Securities Fund
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tougher market conditions ahead, we grew more cautious in the fourth quarter,
reducing duration to 6 years in the belief that the majority of current
interest rate moves was near completion.
During the fourth quarter, we owned securities across the yield curve,
overweighting short and long maturities while underweighting intermediate
maturities. This provided a defensive posture in a period of market
consolidation.
INVESTMENT OUTLOOK
We do not believe the bond market will be as strong in 1996 as it was this
past year, but look for rates to
continue to drop if factors such as corporate cost cutting, higher consumer
saving rates and diminished government spending continue to dominate the
market. Initially, we expect to see a saw tooth performance pattern where
interest rates may fluctuate within a limited range before declining again.
A balanced budget will probably slow the economy
further because it will reduce the economic stimulus that
government spending sometimes provides. A recession is unlikely, but the
economy may grow weaker by the middle of 1996, as it reacts to sluggish
domestic demand, slowing worldwide growth and ongoing consumer concerns about
corporate downsizing.
As a result, we will be less inclined to extend duration as much as we did in
1995. We predict rates will fall somewhat further, so we intend to continue
to maintain a
<PAGE>
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New England Government Securities Fund
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duration that is longer than our peer group's. Depending on market
conditions, we will consider lowering the percentage of non-callable Treasury
securities and increasing the weighting of callable asset- and mortgage-
backed securities. The latter may outperform Treasuries in the less volatile
interest rate environment we anticipate.
As always, the Fund will seek to deliver positive total returns and maintain
attractive dividend yields for shareholders.
Please see page 7 for
an illustration and
explanation of the
yield curve.
<PAGE>
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New England Government Securities Fund
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TREASURY YIELD CURVE
The "yield curve" illustrates the yields available on U.S. Treasury
securities of varying maturities, ranging from
3-month Treasury bills to 30-year Treasury bonds. Under normal conditions, a
security with a longer maturity will offer a higher yield than a shorter term
security, to compensate the bond holder for tying up money for longer periods
of time. The chart below illustrates the yield curve at the beginning and at
the end of 1995. As you can see, long-term rates dropped substantially, with
the 30-year bond falling almost two percentage points, from 7.88% to 5.95%.
THE YIELD CURVE JANUARY-DECEMBER, 1995
[A chart in the form of a line graph appears here, illustrating the yield curve
of U.S. Treasury securities as of the beginning of 1995 and as of the end of
December 1995. The data points from the graph are as follows:]
As of 1/2/95:
Maturity Yield
- --------- ------
3 Month 5.68%
6 Month 6.50%
1 Year 7.16%
3 Year 7.78%
5 Year 7.83%
10 Year 7.83%
30 Year 7.88%
As of 12/29/95:
Maturity Yield
- --------- ------
3 Month 5.07%
6 Month 5.15%
1 Year 5.13%
3 Year 5.21%
5 Year 5.37%
10 Year 5.57%
30 Year 5.95%
Source: Bloomberg
What caused this dramatic drop? Over the year it became apparent that the
economy was growing at a more subdued pace and that inflation remained under
control. (Inflation is the bond market's primary enemy because it eats away
at the value of fixed income investments). The markets responded
enthusiastically, driving down long term rates. Bond prices, which move in
the opposite direction from interest rates, moved sharply upwards in an
impressive rebound from 1994's market decline.
<PAGE>
[LOGO OF NEW ENGLAND FUNDS APPEARS HERE]
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Portfolio Composition, Financial Statements and Highlights
- --------------------------------------------------------------------------------
NEW ENGLAND
GOVERNMENT SECURITIES
FUND
- -----------------
December 31, 1995
- -----------------
<PAGE>
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PORTFOLIO COMPOSITION
- ------------------------------------------------------------------------------
Investments as of December 31, 1995
BONDS AND NOTES--97.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION
VALUE (A)
- --------------------------------------------------------------------------------
- ---------
<S> <C> <C>
GOVERNMENT AGENCIES--6.2%(B)
$ 481,052 Government National Mortgage Association 8.500%, 2/15/2006..... $
505,408
1,011,619 Government National Mortgage Association 9.000% with various
maturities to 2016...........................................
1,072,630
362,332 Government National Mortgage Association 9.500% with various
maturities to 2009...........................................
389,166
826,926 Government National Mortgage Association 10.000% with various
maturities to 2016...........................................
897,300
1,069,629 Government National Mortgage Association 12.000% with various
maturities to 2015...........................................
1,244,112
2,248,778 Government National Mortgage Association 12.500% with various
maturities to 2015...........................................
2,650,748
1,031,436 Government National Mortgage Association 13.000% with various
maturities to 2015...........................................
1,231,922
479,730 Government National Mortgage Association 13.250% with various
maturities to 2014...........................................
578,223
696,855 Government National Mortgage Association 13.500% with various
maturities to 2014...........................................
843,195
395,521 Government National Mortgage Association 14.000% with various
maturities to 2014...........................................
485,006
---
- ---------
9,897,710
---
- ---------
U.S. GOVERNMENT--91.6%
34,750,000 U.S. Treasury Bonds 11.750%, 2/15/2001.........................
44,554,712
21,500,000 U.S. Treasury Bonds 9.875%, 11/15/2015.........................
31,092,655
30,025,000 U.S. Treasury Bonds 9.250%, 2/15/2016..........................
41,290,080
16,500,000 U.S. Treasury Notes 9.375%, 4/15/1996..........................
16,692,225
11,500,000 U.S. Treasury Notes 9.250%, 8/15/1998..........................
12,616,765
---
- ---------
146,246,437
---
- ---------
Total Bonds and Notes (Identified Cost $152,080,625)...........
156,144,147
---
- ---------
<PAGE>
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PORTFOLIO COMPOSITION--continued
- ------------------------------------------------------------------------------
Investments as of December 31, 1995
SHORT-TERM INVESTMENT--0.2%
FACE
AMOUNT DESCRIPTION
VALUE(A)
- --------------------------------------------------------------------------------
- --------------
$ 410,000 Household Finance Corp. 5.650%, 1/02/1996...................... $
409,936
--
- ---------
Total Short-Term Investment (Identified Cost $409,936).........
409,936
--
- ---------
Total Investments--98.0% (Identified Cost $152,490,561) (c)....
156,554,083
Cash and Receivables...........................................
3,805,984
Liabilities....................................................
(635,471)
--
- ---------
Total Net Assets--100%.........................................
$159,724,596
=============
<FN>
(a) See Note 1a.
(b) The Fund's investments in mortgage backed securities of the Government
National Mortgage Association are interests in separate pools of
mortgages. All separate investments of each of these issues, which
have the same coupon rate, have been aggregated for the purpose of
presentation in the schedule of investments.
(c) Federal Tax Information: At December 31, 1995 the net unrealized
appreciation on investments based on cost for federal income tax
purposes of $152,490,561 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost............................. $
4,090,594
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value.............................
(27,072)
---
- -------
Net unrealized appreciation........................................... $
4,063,522
==========
At December 31, 1995 the Fund had a capital loss carryover of
approximately $7,302,000 which expires December 31, 2002. This may be
available to offset future realized capital gains, if any, to the
extent provided by regulations.
</TABLE>
<PAGE>
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STATEMENT OF ASSETS & LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments at value..........................................
$156,554,083
Cash..........................................................
4,834
Receivable for:
Fund shares sold............................................
113,285
Accrued interest............................................
3,680,865
Prepaid registration expense..................................
7,000
--
- ---------
160,360,067
LIABILITIES
Payable for:
Fund shares redeemed........................................ $ 259,204
Dividends declared.......................................... 158,126
Accrued expenses:
Management fees............................................. 87,457
Deferred trustees' fees..................................... 42,379
Accounting and administrative............................... 3,790
Other expenses.............................................. 84,515
-------
635,471
--
- ---------
$159,724,596
===========
NET ASSETS
Net Assets consist of:
Capital paid in.............................................
$162,854,305
Undistributed net investment income.........................
110,228
Accumulated net realized losses.............................
(7,303,459)
Unrealized appreciation on investments......................
4,063,522
--
- ---------
NET ASSETS......................................................
$159,724,596
===========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($147,503,235 divided by 12,575,018 shares of beneficial
interest).....................................................
$11.73
=====
Offering price per share (100/95.50 of $11.73 ).................
$12.28*
=====
Net asset value and offering price of Class B shares
($4,857,616 divided by 413,680 shares of beneficial
interest).....................................................
$11.74**
=====
Net asset value and offering price of Class Y shares
($7,363,745 divided by 628,802 shares of beneficial
interest).....................................................
$11.71
=====
Identified cost of investments..................................
$152,490,561
===========
<FN>
* Based upon single purchases of less than $100,000. Reduced sales charges
apply for purchases in excess of these amounts.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
</TABLE>
<PAGE>
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STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
Year Ended December 31, 1995
<TABLE>
<S> <C>
<C>
INVESTMENT INCOME
Interest.....................................................
$12,482,172
Expenses
Management fees............................................ $ 1,008,846
Service fees--Class A...................................... 366,630
Service and distribution fees--Class B..................... 37,075
Trustees' fees and expenses................................ 24,802
Accounting and administrative.............................. 50,822
Custodian.................................................. 128,121
Transfer agent............................................. 333,590
Audit and tax services..................................... 46,800
Legal...................................................... 20,147
Printing................................................... 41,948
Registration............................................... 43,315
Miscellaneous.............................................. 12,463
2,114,559
----------
- ----------
Net investment income........................................
10,367,613
REALIZED and UNREALIZED GAIN (LOSS) on INVESTMENTS, OPTIONS and
FUTURES CONTRACTS
Realized gain (loss) on:
Investments--net............................................. 12,023,382
Options--net................................................. (1,517,534)
Futures contracts--net....................................... 1,025,812
----------
Total realized gain on investments, options and futures
contracts.................................................. 11,531,660
Unrealized appreciation on:
Investments--net........................................... 6,486,892
----------
Net gain on investment transactions..........................
18,018,552
- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.....................
$28,386,165
==========
</TABLE>
<PAGE>
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STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR
ENDED
DECEMBER 31,
DECEMBER 31,
1994
1995
------------ -------
- -------
FROM OPERATIONS
<S> <C> <C>
Net investment income................................. $ 11,300,782 $
10,367,613
Net realized gain (loss) on investment transactions... (19,482,114)
11,531,660
Unrealized appreciation (depreciation) on
investments......................................... (1,649,028)
6,486,892
----------- ------
- -------
Increase (decrease) in net assets from operations..... (9,830,360)
28,386,165
----------- ------
- -------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A............................................. (10,319,365)
(9,617,397)
Class B............................................. (128,881)
(214,648)
Class Y............................................. (224,780)
(347,523)
----------- ------
- -------
(10,673,026)
(10,179,568)
----------- ------
- -------
Decrease in net assets derived from capital share
transactions........................................ (8,338,702)
(13,330,766)
----------- ------
- -------
Total increase (decrease) in net assets............... (28,842,088)
4,875,831
NET ASSETS
Beginning of the year................................. 183,690,853
154,848,765
----------- ------
- -------
End of the year....................................... $154,848,765
$159,724,596
===========
=============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year................................. $ 0 $
35,432
===========
=============
End of the year....................................... $ 35,432 $
110,228
===========
=============
</TABLE>
<PAGE>
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FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------
- ------------
YEAR ENDED DECEMBER 31,
1991 1992 1993 1994
1995
------- ------- ------- ------
- - -------
<S> <C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Period....... $ 11.38 $ 11.92 $ 11.73 $
11.75 $ 10.43
-------- -------- -------- ------
- -- --------
Income From Investment Operations
Net Investment Income.................... 0.82 0.70 0.72
0.69 0.74
Net Realized and Unrealized Gain (Loss) on
Investments.............................. 0.75 0.07 0.32
(1.32) 1.29
-------- -------- -------- ------
- -- --------
Total From Investment Operations........... 1.57 0.77 1.04
(0.63) 2.03
-------- -------- -------- ------
- -- --------
Less Distributions
Distributions From Net Investment Income... (0.82) (0.68) (0.72)
(0.69) (0.73)
Distributions From Net Realized Capital
Gains.................................... (0.21) (0.28) (0.30)
0.00 0.00
-------- -------- -------- ------
- -- --------
Total Distributions........................ (1.03) (0.96) (1.02)
(0.69) (0.73)
-------- -------- -------- ------
- -- --------
Net Asset Value, End of Period............. $ 11.92 $ 11.73 $ 11.75 $
10.43 $ 11.73
======== ======== ========
======== ========
Total Return (%)........................... 14.9 6.8 9.0
(5.5) 20.0
Ratio of Operating Expenses to Average
Net Assets (%)........................... 1.21 1.23 1.22
1.29 1.35
Ratio of Net Investment Income to Average
Net Assets (%)........................... 7.28 5.92 5.70
6.66 6.69
Portfolio Turnover Rate (%)................ 305 730 276
809 559
Net Assets, End of Period (000)............ $180,198 $178,030 $182,436
$147,986 $147,503
</TABLE>
<PAGE>
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FINANCIAL HIGHLIGHTS--continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
CLASS Y
--------------------------------------- ------------
- -----------
SEPTEMBER 23(A) YEAR YEAR MARCH 31(A)
YEAR
THROUGH ENDED ENDED THROUGH
ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
DECEMBER 31,
1993 1994 1995 1994
1995
--------------- ----------- ----------- -----------
- -----------
<S> <C> <C> <C> <C>
<C>
Net Asset Value,
Beginning of
Period............. $12.26 $11.75 $10.43 $11.20
$10.44
------ ------ ------ ------
- ------
Income From
Investment
Operations
Net Investment
Income............. 0.16 0.60 0.65 0.54
0.80
Net Realized and
Unrealized Gain
(Loss) on
Investments........ (0.30) (1.32) 1.30 (0.77)
1.26
------ ------ ------ ------
- ------
Total From Investment
Operations......... (0.14) (0.72) 1.95 (0.23)
2.06
------ ------ ------ ------
- ------
Less Distributions
Distributions From
Net Investment
Income............. (0.16) (0.60) (0.64) (0.53)
(0.79)
Distributions From
Net Realized
Capital
Gains.............. (0.21) 0.00 0.00 0.00
0.00
------ ------ ------ ------
- ------
Total
Distributions...... (0.37) (0.60) (0.64) (0.53)
(0.79)
------ ------ ------ ------
- ------
Net Asset Value, End
of Period.......... $11.75 $10.43 $11.74 $10.44
$11.71
====== ====== ====== ======
======
Total Return (%)..... (1.2)(c) (6.2) 19.2 (2.0)(c)
20.3
Ratio of Operating
Expenses to Average
Net Assets (%)..... 1.97(b) 2.04 2.10 0.93(b)
1.10
Ratio of Net
Investment Income
to Average
Net Assets (%)..... 5.03(b) 5.91 5.94 7.25(b)
6.94
Portfolio Turnover
Rate (%)........... 276 809 559 809
559
Net Assets, End of
Period (000)....... $1,255 $2,760 $4,858 $4,104
$7,364
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
December 31, 1995
1. The Fund is a series of The 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, and Class Y shares. The Fund commenced its
public offering of Class B shares on September 23, 1993, and of Class Y shares
on March 31, 1994. Class A shares are sold with a maximum front end sales
charge of 4.50%. Class B shares do not pay a front end sales charge, but pay a
higher ongoing distribution fee than Class A shares for eight years (at which
point they automatically convert to Class A shares), and are subject to a
contingent deferred sales charge if those shares are redeemed within five
years of purchase. Class 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 all classes 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. The Fund's investment adviser, Back Bay Advisors, L.P.
("Back Bay Advisors"), under the supervision of the Fund's trustees,
determines the value of the Fund's portfolio of securities, using valuations
provided by a pricing service selected by Back Bay Advisors and other
information with respect to transactions in securities, including quotations
from securities dealers. Valuations of securities and other assets owned by
the Fund for which market quotations are readily available are based on those
quotations. Short-term obligations that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value as determined in good
faith by Back Bay Advisors under the supervision of the Fund's trustees.
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
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. Interest income is increased by the accretion of discount.
Interest income is decreased by the amortization of acquisition premium on
original issue discount securities. In determining net gain or loss on
securities sold, the cost of securities has been determined on the identified
cost basis.
C. OPTIONS AND FUTURES. CALLS AND PUTS. The Fund may write (sell) call and
put options on securities to manage its exposure to interest rates and the
bond market. Buying futures, writing puts, and buying calls tend to increase
the fund's exposure to the underlying instrument. Selling futures, buying
puts, and writing calls tend to decrease the fund's exposure to the underlying
instrument, or hedge other fund investments. When a fund writes a call or put
option, an amount equal to the premium received by the fund is included in the
fund's statement of assets and liabilities as an asset and as an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. The current value of a
written option is the closing price on the principal exchange on which such
option is traded. If an option which the fund has written expires on its
stipulated expiration date, or if the fund enters into a closing purchase
transaction, the fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which
the fund has written is exercised, the fund realizes a capital gain or loss
from the sale of the underlying security and the proceeds from such sale are
increased by the premium originally received. If a put option which the fund
has written is exercised, the amount of the premium originally received will
reduce the cost of the security which the fund purchases upon exercise of the
option.
The premium paid by a fund for the purchase of a call or a put option is
included in the asset section of the fund's statement of assets and
liabilities as an investment and subsequently adjusted to the current market
value of the option. The current value of a purchased option is the closing
price on the principal exchange on which such option is traded. If an option
which the fund has purchased expires on the stipulated expiration date, the
fund will realize a loss in the amount of the cost of the option. If the fund
enters into a closing sale transaction, the fund will realize a gain or loss,
depending on whether the sales proceeds from the closing sale transaction are
greater or less than the cost of the option. If the fund exercises a purchased
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. If the fund exercises a purchased call option, the cost of
the security which the fund purchases upon exercise will be increased by the
premium originally paid.
The risk in writing a call option is that the fund gives up the opportunity of
profit if the market price of the underlying security increases above the
strike price. The risk in
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
writing a put option is that the fund may incur a loss if the market price of
the security decreases and the option is exercised. The fund also has the
additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist. The fund also may write
over-the-counter options where the completion of the obligation is dependent
upon the credit standing of the other party.
D. INTEREST RATE FUTURES CONTRACTS. The Fund may enter into interest rate
futures contracts to hedge against changes in the values of securities the
fund owns or expects to purchase. An interest rate futures contract is an
agreement between two parties to buy and sell a debt security for a set price
(or to deliver an amount of cash) on a future date. Upon entering into such a
contract, the purchasing fund is required to pledge to the broker an amount of
cash, U.S. Government securities or other high quality debt securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded, currently up to $3,000 per contract. Pursuant to the
contract, the fund agrees to receive from or pay to the broker involved in the
transaction an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin," and are
recorded by the fund as unrealized gains or losses. When the contract is
closed, the fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that changes in the value
of the contract may not correlate with changes in the value of the underlying
securities.
E. 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily
to shareholders of record at the time and are paid monthly.
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. These differences
are primarily due to differing treatment for mortgaged backed securities for
book and tax purposes. Permanent book and tax basis differences will result in
reclassification to the capital accounts.
G. 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. Back Bay Advisors 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
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities.
H. DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities on a
forward commitment basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities and
the date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for
the year ended December 31, 1995 were as follows:
Purchases Sales
------------ ------------
U.S. U.S.
Government Government
------------ ------------
$851,615,600 $858,265,242
Investments in written options for the Fund for the year ended December 31,
1995 are summarized as follows:
<TABLE>
<CAPTION>
Written Options
-----------------------
Number of Premiums
Contracts Received
--------- ---------
<S> <C> <C>
Contracts opened............................. 1,150 $ 380,027
Contracts closed............................. (1,150) (380,027)
-------- ---------
0 $ 0
======== =========
</TABLE>
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, Back Bay Advisors. Certain officers and directors of the
adviser and its affiliated companies are also officers or trustees of the
Fund. Back Bay Advisors is a wholly owned subsidiary of New England Investment
Companies, L.P. ("NEIC"), which is a majority owned subsidiary of New England
Mutual Life Insurance Company. The management agreement in effect during the
year ended December 31, 1995 provided for fees as set forth below:
Annual
Fees Earned Percentage Rate Annual Net Asset Value Levels
- ---------- ------------------ ------------------------------
$1,008,846 0.650% the first $200 million
0.625% the next $300 million
0.600% the excess over $500 million
Effective January 1, 1996, New England Funds Management, L.P. became the
adviser for the Fund with the aforementioned adviser being retained as the
Fund's sub-adviser.
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds L.P. ("New
England Funds"), the Fund's distributor, 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
year ended December 31, 1995 these expenses amounted to $50,822 and are shown
separately in the financial statements as accounting and administrative
services.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent to the Fund. For the year ended December 31, 1995, the Fund
paid New England Funds $247,032 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 a Service and Distribution Plan relating to the
Fund's Class B shares (the "Class B Plan").
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 New England Funds in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts. For the year
ended December 31, 1995, the Fund paid New England Funds $366,630 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 into 1996 is $1,583,658.
Under the Class B 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 B 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 shares and/or the maintenance of
shareholder accounts. For the year ended
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
December 31, 1995, the Fund paid New England Funds $9,269 in service fees
under the Class B Plan.
Also under the Class B 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 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 shares. For the year ended
December 31, 1995, the Fund paid New England Funds $27,806 in distribution
fees under the Class B Plan.
Commissions (including contingent deferred sales charges) on Fund shares paid
to New England Funds by investors in shares of the Fund during the year ended
December 31, 1995 amounted to $224,332.
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 Back Bay Advisors, 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 Annual Retainer $125
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>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--continued
- ------------------------------------------------------------------------------
December 31, 1995
4. CAPITAL SHARES. At December 31, 1995 there was an unlimited number of
shares of beneficial interest authorized, divided into three classes: Class A,
Class B and Class Y capital stock. Transactions in capital shares were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR
ENDED
DECEMBER 31, 1994 DECEMBER
31, 1995
----------------------- ------------
- -----------
CLASS A SHARES AMOUNT SHARES
AMOUNT
- ------- --------- ----------- ---------
- -----------
<S> <C> <C> <C>
<C>
Shares sold....................... 1,707,576 $ 19,003,399 1,068,035
$ 11,814,179
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income........................ 813,974 8,906,248 750,226
8,348,543
--------- ----------- ---------
- -----------
2,521,550 27,909,647 1,818,261
20,162,722
Shares repurchased................ (3,859,299) (42,427,673) (3,428,266)
(37,859,136)
--------- ----------- ---------
- -----------
Net decrease...................... (1,337,749) $(14,518,026) (1,610,005)
$(17,696,414)
========= =========== =========
===========
YEAR ENDED YEAR
ENDED
DECEMBER 31, 1994 DECEMBER
31, 1995
----------------------- ------------
- -----------
CLASS B SHARES AMOUNT SHARES
AMOUNT
- ------- --------- ----------- ---------
- -----------
<S> <C> <C> <C>
<C>
Shares sold....................... 233,553 $ 2,587,547 177,242
$ 1,973,019
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income........................ 9,080 98,541 14,498
162,005
--------- ----------- ---------
- -----------
242,633 2,686,088 191,740
2,135,024
Shares repurchased................ (84,746) (907,115) (42,705)
(477,235)
--------- ----------- ---------
- -----------
Net increase...................... 157,887 $ 1,778,973 149,035
$ 1,657,789
========= =========== =========
===========
YEAR ENDED YEAR
ENDED
DECEMBER 31, 1994 DECEMBER
31, 1995
----------------------- ------------
- -----------
CLASS Y SHARES AMOUNT SHARES
AMOUNT
- ------- --------- ----------- ---------
- -----------
<S> <C> <C> <C>
<C>
Shares sold....................... 503,105 $ 5,576,530 319,873
$ 3,655,072
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income........................ 20,659 222,025 30,819
344,793
--------- ----------- ---------
- -----------
523,764 5,798,555 350,692
3,999,865
Shares repurchased................ (130,704) (1,398,204) (114,950)
(1,292,006)
--------- ----------- ---------
- -----------
Net increase...................... 393,060 $ 4,400,351 235,742
$ 2,707,859
========= =========== =========
===========
Decrease derived from capital
share transactions.............. (786,802) $ (8,338,702) (1,225,228)
$(13,330,766)
========= =========== =========
===========
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of NEW ENGLAND GOVERNMENT SECURITIES
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 Government Securities
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 the financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibly 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, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1996
<PAGE>
- ------------------------------------------------------------------------------
SHAREHOLDER MEETING
- ------------------------------------------------------------------------------
At a special shareholders' meeting held on December 28, 1995, shareholders of
the New England Government Securities Fund voted for the following proposals:
<TABLE>
<CAPTION>
VOTED VOTED ABSTAINED BROKER
TOTAL
FOR AGAINST VOTES NON-VOTES
VOTES
------------- ----------- ----------- ---------
- - -------------
<S> <C> <C> <C> <C>
<C>
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............ 7,082,227.492 180,819.018 337,462.065
7,600,508.575
============= =========== ===========
2. To approve a new Advisory
Agreement between the Fund
and New England Funds
Management, L.P.
("NEFM").................. 6,993,490.600 211,602.853 366,958.122
28,457.000 7,600,508.575
============= =========== ===========
==========
3. To approve a related Sub-
Advisory Agreement between
NEFM and such Fund's
current investment
adviser................... 6,933,168.541 217,490.881 421,392.153
28,457.000 7,600,508.575
============= =========== ===========
==========
</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
retirement or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England Funds' automatic investment program,
you can invest as little as $50 a month in your New England Fund
automatically -
without even writing a check. And, as you can see from the chart below, your
monthly investments can really add up over time.
THE POWER OF MONTHLY INVESTING
[A line graph appears here, illustrating the hypothetical accumulation of
monthly investments at an 8% annual rate of return. The data points of the graph
are as follows:]
Monthly investments of $50
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>
- -----------------------------------------------------------------------
Saving For Retirement
- -----------------------------------------------------------------------
An Early Start Can Make a Big Difference
With today's lengthening life spans, you may be retired for 20 years or more
after you complete your working career. Living these retirement years the way
you've dreamed of will require considerable financial resources. While it's
never too late to start a retirement savings program, it's certainly never
too early: The sooner you begin, the longer the time your money has to grow.
The chart below illustrates this point dramatically. One investor starts at
age 30, saves for just 10 years, then leaves the investment to grow. The
second investor starts 10 years later but saves much longer - for 25 years,
in fact. Can you guess which investor accumulates the greater retirement nest
egg?
For the answer, look at the chart.
AN EARLY START CAN MAKE A BIG DIFFERENCE
[A chart in the form of a line graph appears here, comparing the growth of
investments made for 10 years by an investor who begins investing at age 30 to
the growth of investments made for twenty-five years by an investor who begins
investing at age 40. A hypothetical appreciation of 10% is assumed. The data
points from the graph are as follows:]
Investor A - Begins at age 30 for 10 years:
Age Growth of Investments
30 $2,000
35 $15,431
40 $35,062
45 $90,943
55 $146,464
60 $235,882
65 $379,890
Investor B - Begins investing at age 40 for 25 years:
Age Growth of Investments
40 $2,000
45 $15,431
50 $37,062
55 $71,899
60 $128,005
65 $216,364
Assumes 10% hypothetical appreciation. For illustrative purposes only and not
indicative of future performance of any New England Fund.
Investor A invested $20,000, less than half of investor B's commitment - and
for less than half the time. Yet investor A wound up with a much greater
retirement nest egg. The reason? It's all thanks to an early start.
New England Funds has prepared a number of informative retirement planning
guides. Call your financial representative or New England Funds today, and
ask for the guide that best fits your personal needs.
<PAGE>
- --------------------------------------------------------------------------------
- --
INFORMATION ON CALL
- --------------------------------------------------------------------------------
- --
You Can Call New England Funds Day or Night
Do you like to keep on top of your New England Funds but can't always
call us during regular business hours? With Tele#Facts, New England Funds'
24-hours a day automated telephone system, you can call us any time that's
convenient for you - day or night!
By calling 1-800-346-5984 from any Touch-ToneRegistration Mark telephone, you
can:
- - Check the current value of your New England Fund account
- - Find out the current yield and total return on any New England Fund
- - Buy, sell or exchange fund shares
Just remember to have these four items with you before calling:
1. YOUR PERSONAL IDENTIFICATION NUMBER which is the last four digits of
your Social Security number
2. THE FUND NUMBER - two- or three-digit number listed on the Tele#Facts
wallet card
3. FUNCTION NUMBER - listed on the Tele#Facts wallet card
4. ACCOUNT NUMBER - listed on all your statements
You can get the information you need to use Tele#Facts from the back of your
statement. If you need another Tele#Facts wallet card or have questions about
getting started, please call us at 1-800-225-5478.
So go ahead and give Tele#Facts a try. We think you'll enjoy this easy-to-use
and convenient service from New England Funds!
<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 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
Where the best Minds Meet[TM]
399 Boylston Street
Boston, Massachusetts
02116
[ARTWORK]
QUALITY
TESTED SERVICE
1996
DALBAR
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Permit No. 770
399 Boylston Street
Boston, Massachusetts
02116
GS56
<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
"See accompanying notes to financial statements") 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, and similar graphic symbols are omitted.
(7) Page numbering is different.
