<PAGE>
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SEMIANNUAL REPORT
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[Logo](R)
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
New England
Equity Income Fund
[graphic omitted]
WHERE
THE BEST
MINDS
MEET(R)
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JUNE 30, 1999
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<PAGE>
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AUGUST 1999
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[Photo of Bruce R. Speca]
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"Most investment professionals I know agree that proper asset allocation is a
bedrock principle of sound investing."
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Dear Shareholder,
Performance results for the New England Family of Funds were driven mainly by
two important changes that took place in our financial markets during the first
half of 1999. First, the long, upward climb of large-capitalization stocks
slowed dramatically as attention turned to stocks with more reasonable
valuations. Then, bond investors grew fearful that our persistently strong
economy would lead the Federal Reserve Board to impose higher interest rates.
Your manager's commentary on the following pages details how these trends
affected your fund's strategy and performance.
As I watch investments come in and out of favor, I'm reminded of the importance
of asset allocation - the practice of dividing your portfolio among different
kinds of stocks and bonds. The idea is to own more or less of each investment
type according to your feelings about risk and your investment time horizon.
Most investment professionals I know agree that proper asset allocation is a
bedrock principle of sound investing. In addition to broadening diversification,
it seeks to avoid exposure to narrow market segments and can help reduce
volatility.
While a diversified portfolio may have given solid returns during the past year,
many investors were disappointed when they compared those returns to the
performance of large-company growth stocks or to the soaring returns of Internet
stocks. Suddenly, investors were asking: Is asset allocation dead?
Certainly not! Like so much in life, market cycles are inevitable. Different
categories of investments will be popular at different times, and a sensible
asset allocation program can help you as market trends change.
I know it can be tempting to jump on a bandwagon and go after "easy money." But
I encourage you, instead, to maintain a rational, long-term perspective and to
consult your financial representative regularly to review and fine-tune your
investments, including a well-diversified asset allocation program.
Thank you for your continued interest. We look forward to helping you achieve
your long-term financial objectives.
Sincerely,
/s/ Bruce R. Speca
Bruce R. Speca
President and CEO
<PAGE>
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NEW ENGLAND EQUITY INCOME FUND
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INVESTMENT RESULTS THROUGH JUNE 30, 1999
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Putting Performance in Perspective
The charts comparing your Fund's performance to a benchmark index provide 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 below 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 and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
Your Fund's benchmark has changed from the Standard & Poor's Composite Index of
500 Stocks ("S&P 500")4 to the Russell 1000 Value Index5 to better reflect its
investment goal, strategy and the type of stocks normally included in the
portfolio.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
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[A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares since New England Equity Income Fund's
inception on 11/28/95, compared to the S&P 500 Index and the Russell 1000 Value
Index. The data points from the graph are as follows:]
DECEMBER 1995 (INCEPTION) THROUGH JUNE 1999
NET MAXIMUM S&P RUSSELL 1000
ASSET SALES 500 VALUE
VALUE(1) CHARGE(2) INDEX(3) INDEX(5)
- -------------------------------------------------------------------------------
12/95 $10,000 $ 9,425 $10,000 $10,000
6/96 $11,003 $10,370 $11,008 10,748
12/96 $12,661 $11,933 $12,290 12,164
6/97 $14,174 $13,359 $14,821 14,315
12/97 $15,528 $13,359 $16,385 16,444
6/98 $16,473 $14,173 $19,280 18,444
12/98 $15,943 $13,716 $21,057 19,016
6/99 $15,863 $13,648 $23,660 21,463
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 C share
performance will differ from that shown based on differences in inception date,
fees and sales charges. All index and Fund performance assumes reinvestment of
distributions.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
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NEW ENGLAND EQUITY INCOME FUND
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AVERAGE ANNUAL TOTAL RETURNS - 6/30/99
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CLASS A (INCEPTION 11/28/95) 6 MONTHS 1 YEAR SINCE INCEPTION
Net Asset Value(1) 5.5% 2.1% 16.6%
With Maximum Sales Charge(2) -0.5 -3.7 14.7
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CLASS B (INCEPTION 9/15/97) 6 MONTHS 1 YEAR SINCE INCEPTION
Net Asset Value(1) 5.2% 1.4% 6.1%
With CDSC(3) 0.2 -3.6 4.0
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CLASS C (INCEPTION 9/15/97) 6 MONTHS 1 YEAR SINCE INCEPTION
Net Asset Value(1) 5.2% 1.5% 6.1%
With CDSC(3) 4.2 0.5 6.1
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<TABLE>
<CAPTION>
SINCE SINCE SINCE
FUND'S FUND'S FUND'S
CLASS A CLASS B CLASS C
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR INCEPTION INCEPTION INCEPTION
<S> <C> <C> <C> <C> <C>
S&P 5004 12.4% 22.7% 28.0% 25.4% 25.4%
Russell 1000 Value(5) 12.9 16.4 24.6 19.4 19.4
Lipper Equity Income Average(6) 9.0 11.4 19.0 13.2 13.2
Morningstar Large Value Average(7) 10.7 12.7 20.3 13.8 13.8
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</TABLE>
NOTES TO CHARTS
Fund performance for the period through May 31, 1999 reflects that of the prior
subadviser, Loomis, Sayles & Company, L.P. Vaughan, Nelson, Scarborough &
McCullough, L.P. (VNSM) is the subadviser beginning June 1, 1999.
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.
(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.
Returns would have been lower had sales charges been reflected.
(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
reinvestment of all distributions and, for Class B shares, assumes that a
maximum 5.00% sales charge is applied to redemptions of Class B shares. The
sales charge will decrease over time, declining to zero six years after the
purchase of shares. With CDSC performance for Class C shares assumes a
maximum 1.00% sales charge on redemptions within the first year of purchase.
(4) The S&P 500(r) is a market value-weighted unmanaged index of common stock
prices for 500 selected stocks, most of which are listed on the New York
Stock Exchange. It is a common measure of stock total return performance.
The performance of the index has not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to mutual
fund investments. It is not possible to invest directly in an index.
(5) Russell 1000 Value Index is an unmanaged index measuring the performance of
those Russell 1000 companies with lower price-to-book ratios and lower
forecasted growth values. The performance of the index has not been adjusted
for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. It is not possible to invest
directly in an index. Class B share since inception return is calculated
from 9/30/97.
(6) Lipper Equity Income Average is an average (calculated on the basis of net
asset value) of funds with similar investment objectives as calculated by
Lipper Inc., an independent mutual fund ranking service. Class A share since
inception return is calculated from 11/30/95. Class B and C share since
inception performance is calculated from 9/30/97.
(7) Morningstar Large Value Average is an average (calculated on the basis of
net asset value) of funds with similar investment objectives as calculated
by Morningstar, Inc., an independent mutual fund ranking service. Class A
share since inception return is calculated from 11/30/95. Class B and C
share since inception performance is calculated from 9/30/97.
<PAGE>
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NEW ENGLAND EQUITY INCOME FUND
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QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGERS
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On May 14, 1999 the Fund's Board of Trustees authorized Vaughan, Nelson,
Scarborough & McCullough, L.P (VNSM) to act as interim subadviser of New England
Equity Income Fund, starting June 1, 1999. VNSM succeeds Loomis, Sayles & Co.,
L.P. as the Fund's subadviser. Shareholders approved VNSM as the Fund's
subadviser in July 1999. VNSM is a Houston-based counseling firm of highly
experienced research-oriented professionals who have been managing portfolios in
the equity income style for more than 10 years. The following is an interview
with VNSM about the market and the Firm's investment strategy for the Fund.
- --------------------------------------------------------------------------------
Q. Please tell us about New England Equity Income Fund's performance during the
first half of 1999.
For the six months ending June 30, 1999, New England Equity Income Fund's Class
A shares at net asset value had a return of 5.5%. This return includes a $0.87
per share gain in net asset value and reinvested distributions of $0.10. The
Fund lagged the 12.4% return of the Standard & Poor's Composite Index of 500
Stocks (S&P 500) during the period, as investors continued to prefer growth
stocks over value stocks - the type the Fund primarily invests in.
While no benchmark is a perfect match for a managed fund, we intend to use the
Russell 1000 Value Index as a benchmark of the Fund's performance to better
reflect the Fund's investment goal and strategy, which remain the same.
Q. Describe the market environment in the first six months of 1999.
Investors were watching for signs of a rebound in overseas economies and the
possibility of increased demand for U.S.-produced goods and services. Expanded
demand often translates to higher prices, a possibility that triggered a
preemptive tightening of interest rates by the Federal Reserve Board, which
raised the Fed Funds Rate by one-quarter of a percent at the end of June. The
threat of higher rates and resulting pressure on corporate earnings may cause
investors to rethink their exposure to high-valuation growth stocks, the group
that has been the primary driver of the extended U.S. bull market.
In the first quarter of 1999, it seemed that owning growth and technology stocks
was the only way to invest profitably. However, continued economic strength
during the second quarter led some investors to companies in cyclical sectors
that could ride an economic upswing to higher profitability. The possibility of
higher interest rates and stronger growth also focused some renewed attention on
value-oriented stocks - those whose prices appear reasonable in terms of
potential earnings and other measures.
Q. What changes have you made since taking over management of the Fund?
Our objective is to produce positive risk-adjusted returns for the Fund's
shareholders with lower volatility than the Russell 1000 Value Index. The
market's tilt toward a greater cyclical focus presented us with an opportunity
to reposition the portfolio in line with our management style, which includes
representation in many sectors of the economy. Dividend yield is our primary
selection tool. Our dividend emphasis is relative; we do not target an absolute
level of yield. Instead, we prefer to invest in out-of-favor stocks with
attractive potential whose yields have risen relative to the market.
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YOUR FUND'S 10 LARGEST INVESTMENTS - 6/30/99
% OF
COMPANY NET ASSETS
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1. CHASE MANHATTAN 4.7
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2. PHARMACIA & UPJOHN, INC. 4.2
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3. AMERICAN GENERAL 4.1
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4. FEDERAL NATIONAL MORTGAGE ASSOCIATION 4.1
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5. ABBOTT LABORATORIES 4.0
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6. BANK OF NEW YORK COMPANY, INC. 3.8
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7. GTE CORP. 3.7
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8. MERCK & CO. 3.3
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9. PEPSICO, INC. 3.2
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10. BANK ONE CORP. 3.2
Portfolio holdings and asset allocation will vary.
- ------------------------------------------------------------------------------
We reduced the Fund's exposure to economically sensitive basic industries and
repositioned those assets into consumer staples and drugs, two areas that have
historically shown less sensitivity to changing economic cycles than many other
sectors. The Fund's commitment to financial companies is unchanged.
The portfolio now has less emphasis on medium-sized companies and more on
companies with larger capitalizations. We favor larger companies currently
because they are generally better able to maintain or increase profit margins
around the globe, thanks to their substantial resources and economies of scale.
Among the Fund's largest holdings at mid-year were drugmakers Abbott
Laboratories and Pharmacia & Upjohn and, in the financial sector, American
General, Chase Manhattan and Fannie Mae. Energy was represented by BP and Shell,
which may benefit from rising oil prices.
Q. What is your current outlook for the market and the Fund?
Our disciplined strategy is designed to discover attractive investment
opportunities for the Fund regardless of the market outlook.
Prices of many securities may already reflect the possible impact of higher
interest rates. Growing demand overseas and tight domestic labor markets could
rekindle inflation. We expect the Federal Reserve to be vigilant in controlling
inflation by slowing the growth rate of the U.S. economy. We have therefore
attempted to reduce the portfolio's exposure to a possible economic slowdown by
underweighting the most cyclical groups.
Overall, we believe that the companies in the portfolio are well positioned to
help improve results for the Fund's shareholders for the balance of 1999 and
into next year.
The portfolio managers' commentary reflects the conditions and actions taken
during the reporting period, which are subject to change. A shift in opinion may
result in strategic and other portfolio changes.
The Fund invests in foreign securities. Investing in foreign securities involves
special risks. These risks may increase share price volatility. See the Fund's
prospectus for details.
<PAGE>
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PORTFOLIO COMPOSITION
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Investments as of June 30, 1999
(unaudited)
COMMON STOCK - 98.8% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE (A)
- --------------------------------------------------------------------------------
AEROSPACE - 6.3%
10,000 Allied Signal, Inc. ......................... $ 630,000
8,900 General Dynamics Corp. ...................... 609,650
8,600 Northrop Grumman Corp. ...................... 570,287
-------------
1,809,937
-------------
AUTO PARTS - 0.0%
1 Delphi Automotive Systems Corp. ............. 19
-------------
AUTOMOTIVE - 2.3%
10,100 General Motors Corp. ........................ 666,600
-------------
BANKS - 14.4%
10,900 Bank America Corp. .......................... 799,106
30,000 Bank of New York Company, Inc. .............. 1,100,625
15,400 Bank One Corp. .............................. 917,263
15,500 Chase Manhattan ............................. 1,342,687
-------------
4,159,681
-------------
BUSINESS SERVICES - 2.0%
8,100 Dun & Bradstreet Corp. ...................... 287,044
5,100 Electronic Data Systems ..................... 288,469
-------------
575,513
-------------
CHEMICALS - 4.0%
9,400 Avery Dennison Corp. ........................ 567,525
8,600 E.l. du Pont de Nemours & Co. ............... 587,488
-------------
1,155,013
-------------
COMPUTERS & BUSINESS EQUIPMENT - 4.2%
12,200 Compaq Computer Corp. ....................... 288,988
6,100 Hewlett-Packard Co. ......................... 613,050
5,200 Xerox Corp. ................................. 307,125
-------------
1,209,163
-------------
DRUGS & HEALTH CARE - 13.3%
25,200 Abbott Laboratories ......................... 1,146,600
9,000 Baxter International, Inc. .................. 545,625
12,800 Merck & Co. ................................. 947,200
21,300 Pharmacia & Upjohn, Inc. .................... 1,210,106
-------------
3,849,531
-------------
ELECTRIC UTILITIES - 2.7%
14,300 Duke Power Co. .............................. 777,563
-------------
ELECTRICAL EQUIPMENT - 2.8%
7,100 General Electric Co. ........................ 802,300
-------------
FINANCIAL SERVICES - 6.1%
17,100 Federal National Mortgage Association ....... 1,169,212
7,500 GATX ........................................ 285,469
1,000 Hvide Capital Trust 144A .................... 5,750
3,700 Merrill Lynch & Company, Inc. ............... 295,769
-------------
1,756,200
-------------
FOOD & BEVERAGES - 12.3%
13,400 Brown-Forman Corp., Class B ................. 873,512
12,000 H.J. Heinz Co. .............................. 601,500
23,900 PepsiCo, Inc. ............................... 924,631
14,500 Philip Morris Cos ........................... 582,719
8,400 Quaker Oats Co. ............................. 557,550
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3,539,912
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FOREST PRODUCTS - 1.0%
4,300 Weyerhaeuser Co. ............................ 295,625
-------------
INSURANCE - 7.0%
15,700 American General ............................ 1,183,387
7,800 Chubb Corp. ................................. 542,100
6,900 HSB Group Inc. .............................. 284,194
-------------
2,009,681
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INTERNATIONAL OIL - 7.6%
5,200 BP Amoco plc ................................ 564,200
19,700 Shell Transport & Trading Co. (ADR) ......... 913,587
11,700 Texaco, Inc. ................................ 731,250
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2,209,037
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PETROLEUM SERVICES - 2.6%
11,900 Schlumberger, Ltd. .......................... 757,881
-------------
PHOTOGRAPHY - 2.1%
9,100 Eastman Kodak Co. ........................... 616,525
-------------
TELECOMMUNICATION - 8.1%
9,900 Ameritech Corp. ............................. 727,650
10,000 AT&T Corp. .................................. 558,125
14,000 GTE Corp. ................................... 1,060,500
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2,346,275
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Total Common Stock (Identified Cost $26,394,553) 28,536,456
-------------
SHORT TERM INVESTMENT - 1.4%
402,000 Repurchase Agreement with State Street Bank
and Trust Co. dated 06/30/99 at 4.000% to
be repurchased at $402,045 on 7/01/99,
collateralized by $365,000 U.S. Treasury
Bond at 7.500% due 11/15/2016 valued
at $410,625 ............................... 402,000
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Total Short Term Investment
(Identified Cost $402,000) ................ 402,000
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Total Investments - 100.2%
(Identified Cost $26,796,553) (b) ......... 28,938,456
Other assets less liabilities ............... (68,213)
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Total Net Assets - 100% ..................... $ 28,870,243
=============
(a) See Note 1a of Notes to Financial Statements.
(b) Federal Tax Information: At June 30, 1999, the net
unrealized appreciation on investments based on cost
of $26,796,553 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 .................................... $ 2,344,971
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value .................................. (203,068)
-------------
Net unrealized appreciation $ 2,141,903
=============
ADR/GDR An American Depository Receipt (ADR) or Global Depository Receipt
(GDR) is a certificate issued by a Custodian Bank representing
the right to receive securities of the foreign issuer described.
The values of ADRs and GDRs are significantly influenced by
trading on exchanges not located in the United States or Canada.
Rule 144A Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional
buyers. At the period end, the value of these amounted to $5,750
or 0.02% of net assets.
See accompanying notes to financial statements.
<PAGE>
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STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
(unaudited)
ASSETS
Investments at value
(Identified Cost $26,796,553) $ 28,938,456
Cash 94
Receivable for:
Fund shares sold 28,659
Securities sold 802,220
Dividends and interest 88,826
Miscellaneous 7,228
Unamortized organization expense 6,045
------------
29,871,528
LIABILITIES
Payable for:
Securities purchased $ 895,362
Fund shares redeemed 52,902
Withholding taxes 1,507
Accrued expenses:
Management fees 20,170
Deferred trustees' fees 1,732
Accounting and administrative 3,650
Other expenses 25,962
---------
1,001,285
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NET ASSETS $ 28,870,243
============
Net Assets consist of:
Capital paid in $ 26,948,734
Undistributed net investment income
(loss) 5,185
Accumulated net realized gains (losses) (225,579)
Unrealized appreciation (depreciation)
on investments 2,141,903
------------
NET ASSETS $ 28,870,243
============
Computation of net asset value and
offering price:
Net asset value and redemption price of
Class A shares ($14,746,775 / 797,513
shares of beneficial interest) $ 18.49
============
Offering price per share
(100 / 94.25 of $18.49) $ 19.62*
============
Net asset value and offering price of
Class B shares ($12,398,248 / 670,596
shares of beneficial interest) $ 18.49**
============
Net asset value and offering price of
Class C shares ($1,725,220 / 93,265
shares of beneficial interest) $ 18.50
============
* 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>
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STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1999
(unaudited)
INVESTMENT INCOME
Dividends (net of foreign taxes of $3,586) $ 394,493
Interest 9,074
------------
403,567
Expenses
Management fees $ 106,906
Service fees - Class A 18,753
Service and distribution fees - Class B 67,074
Service and distribution fees - Class C 9,219
Trustees' fees and expenses 3,665
Accounting and administrative 11,198
Custodian 26,422
Transfer agent 63,233
Audit and tax services 10,450
Legal 1,244
Printing 6,497
Registration 29,257
Amortization of organization expense 2,308
Insurance 270
Miscellaneous 7,080
---------
Total expenses 363,576
Less expenses waived by the investment
adviser and subadvisers (77,274) 286,302
--------- ------------
Net investment income 117,265
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on investments - net 483,409
---------
Unrealized appreciation (depreciation) on:
Investments - net 602,712
Foreign currency transactions - net (32)
---------
Total unrealized appreciation (depreciation)
on investments and foreign currency
transactions ............................. 602,680
---------
Net gain (loss) on investment transactions 1,086,089
------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 1,203,354
============
See accompanying notes to financial statements.
<PAGE>
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STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(unaudited)
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
----------- ------------
FROM OPERATIONS
Net investment income (loss) $ 396,289 $ 117,265
Net realized gain (loss) on investments (495,667) 483,409
Net unrealized appreciation
(depreciation) on investments 395,829 602,680
----------- ------------
Increase (decrease) in net assets
from operations 296,451 1,203,354
----------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A (268,096) (84,422)
Class B (115,988) (28,001)
Class C (15,562) (3,761)
Net realized gain on investments
Class A (179,152) 0
Class B (162,228) 0
Class C (21,050) 0
----------- ------------
(762,076) (116,184)
----------- ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS 11,376,636 (8,780,076)
----------- ------------
Total increase (decrease) in net assets 10,911,011 (7,692,906)
NET ASSETS
Beginning of the period 25,652,138 36,563,149
----------- ------------
End of the period $36,563,149 $ 28,870,243
=========== ============
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period $ 4,105 $ 5,185
========= ============
See accompanying notes to financial statements.
<PAGE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
NOVEMBER 15,
1995(A) SIX MONTHS
THROUGH YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ----------------------------- JUNE 30,
1995 1996 1997 1998 1999
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................ $ 12.50 $ 12.86 $ 15.15 $ 17.59 $ 17.62
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income ....................................... 0.04 0.31 0.25 0.26(b) 0.10
Net Realized and Unrealized Gain (Loss) on Investments ...... 0.36 3.11 3.15 0.20(c) 0.87
------- ------- ------- ------- -------
Total From Investment Operations ............................ 0.40 3.42 3.40 0.46 0.97
------- ------- ------- ------- -------
Less Distributions
Dividends From Net Investment Income ........................ (0.04) (0.30) (0.26) (0.26) (0.10)
Distributions From Net Realized Capital Gains ............... 0.00 (0.83) (0.70) (0.17) 0.00
------- ------- ------- ------- -------
Total Distributions ......................................... (0.04) (1.13) (0.96) (0.43) (0.10)
------- ------- ------- ------- -------
Net Asset Value, End of Period .............................. $ 12.86 $ 15.15 $ 17.59 $ 17.62 $ 18.49
======= ======= ======= ======= =======
Total Return (%) (d) ........................................ 3.2 26.6 22.6 2.7 5.5
Ratio of Operating Expenses to Average Net
Assets (%) (e) .............................................. 1.50(f) 1.50 1.50 1.50 1.50(f)
Ratio of Net Investment Income to Average Net
Assets (%) .................................................. 3.58(f) 2.06 1.76 1.48 1.14(f)
Portfolio Turnover Rate (%) ................................. 0 45 33 61 150
Net Assets, End of Period (000) ............................. $ 2,064 $ 2,613 $14,681 $17,839 $14,747
The subadviser to the Fund prior to June 1, 1999 was Loomis, Sayles & Company, L.P. Effective June 1, 1999 Vaughn,
Nelson, Scarborough & McCullough, L.P. became the subadviser.
(a) Commencement of operations.
(b) Per share net investment income has been calculated using the average shares outstanding during the period.
(c) The amount shown for a share outstanding does not correspond with the aggregate net gain/(loss) on investments
for the period ended December 31, 1998, due to the timing of purchases and redemptions of fund shares in relation
to fluctuating market values of the investments of the Fund.
(d) A sales charge is not reflected in total return calculations.
(e) The ratio of operating expenses to average net assets without giving effect to the expense limitation described
in Note 4 to the Financial Statements would have been (%) 5.97(f) 3.67 3.10 1.92 2.01
(f) Computed on an annualized basis.
</TABLE>
<PAGE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------- ------------------------------------------
SEPTEMBER 15, SEPTEMBER 15,
1997(A) SIX MONTHS 1997(A) SIX MONTHS
THROUGH YEAR ENDED ENDED THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30,
1997 1998 1999 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 17.06 $ 17.59 $ 17.62 $ 17.06 $ 17.59 $ 17.63
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income ................... 0.03 0.13(b) 0.04 0.03 0.13(b) 0.04
Net Realized and Unrealized Gain
(Loss) on Investments .................. 0.60 0.20(c) 0.87 0.60 0.21(c) 0.87
------- ------- ------- ------- ------- -------
Total From Investment Operations ........ 0.63 0.33 0.91 0.63 0.34 0.91
------- ------- ------- ------- ------- -------
Less Distributions
Dividends From Net Investment Income .... (0.04) (0.13) (0.04) (0.04) (0.13) (0.04)
Distributions From Net
Realized Capital Gains ................. (0.06) (0.17) 0.00 (0.06) (0.17) 0.00
------- ------- ------- ------- ------- -------
Total Distributions ..................... (0.10) (0.30) (0.04) (0.10) (0.30) (0.04)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .......... $ 17.59 $ 17.62 $ 18.49 $ 17.59 $ 17.63 $ 18.50
======= ======= ======= ======= ======= =======
Total Return (%) (d) .................... 3.7 2.0 5.2 3.7 2.0 5.2
Ratio of Operating Expenses to Average
Net Assets (%) (e) ..................... 2.25(f) 2.25 2.25(f) 2.25(f) 2.25 2.25(f)
Ratio of Net Investment Income to Average
Net Assets (%) ......................... 1.01(f) 0.73 0.39(f) 1.01(f) 0.73 0.39(f)
Portfolio Turnover Rate (%) ............. 33 61 150 33 61 150
Net Assets, End of Period (000) ......... $ 9,375 $16,623 $12,398 $ 1,596 $ 2,101 $ 1,725
The subadviser to the Fund prior to June 1, 1999 was Loomis, Sayles & Company, L.P. Effective June 1, 1999 Vaughn, Nelson,
Scarborough & McCullough, L.P. became the subadviser.
(a) Commencement of operations.
(b) Per share net investment income has been calculated using the average shares outstanding during the Period.
(c) The amount shown for a share outstanding does not correspond with the aggregate net gain/(loss) on investments for the period
ended December 31, 1998, due to the timing of purchases and redemptions of fund shares in relation to fluctuating market
values of the investments of the Fund.
(d) A contingent deferred sales charge is not reflected in total return calculations.
(e) The ratio of operating expenses to average net assets without giving effect to the expense limitation described in Note 4
to the Financial Statements would
have been (%) ...................... 3.85(f) 2.67 2.76 3.85(f) 2.67 2.76
(f) Computed on an annualized basis.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the Period Ended June 30, 1999
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES. The Fund is a Series of New England Funds
Trust III, 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 Fund seeks current income and capital growth.
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 is a "Fund").
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a maximum front end sales charge of 5.75%. Class B shares do not pay a
front end sales charge, but pay a higher ongoing distribution fee than Class A
shares for eight years (at which point they automatically convert to Class A
shares), and are subject to a contingent deferred sales charge if those shares
are redeemed within six years of purchase. Class C shares do not pay front end
sales charges and do not convert to any other class of shares, but they do pay a
higher ongoing distribution fee than Class A shares and may be subject to a
contingent deferred sales charge if those shares are redeemed within one year.
Expenses of the Fund are borne pro rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees applicable to such class), and votes as a
class only with respect to its own Rule 12b-1 plan. Shares of each class would
receive their pro rata share of the net assets of the Fund, if the Fund were
liquidated. In addition, the Trustees approve separate dividends on each class
of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price. Short-term obligations with a remaining
maturity of less than sixty days are stated at amortized cost, which
approximates market value. All other securities and assets are valued at their
fair value as determined in good faith by the Fund's adviser and subadviser,
under the supervision of the Fund's Trustees.
B. SECURITY TRANSACTIONS AND RELATED INCOME. Security transactions are accounted
for on the trade date. Dividend 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. 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.
These differences are primarily due to differing treatments for organization
costs and distributions from Real Estate Investment Trusts for book and tax
purposes. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassification to the capital accounts.
E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price including interest. 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.
F. ORGANIZATION EXPENSE. Costs incurred in fiscal 1995 in connection with the
Fund's organization and registration, amounting to approximately $19,700 in the
aggregate, were paid by the Fund and are being amortized by the Fund over 60
months.
2. PURCHASES AND SALES OF SECURITIES. For the year six months ended June 30,
1999 purchases and sales of securities (excluding short-term investments) were
$31,311,444 and $22,920,167, respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. During the six
months ended June 30, 1999, the Fund operated under two management fee
contracts. Prior to June 1, 1999, Loomis Sayles & Company, L.P. ("Loomis
Sayles") was the Fund's investment subadviser. Effective June 1, 1999 Vaughn,
Nelson, Scarborough & McCullough, L.P. ("VNSM") became the investment
subadviser.
The Fund pays gross management fees to its investment adviser, New England Funds
Management, L.P. ("NEFM") at the annual rate of 0.70% of the first $200 million
of the Fund's average daily net assets, 0.65% of the next $300 million and 0.60%
of such assets in excess of $500 million reduced by the payment of subadviser
fees to the Fund's investment subadviser VNSM at the rate of 0.40% of the first
$200 million of the average daily net assets of the Fund, 0.325% of the next
$300 million of such assets and 0.275% of such assets in excess of $500 million.
Loomis Sayles was paid at the annual rate of 0.40% of the Fund's average daily
net assets. Certain officers and directors of NEFM are also officers or trustees
of the Fund. NEFM, VNSM and Loomis Sayles are wholly owned subsidiaries of Nvest
Companies, L.P. ("Nvest"), which is a subsidiary of Metropolitan Life Insurance
Company ("MetLife").
Fees earned by NEFM, VNSM and Loomis Sayles under the management and subadvisory
agreements in effect during the six months ended June 30, 1999 are as follows:
FEES EARNED (A) PERIOD
--------------- ------
NEFM $ 45,817 1/1 - 6/30/99
Loomis Sayles 51,737 1/1 - 5/31/99
VNSM 9,352 6/1 - 6/30/99
---------
$ 106,906
(a) Before reduction pursuant to voluntary expense limitations. See note 4.
The effective annualized management fee for the six months ended June 30, 1999
was 0.70%.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. Nvest Services Company, Inc. ("NSC")
is a wholly owned subsidiary of Nvest and performs certain accounting and
administrative services for the Fund. The Fund reimburses NSC for all or part of
NSC's expenses of providing these services which include the following: (i)
expenses for personnel performing bookkeeping, accounting, and financial
reporting functions and clerical functions relating to the Fund and (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance. For the six months ended June 30, 1999 these
expenses amounted to $11,198 and are shown separately in the financial
statements as accounting and administrative.
C. TRANSFER AGENT FEES. NSC is the transfer and shareholder servicing agent for
the Fund and Boston Financial Data Services serves as the sub-transfer agent for
the Fund. For the six months ended June 30, 1999, the Fund paid NSC $48,576 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, L.P. ("New England
Funds"), the Fund's distributor (a wholly owned subsidiary of Nvest), a monthly
service fee at the annual rate of 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, 1999, the Fund paid New England
Funds $18,753 in fees under the Class A Plan.
Under the Class B and Class C Plan, the Fund pays New England Funds a monthly
service fee at the annual rate of 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, 1999, the Fund paid New England Funds $16,768 and $2,305 in service fees
under the Class B and Class C plans, respectively.
Also under the Class B and Class C Plans, the Fund pays New England Funds
monthly distribution fees at the annual rate of 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, 1999, the Fund paid New England Funds $50,306
and $6,914 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, 1999 amounted to $265,746.
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 NEFM,
New England Funds, Nvest, NSC or their affiliates. Each other Trustee receives a
retainer fee at the annual rate of $40,000 and meeting attendance fees of $3,500
for each meeting of the Board of Trustees attended. Each committee member
receives an additional retainer fee at the annual rate of $6,000 while each
committee chairman receives a retainer fee (beyond the $6,000 fee) at the annual
rate of $4,000. These fees are allocated to the various New England Funds based
on a formula that takes into account, among other factors, the relative net
assets of each fund.
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 been, had it been invested in the Fund on the
normal payment date. Deferred amounts remain in the Fund until distributed in
accordance with the Plan.
4. EXPENSE LIMITATIONS AND CONTINGENT EXPENSE OBLIGATION. VNSM has voluntarily
agreed, until June 30, 1999, to waive its entire subadvisory fee with respect to
the Fund. In addition, under an expense deferral arrangement, which NEFM may
terminate at any time, NEFM has agreed to defer its management fee for the Fund
and, if necessary, to bear certain expenses associated with the Fund to the
extent necessary to limit the Fund's expenses to the annual rate of 1.50% for
Class A shares, 2.25% for Class B shares and 2.25% for Class C shares, subject
to the obligation of the Fund to pay NEFM such deferred fees and expenses in
later periods to the extent that the Fund's expenses fall below the annual rate
of 1.50% for Class A shares, 2.25% for Class B shares and 2.25% for Class C
shares; provided, however, that the Fund is not obligated to pay any such
deferred fees or expenses more than two years after the end of the fiscal year
in which the fee or expense was deferred. As a result of the Fund's expenses
exceeding the voluntary expense limitation during the six months ended June 30,
1999, NEFM deferred $16,185 of its $45,817 management fees and Loomis Sayles
waived their entire management fee of $51,737 and VNSM waived their entire
management fee of $9,352
Expenses deferred in 1998 (subject to repayment until December 31, 2000): NEFM
deferred $29,753 of its management fees.
5. CAPITAL SHARES. At June 30, 1999, there was an unlimited number of shares of
beneficial interest authorized, divided into three classes, Class A, Class B and
Class C capital shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ......................................... 605,911 $ 11,038,787 56,291 $ 977,442
Shares issued in connection with the reinvestment of:
Dividends from net investment income .............. 14,398 255,693 4,597 80,610
Distributions from net realized gains ............. 10,133 171,218 0 0
------------ ------------ ------------ ------------
630,442 11,465,698 60,888 1,058,052
Shares repurchased .................................. (452,923) (8,091,937) (275,678) (4,726,210)
------------ ------------ ------------ ------------
Net increase (decrease) ............................. 177,519 $ 3,373,761 (214,790) $ (3,668,158)
------------ ------------ ------------ ------------
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ......................................... 547,429 $ 9,914,032 38,935 $ 670,908
Shares issued in connection with the reinvestment of:
Dividends from net investment income .............. 5,903 104,500 1,412 24,491
Distributions from net realized gains ............. 8,752 147,992 0 0
------------ ------------ ------------ ------------
562,084 10,166,524 40,347 695,399
Shares repurchased .................................. (151,715) (2,689,057) (312,956) (5,356,849)
------------ ------------ ------------ ------------
Net increase (decrease) ............................. 410,369 $ 7,477,467 (272,609) $ (4,661,450)
------------ ------------ ------------ ------------
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- ----------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ......................................... 64,147 $ 1,161,625 5,536 $ 95,283
Shares issued in connection with the reinvestment of:
Dividends from net investment income .............. 776 13,773 188 3,246
Distributions from net realized gains ............. 1,200 20,278 0 0
------------ ------------ ------------ ------------
66,123 1,195,676 5,724 98,529
Shares repurchased .................................. (37,673) (670,268) (31,633) (548,997)
------------ ------------ ------------ ------------
Net increase (decrease) ............................. 28,450 $ 525,408 (25,909) $ (450,468)
------------ ------------ ------------ ------------
Increase (decrease) derived from
capital shares transactions ....................... 616,338 $ 11,376,636 (513,308) $ (8,780,076)
============ ============ ============ ============
</TABLE>
6. LINE OF CREDIT. The Fund along with the other portfolios that comprise the
New England Funds (the "Funds") participate in a $100,000,000 committed line of
credit provided by Citibank, N.A. under a credit agreement (the "Agreement")
dated March 4, 1999. Advances under the Agreement are taken primarily for
temporary or emergency purposes. Borrowings under the Agreement bear interest at
a rate tied to one of several short-term rates that may be selected from time to
time. In addition, the Funds are charged a facility fee equal to 0.08% per annum
on the unused portion of the line of credit. The annual cost of maintaining the
line of credit and the facility fee is apportioned pro rata among the
participating Funds. There were no borrowings as of or during the six months
ended June 30, 1999.
7. SHAREHOLDER MEETING (UNAUDITED). At a special shareholders' meeting held on
July 27, 1999, shareholders of the Fund voted for the following proposals:
1. Subadvisory agreement relating to the Fund between NEFM and VNSM
<TABLE>
<CAPTION>
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
--------- ------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
829,953.823 30,526.261 26,368.194 0.000 886,848.278
</TABLE>
2. To the extent permitted by exemptions granted by the SEC, to permit NEFM
to enter into new and amended agreements with subadvisers with respect to
the Fund without obtaining shareholder approval of such agreements, and
to permit such subadvisers to manage assets of the Fund (or a segment
thereof) pursuant to such subadvisory agreements.
<TABLE>
<CAPTION>
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
--------- ------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
645,056.774 46,110.013 47,874.491 147,807.000 886,848.278
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY FOR MUTUAL FUND INVESTORS
- --------------------------------------------------------------------------------
TOTAL RETURN - The change in value of a mutual fund investment over a specific
time period, assuming all earnings are reinvested in additional shares of the
fund. Expressed as a percentage.
INCOME DISTRIBUTIONS - Payments to shareholders resulting from the net interest
or dividend income earned by a fund's portfolio.
CAPITAL GAINS DISTRIBUTIONS - Payments to shareholders of profits earned from
selling securities in a fund's portfolio. Capital gains distributions are
usually paid once a year.
MARKET CAPITALIZATION - The value of a company's issued and outstanding common
stock, as priced by the market:
NUMBER OF OUTSTANDING SHARES X CURRENT MARKET PRICE OF A SHARE = MARKET
CAPITALIZATION.
PRICE/EARNINGS RATIO - Current market price of a stock divided by its earnings
per share. Also known as the "multiple," the price/earnings ratio gives
investors an idea of how much they are paying for a company's earning power and
is a useful tool for evaluating the costs of different issues.
GROWTH INVESTING - An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
VALUE INVESTING - A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets
aren't fully reflected in their stock prices. Value stocks will tend to have a
lower price/earnings ratio than that of growth stocks.
STANDARD & POOR'S 500(R) (S&P 500) - Market value-weighted index showing the
change in aggregate market value of 500 stocks relative to the base period of
1941-1943. It is composed mostly of companies listed on the New York Stock
Exchange. It is not possible to invest directly in an index.
<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 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 accumulated 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 investing 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. Past performance is no guarantee of
future results. For illustrative purposes only and not indicative of future
performance of any New England Fund. The value of a New England fund will
fluctuate with changing market conditions.
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. We will include a prospectus,
which contains more information including charges and other ongoing expenses.
Please read the prospectus carefully before you invest.
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY FUNDS
Capital Growth Fund
Growth Fund
Growth and Income Fund
(formerly Growth Opportunities Fund)
Balanced Fund
Value Fund
ALL-CAP EQUITY FUNDS
Star Advisers Fund
Star Worldwide Fund
International Equity Fund
Bullseye Fund
Equity Income Fund
SMALL-CAP EQUITY FUNDS
Star Small Cap Fund
GOVERNMENT INCOME FUNDS
Limited Term U.S. Government Fund
Government Securities Fund
TAX-FREE INCOME FUNDS
Municipal Income Fund
Intermediate Term Tax Free
Fund of California
Massachusetts Tax Free Income Fund
MONEY MARKET FUNDS
Cash Management Trust,
Money Market Series
Tax Exempt Money Market Trust
CORPORATE INCOME FUNDS
Short Term Corporate Income Fund
(formerly Adjustable Rate U.S. Government Fund)
Bond Income Fund
High Income Fund
Strategic Income Fund
To learn more, and for a free prospectus, contact your financial representative.
Visit our World Wide Web site at www.mutualfunds.com
New England Funds, L.P., Distributor
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.
New England Funds, L.P., and other firms selling shares of New England
Funds are members of the National Association of Securities Dealers,
Inc. (NASD). As a service to investors, the NASD has asked that we
inform you of the availability of a brochure on its Public Disclosure
Program. The program provides access to information about securities
firms and their representatives. Investors may obtain a copy by
contacting the NASD at 800-289-9999 or by visiting their Web site at
www.NASDR.com.
Y2K Readiness Report: New England Funds has kept pace with the Y2K
challenge. Mission critical systems have been tested and non-mission
critical systems are scheduled for completion by September 30, 1999.
Y2K is a top priority at New England Funds. For more information on
our Y2K readiness, please visit our Web site at www.mutualfunds.com.
This material represents Year 2000 Readiness Disclosure pursuant to the
Year 2000 Information and Readiness Disclosure Act.
<PAGE>
------------------
[LOGO](R) BULK RATE
NEW ENGLAND FUNDS(R) U.S. POSTAGE
Where The Best Minds Meet(R) PAID
BROCKTON, MA
PERMIT NO. 770
------------------
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
EI58-0699
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