-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JXyagawwZcTDyK9xuOPIY00Z1WB7EM9lKX/XgGaifk1YZ1W9+CS4XpD9Stn434b2 jCnzQCDltoXT9bxjMeYvGw== 0000950156-97-000740.txt : 19970912 0000950156-97-000740.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950156-97-000740 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970902 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND FUNDS TRUST I CENTRAL INDEX KEY: 0000770540 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04323 FILM NUMBER: 97673931 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8002831155 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND GOVERNMENT SECURITIES FUND DATE OF NAME CHANGE: 19861111 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND LIFE GOVERNMENT SECURITIES TRUST DATE OF NAME CHANGE: 19860930 N-30D 1 NEF TRUST I - VALUE FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT - -------------------------------------------------------------------------------- [LOGO] New England Funds(R) Where The Best Minds Meet(R) - -------------------------------------------------------------------------------- New England Value Fund [GRAPHIC] - ------------------ June 30, 1997 - ------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AUGUST 1997 - -------------------------------------------------------------------------------- DEAR NEW ENGLAND FUNDS SHAREHOLDER, [Photo of Henry L.P. Schmelzer] Spurred by bright economic prospects, the broader U.S. stock market continued its record run during the first half of the year, experiencing only short-lived setbacks along the way. These fresh gains come on top of significant increases in 1995 and 1996, leaving many investors wary of what might come next. Bond markets, meanwhile, contended with some volatility in interest rates, but have been relatively stable this year. Building a portfolio for variable markets Investors should not abandon well-conceived financial programs for fear of a down market. Whether today's market levels are excessive -- only hindsight will tell. So you should remain patient and realistic, alert to the possibility of periodic market declines. Consultation with your financial representative should be a regular part of your planning. Your representative can help you take prudent steps to adjust your portfolio, whatever the next trend may bring. Strategic initiatives deliver shareholder benefits Four years ago New England Funds embarked on a new strategic direction. Expressed in our corporate slogan Where The Best Minds Meet(R), this new thrust has meant improved performance for many of our funds, award-winning service and a host of behind-the-scenes enhancements designed to help our shareholders and their financial representatives. Our sights, like yours, are focused on the long term. At the same time, we work to enhance service every day. We also keep a disciplined eye on the performance that each fund manager achieves. Through these persistent efforts we're convinced we'll merit your continued commitment and loyalty. Thank you for your confidence in New England Funds. Sincerely, /s/ Henry L.P. Schmelzer Henry L.P. Schmelzer, President - -------------------------------------------------------------------------------- NEW ENGLAND VALUE FUND - -------------------------------------------------------------------------------- AWARD-WINNING SERVICE -- TWO YEARS RUNNING - -------------------------------------------------------------------------------- - --------------------- For two years running we're proud to announce that [LOGO] DALBAR, an independent evaluator of mutual fund QUALITY service, has awarded New England Funds its Quality TESTED SERVICE Tested Service Seal for "providing the highest 1996 tier of service excellence in the mutual fund - --------------------- industry." New England Funds is one of just three DALBAR mutual fund companies to earn this distinction in HONORS COMMITMENT TO: each of the last two years -- another reason why INVESTORS we are becoming known as the mutual fund company - --------------------- Where The Best Minds Meet. INVESTMENT RESULTS THROUGH JUNE 30, 1997 - -------------------------------------------------------------------------------- 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 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. See next page [symbol - hand pointing right] - -------------------------------------------------------------------------------- NEW ENGLAND VALUE FUND - -------------------------------------------------------------------------------- [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class A Shares, since 6/30/87, compared to the S&P 500 Index. The data points from the graph are as follows:] - -------------------------------------------------------------------------------- A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- COMPARED TO STANDARD & POOR'S 500(R) INDEX(4) JUNE 1987 - JUNE 1997 Net Asset With Maximum S&P 500 Value(1) Sales Charge(2) Index(4) 6/30/87 $10,000 $ 9,425 $10,000 6/88 $ 8,624 $ 8,128 $ 9,310 6/89 $ 9,342 $ 8,804 $11,220 6/90 $10,469 $ 9,867 $13,061 6/91 $10,671 $10,058 $14,026 6/92 $12,191 $11,490 $15,915 6/93 $14,173 $13,358 $18,076 6/94 $15,134 $14,264 $18,396 6/95 $18,285 $17,233 $23,178 6/96 $22,002 $20,737 $29,188 6/97 $29,001 $27,333 $39,295 This illustration represents past performance of Class A shares and cannot predict future results. Investment return and principal value may vary, resulting in a gain or loss on the sale of shares. Class B, Class C and Class Y share performance will be greater or less than that shown based on differences in inception date, fees and sales charges. All Index and Fund performance assumes reinvested distributions. - -------------------------------------------------------------------------------- NEW ENGLAND VALUE FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 6/30/97 - -------------------------------------------------------------------------------- CLASS A (Inception 6/5/70) YTD 1 Year 5 Years 10 Years Net Asset Value(1) 12.92% 31.81% 18.93% 11.24% With Max. Sales Charge(2) 6.38 24.23 17.51 10.58 Standard & Poor's 500(4) 20.59 34.63 19.73 14.60 Lipper Growth & Income Avg.(5) 15.52 28.09 17.26 12.67 - -------------------------------------------------------------------------------- CLASS B (Inception 9/13/93) YTD 1 Year 3 Years Since Inception Net Asset Value(1) 12.46% 30.75% 23.25% 18.87% With CDSC(3) 7.46 25.75 22.59 18.38 Standard & Poor's 500(4) 20.59 34.63 28.79 21.75 Lipper Growth & Income Avg.(5) 15.52 28.09 23.54 18.09 - -------------------------------------------------------------------------------- CLASS C (Inception 12/30/94) YTD 1 Year Since Inception Net Asset Value(1) 12.58% 30.91% 27.94% Standard & Poor's 500(4) 20.59 34.63 33.31 Lipper Growth & Income Avg.(5) 15.52 28.09 27.53 - -------------------------------------------------------------------------------- CLASS Y (Inception 3/31/94) YTD 1 Year 3 Years Since Inception Net Asset Value(1) 13.09% 32.11% 24.42% 22.68% Standard & Poor's 500(4) 20.59 34.63 28.79 26.47 Lipper Growth & Income Avg.(5) 15.52 28.09 23.54 21.44 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 (1)Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. (2)With Maximum Sales Charge performance assumes reinvestment of all distributions and reflects the maximum sales charge of 5.75% at the time of purchase of Class A shares. (3)With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 5% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero six years after the purchase of shares. (4)Standard & Poor's Composite Index of 500 stocks(R) (S&P 500) is an unmanaged index representing the performance of 500 major companies, most of which are listed on the New York Stock Exchange. The S&P 500 performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. (5)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. - -------------------------------------------------------------------------------- NEW ENGLAND VALUE FUND - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH PORTFOLIO MANAGERS - -------------------------------------------------------------------------------- [Photos of Carol McMurtrie, and Tricia Mills] Loomis, Sayles & Company, L.P. Q. How did New England Value Fund perform in the first half of 1997? For the six-month period ending June 30, 1997, your Fund produced a total return of 12.92% (Class A shares at net asset value). We're pleased to report that Lipper ranked your Fund's Class A shares in the top 24% (#126 out of 544) of its growth and income funds peer group for the one-year period ended June 30, 1997. Longer term, your Fund ranks #55 out of 215 for five years and #106 out of 126 for 10 years. Q. How did changes in the market affect the Fund's performance? The first half of 1997 was a turbulent one in terms of stock market performance. Stock price movements did not reflect fundamental company developments so much as the improvement in the overall financial outlook: stronger-than-expected economic growth with stable inflation and stable interest rates. Also influencing price movements were liquidity demands, particularly from large index funds, which favor larger-cap stocks. Q. How did changes within the portfolio affect performance? An overweighting in strong financial stocks, such as NationsBank (up 32% through 6/30/97), contributed to Fund performance. Several other companies, including Philips NV, Everest Reinsurance, EI duPont and Federal Express, also enjoyed returns of 30% or more. However, developments in specific holdings, such as York International, Greentree Financial and United Meridian, hurt the portfolio's performance during the first six months of the year. In the case of United Meridian, an oil and gas exploration company, temporary setbacks in exploration activities off the coast of West Africa and in onshore Texas prospects concerned stock investors and caused the stock to lag the market. Longer term, the fundamental investment case remains intact, as it does for both York International and Green Tree Financial. We continued to focus on stock selection, adding such companies such as Warnaco, a clothing manufacturer, Dayton Hudson, a department store/discount store retailer and two new issues in the technology sector -- Symantec, a software company and 3Com, a data networking company. What all these companies have in common are good-to-excellent growth prospects selling at a substantial price-to-earnings discount to the market. Q. What is your outlook for the next six months? Over the balance of 1997, we expect the rate of economic growth to moderate from the high and unsustainable level achieved in the first quarter. At the same time, inflation should remain in check while interest rates may move within a fairly narrow range around current levels. We may also see the stock market's volatility of the past few months continue through the rest of the year. This environment underscores the value of careful stock selection, which will remain key to performance in the next six months. We continue to emphasize mid-capitalization stocks with low price-to-earnings ratios, believing that their recent lagging performance relative to large-cap growth stocks has created exceptional value. - -------------------------------------------------------------------------------- Important note: Effective in August 1997, your Fund's management team consists of Carol C. McMurtrie, Tricia H. Mills and Roderic Dillon (not pictured in this report). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEW ENGLAND VALUE FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- YOUR FUND'S FIVE LARGEST HOLDINGS 6/30/97* - -------------------------------------------------------------------------------- PERCENTAGE COMPANY OF ASSETS - -------------------------------------------------------------------------------- 1. AETNA, INC. 2.4% Liability insurance - -------------------------------------------------------------------------------- 2. PHILIPS ELECTRONICS NV (ADR) 2.4% Consumer electronics manufacturer - -------------------------------------------------------------------------------- 3. LEGGETT & PLATT, INC. 2.4% Housing and building materials - -------------------------------------------------------------------------------- 4. EVEREST REINSURANCE HOLDINGS, INC. 2.4% Liability insurance - -------------------------------------------------------------------------------- 5. CARNIVAL CORP. 2.3% Cruise line operator - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- YOUR FUND'S TEN LARGEST STOCK SECTORS AS OF 6/30/97* - -------------------------------------------------------------------------------- PERCENTAGE INDUSTRY OF ASSETS - -------------------------------------------------------------------------------- 1. HEALTH CARE-SERVICES 8.3% 2. BANKS 8.0% 3. INSURANCE 7.8% 4. CHEMICALS 7.0% 5. HOUSING AND BUILDING MATERIALS 6.4% 6. CONGLOMERATES 6.4% 7. FREIGHT TRANSPORTATION 5.7% 8. TELECOMMUNICATION 5.6% 9. FINANCIAL SERVICES 4.8% 10. AEROSPACE 4.7% - -------------------------------------------------------------------------------- *Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Investments as of June 30, 1997 (unaudited) COMMON STOCKS -- 97.5% OF TOTAL NET ASSETS SHARES DESCRIPTION VALUE (a) - -------------------------------------------------------------------------------- AEROSPACE--4.7% 41,800 Lockheed Martin Corp. ............................ $ 4,328,912 91,500 Northrop Grumman Corp. ........................... 8,034,844 148,600 Raytheon Co. ..................................... 7,578,600 ------------ 19,942,356 ------------ APPAREL & TEXTILES--3.9% 186,700 Reebok International, Ltd. ....................... 8,728,225 251,500 Warnaco Group .................................... 8,016,563 ------------ 16,744,788 ------------ BANKS--8.0% 144,800 BankAmerica Corp. ................................ 9,348,650 77,000 Chase Manhattan Corp. ............................ 7,473,812 134,400 NationsBank Corp. ................................ 8,668,800 154,300 Norwest Corp. .................................... 8,679,375 ------------ 34,170,637 ------------ BEVERAGES--1.7% 292,700 Whitman Corp. .................................... 7,408,969 ------------ CHEMICALS--7.0% 370,400 Crompton & Knowles Corp. ......................... 8,241,400 146,400 EI duPont de Nemours & Co. ....................... 9,204,900 62,700 PPG Industries, Inc. ............................. 3,644,438 155,100 W. R. Grace & Co. ................................ 8,549,887 ------------ 29,640,625 ------------ COMPUTERS & BUSINESS EQUIPMENT--3.1% 147,300 3Com Corp. (c) ................................... 6,628,500 168,000 EMC Corp. (c) .................................... 6,552,000 ------------ 13,180,500 ------------ CONGLOMERATES--6.4% 98,200 Allied Signal, Inc. .............................. 8,248,800 139,000 Dover Corp. ...................................... 8,548,500 142,200 Philips Electronics NV (ADR) (d) ................. 10,220,625 ------------ 27,017,925 ------------ ELECTRICAL EQUIPMENT--1.9% 178,200 York International Corp. ......................... 8,197,200 ------------ ELECTRONIC COMPONENTS--0.8% 24,100 Intel Corp. ...................................... 3,417,681 ------------ FINANCIAL SERVICES--4.8% 255,800 Federal Home Loan Mortgage Corp. ................. 8,793,125 179,900 Federal National Mortgage Association ............ 7,848,137 104,200 Green Tree Financial Corp. ....................... 3,712,125 ------------ 20,353,387 ------------ FREIGHT TRANSPORTATION--5.7% 95,300 Burlington Northern Santa Fe ..................... 8,565,087 271,300 Canadian Pacific, Ltd. ........................... 7,715,094 136,900 Federal Express Corp. (c) ........................ 7,905,975 ------------ 24,186,156 ------------ HEALTH CARE - SERVICES--8.3% 100,000 Aetna, Inc. ...................................... 10,237,500 502,700 Beverly Enterprises, Inc. (c) .................... 8,168,875 218,900 Columbia/HCA Healthcare Corp. (c) ................ 8,605,506 271,770 Foundation Health Systems, Inc. (c) .............. 8,238,028 ------------ 35,249,909 ------------ HOUSEHOLD PRODUCTS--1.8% 153,800 Kimberly-Clark Corp. ............................. 7,651,550 ------------ HOUSING & BUILDING MATERIALS--6.4% 115,000 Armstrong World Industries, Inc. ................. 8,438,125 234,900 Leggett & Platt, Inc. ............................ 10,100,700 206,600 Masco Corp. ...................................... 8,625,550 ------------ 27,164,375 ------------ INSURANCE--7.8% 125,600 ACE, Ltd. ........................................ 9,278,700 87,800 Allstate Corp. ................................... 6,409,400 252,400 Everest Reinsurance Holdings, Inc. (c) ........... 10,001,350 231,700 TIG Holdings, Inc. ............................... 7,240,625 ------------ 32,930,075 ------------ LEISURE TIME--4.2% 225,700 American Greetings Corp. ......................... 8,379,113 231,200 Carnival Corp. ................................... 9,537,000 ------------ 17,916,113 ------------ OIL & GAS--2.6% 253,000 Tosco Corp. ...................................... 7,574,188 121,900 United Meridian Corp.(c) ......................... 3,657,000 ------------ 11,231,188 ------------ PACKAGING--2.0% 159,500 Crown Cork & Seal Company, Inc. .................. 8,523,281 ------------ RETAIL--3.1% 158,500 Dayton Hudson Corp. .............................. 8,430,219 237,800 Office Depot, Inc. ............................... 4,622,237 ------------ 13,052,456 ------------ RETAIL - FOOD & DRUG--1.5% 218,000 The Kroger Co. (c) ............................... 6,322,000 ------------ SOFTWARE--0.6% 130,100 Symantec Corp. ................................... 2,536,950 ------------ TELECOMMUNICATION--5.6% 120,600 Ameritech Corp. .................................. 8,193,263 164,000 GTE Corp. ........................................ 7,195,500 134,423 SBC Communications, Inc. ......................... 8,317,423 ------------ 23,706,186 ------------ TOBACCO--3.6% 79,200 Loews Corp. ...................................... 7,929,900 263,900 UST, Inc. ........................................ 7,323,225 ------------ 15,253,125 ------------ TRUCKING & FREIGHT FORWARDING--2.0% 255,800 Ryder Systems, Inc. .............................. 8,441,400 ------------ Total Common Stocks (Identified Cost $301,139,201). 414,238,832 ------------ SHORT TERM INVESTMENT--4.3% FACE AMOUNT - -------------------------------------------------------------------------------- $18,375,000 Associates Corp. North America, 6.080%, 7/01/97 ................................. 18,375,000 ------------ Total Short Term Investment (Identified Cost $18,375,000) ............................... 18,375,000 ------------ Total Investments--101.8% (Identified Cost $319,514,201) (b) .......................... 432,613,832 Other assets less liabilities .................... (7,839,577) ------------ Total Net Assets--100% ............................ $424,774,255 ============ (a) See Note 1a. (b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation on investments based on cost of $319,514,201 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 ............................................. $117,311,211 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ........................................... (4,211,580) ------------ Net unrealized appreciation ........................ $113,099,631 ============ (c) Non-income producing security. (d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The value of ADRs are significantly influenced by trading on exchanges not located in the United States or Canada. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES - --------------------------------------------------------------------------------
June 30, 1997 (unaudited) ASSETS Investments at value ..................................... $432,613,832 Cash ..................................................... 739 Receivable for: Fund shares sold ....................................... 1,188,749 Dividends and interest ................................. 323,240 Foreign taxes .......................................... 2,886 Prepaid registration expense ............................. 8,000 ------------ 434,137,446 LIABILITIES Payable for: Securities purchased ................................... $4,372,920 Fund shares redeemed ................................... 4,574,559 Withholding taxes ...................................... 3,501 Accrued expenses: Management fees ........................................ 251,533 Deferred trustees' fees ................................ 84,523 Accounting and administrative .......................... 5,915 Other expenses ......................................... 70,240 ---------- 9,363,191 ------------ NET ASSETS ................................................. $424,774,255 ============ Net Assets consist of: Capital paid in ........................................ $283,731,398 Undistributed net investment income .................... 572,265 Accumulated net realized gains ......................... 27,370,759 Unrealized appreciation on investments and foreign currency transactions ................................ 113,099,833 ------------ NET ASSETS ................................................. $424,774,255 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($330,763,260 divided by 30,526,440 shares of beneficial interest) .............................................. $10.84 ====== Offering price per share (100/94.25 of $10.84) ............. $11.50* ====== Net asset value and offering price of Class B shares ($68,206,122 divided by 6,406,293 shares of beneficial interest) .............................................. $10.65** ====== Net asset value and offering price of Class C shares ($5,059,973 divided by 474,916 shares of beneficial interest) .............................................. $10.65 ====== Net asset value and offering price of Class Y shares ($20,744,900 divided by 1,920,698 shares of beneficial interest) ..................................... $10.80 ====== Identified cost of investments ............................. $319,514,201 ============ *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.
- -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- Six Months Ended June 30, 1997 (unaudited)
INVESTMENT INCOME Dividends ............................................. $ 2,766,823 (a) Interest .............................................. 348,704 ----------- 3,115,527 Expenses Management fees ..................................... $ 1,386,601 Service fees - Class A .............................. 382,912 Service and distribution fees - Class B ............. 280,581 Service and distribution fees - Class C ............. 20,975 Trustees' fees and expenses ......................... 10,844 Accounting and administrative ....................... 34,953 Custodian ........................................... 68,666 Transfer agent ...................................... 366,169 Audit and tax services .............................. 16,100 Legal ............................................... 9,956 Printing ............................................ 31,668 Registration ........................................ 39,855 Miscellaneous ....................................... 15,243 ----------- Total expenses ........................................ 2,664,523 ----------- Net investment income ................................. 451,004 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized gain on Investments - net .................... 18,686,504 ----------- Unrealized appreciation on: Investments - net ..................................... 28,772,259 Foreign currency transactions - net ................... 256 ----------- 28,772,515 ----------- Net gain on investment transactions ................... 47,459,019 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS .............. $47,910,023 =========== (a) Net of foreign taxes of: $25,508. See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (unaudited) SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ------------ FROM OPERATIONS Net investment income ................... $ 2,113,117 $ 451,004 Net realized gain on investments ........ 41,007,345 18,686,504 Unrealized appreciation on investments and foreign currency transactions ..... 30,101,917 28,772,515 ------------ ------------ Increase in net assets from operations .. 73,222,379 47,910,023 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A ............................... (1,859,247) 0 Class B ............................... (44,342) 0 Class C ............................... (3,710) 0 Class Y ............................... (105,836) 0 Net realized gain on investments Class A ............................... (35,730,736) 0 Class B ............................... (5,470,122) 0 Class C ............................... (360,682) 0 Class Y ............................... (1,371,598) 0 ------------ ------------ (44,946,273) 0 ------------ ------------ Increase in net assets derived from capital share transactions ............ 57,024,198 14,622,272 ------------ ------------ Total increase in net assets ............ 85,300,304 62,532,295 NET ASSETS Beginning of the period ................. 276,941,656 362,241,960 ------------ ------------ End of the period ....................... $362,241,960 $424,774,255 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME Beginning of the period ................. $ 91,904 $ 121,261 ============ ============ End of the period ....................... $ 121,261 $ 572,265 ============ ============ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (unaudited)
CLASS A ---------------------------------------------------------------------------------------- SIX MONTHS YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------------------- JUNE 30, 1992 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- ----- Net Asset Value, Beginning of Period ............... $ 6.69 $ 7.28 $ 7.87 $ 7.27 $ 8.78 $ 9.60 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income ..... 0.09 0.07 0.08 0.10 0.06 0.02 Net Realized and Unrealized Gain (Loss) on Investments ............. 1.02 1.16 (0.19) 2.21 2.12 1.22 ------ ------ ------ ------ ------ ------ Total From Investment Operations .............. 1.11 1.23 (0.11) 2.31 2.18 1.24 ------ ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ....... (0.09) (0.07) (0.08) (0.09) (0.06) 0.00 Distributions From Net Realized Capital Gains .. (0.43) (0.57) (0.41) (0.71) (1.30) 0.00 ------ ------ ------ ------ ------ ------ Total Distributions ....... (0.52) (0.64) (0.49) (0.80) (1.36) 0.00 ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period .................. $ 7.28 $ 7.87 $ 7.27 $ 8.78 $ 9.60 $10.84 ====== ====== ====== ====== ====== ====== Total Return (%) (a) ...... 16.6 17.0 (1.4) 32.3 26.3 12.9 Ratio of Operating Expenses to Average Net Assets (%). 1.32 1.34 1.37 1.37 1.31 1.29(c) Ratio of Net Investment Income to Average Net Assets (%) .......... 1.26 0.83 1.00 1.22 0.78 0.34(c) Portfolio Turnover Rate (%) 38 40 29 52 64 39(c) Average Commission Rate (b) -- -- -- -- $ 0.0574 $ 0.0590 Net Assets, End of Period (000) ................... $156,240 $189,779 $190,869 $241,038 $297,581 $330,763 (a) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (b) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. (c) Computed on an annualized basis. See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- CONTINUED - -------------------------------------------------------------------------------- (unaudited) CLASS B --------------------------------------------------------- SEPTEMBER 13(a) SIX MONTHS THROUGH YEAR ENDED DECEMBER 31, ENDED DECEMBER 31, ------------------------ JUNE 30, 1993 1994 1995 1996 1997 ------------------------------------------ ---------- Net Asset Value, Beginning of Period ... $ 7.97 $ 7.85 $ 7.23 $ 8.70 $ 9.47 ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income .... 0.11 0.04 0.05 0.01 (0.02) Net Realized and Unrealized Gain (Loss) on Investments ......... 0.39 (0.20) 2.18 2.07 1.20 ------ ------ ------ ------ ------ Total From Investment Operations ............. 0.50 (0.16) 2.23 2.08 1.18 ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ...... (0.05) (0.05) (0.05) (0.01) 0.00 Distributions From Net Realized Capital Gains . (0.57) (0.41) (0.71) (1.30) 0.00 ------ ------ ------ ------ ------ Total Distributions ...... (0.62) (0.46) (0.76) (1.31) 0.00 ------ ------ ------ ------ ------ Net Asset Value, End of Period........... $ 7.85 $ 7.23 $ 8.70 $ 9.47 $10.65 ====== ====== ====== ====== ====== Total Return (%) (c) ..... 6.5 (2.0) 31.3 25.4 12.5 Ratio of Operating Expenses to Average Net Assets (%) ......... 2.16(b) 2.12 2.12 2.06 2.04(b) Ratio of Net Investment Income to Average Net Assets (%) ......... 0.05(b) 0.25 0.47 0.03 (0.41)(b) Portfolio Turnover Rate (%) 40 29 52 64 39 (b) Average Commission Rate (d) -- -- -- $0.0574 $0.0590 Net Assets, End of Period (000) .......... $2,182 $13,830 $27,941 $48,210 $68,206 (a) Commencement of operations. (b) Computed on an annualized basis. (c) A contingent deferred sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (d) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- CONTINUED - -------------------------------------------------------------------------------- (unaudited) CLASS C -------------------------------------- YEAR ENDED, SIX MONTHS DECEMBER 31, ENDED ---------------------- JUNE 30, 1995 1996 1997 ---- ---- ---- Net Asset Value, Beginning of Period .... $ 7.23 $ 8.70 $ 9.46 ------ ------ ------ Income From Investment Operations Net Investment Income ................... 0.05 0.01 (0.02) Net Realized and Unrealized Gain (Loss) on Investments ........................ 2.18 2.06 1.21 ------ ------ ------ Total From Investment Operations ........ 2.23 2.07 1.19 ------ ------ ------ Less Distributions Dividends From Net Investment Income .... 0.05) (0.01) 0.00 Distributions From Net Realized Capital Gains ......................... (0.71) (1.30) 0.00 ------ ------ ------ Total Distributions ..................... (0.76) (1.31) 0.00 ------ ------ ------ Net Asset Value, End of Period .......... $ 8.70 $ 9.46 $10.65 ====== ====== ====== Total Return (%) (b) .................... 31.3 25.2 12.6 Ratio of Operating Expenses to Average Net Assets (%) ................ 2.12 2.06 2.04(a) Ratio of Net Investment Income to Average Net Assets (%) ................ 0.47 0.03 (0.41)(a) Portfolio Turnover Rate (%) ............. 52 64 39 (a) Average Commission Rate (c) ............. -- $0.0574 $0.0590 Net Assets, End of Period (000) ......... $1,224 $ 3,735 $5,060 (a) Computed on an annualized basis. (b) Periods less than one year are not computed on an annualized basis. (c) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- CONTINUED - ------------------------------------------------------------------------------- (unaudited)
CLASS Y --------------------------------------------------------- MARCH 31(a) SIX MONTHS THROUGH YEAR ENDED DECEMBER 31, ENDED DECEMBER 31, -------------------------- JUNE 30, 1994 1995 1994 1997 ----------- ---- ---- ----- Net Asset Value, Beginning of Period .. $ 7.57 $ 7.24 $ 8.75 $ 9.55 ------ ------ ------ ------ Income From Investment Operations Net Investment Income ................. 0.10 0.12 0.08 0.03 Net Realized and Unrealized Gain (Loss) on Investments ...................... 0.08 2.21 2.10 1.22 ------ ------ ------ ------ Total From Investment Operations ...... 0.18 2.33 2.18 1.25 ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income .. (0.10) (0.11) (0.08) 0.00 Distributions From Net Realized Capital Gains ................................. (0.41) (0.71) (1.30) 0.00 ------ ------ ------ ------ Total Distributions ................... (0.51) (0.82) (1.38) 0.00 ------ ------ ------ ------ Net Asset Value, End of Period ........ $ 7.24 $ 8.75 $ 9.55 $10.80 ====== ====== ====== ====== Total Return (%)(c) ................... 2.4 32.8 26.4 13.1 Ratio of Operating Expenses to Average Net Assets (%) .............. 1.54(b) 1.12 1.06 1.04(b) Ratio of Net Investment Income to Average Net Assets (%) .............. 1.05(b) 1.47 1.03 0.59(b) Portfolio Turnover Rate (%) ........... 29 52 64 39(b) Average Commission Rate (d) ........... -- -- $0.0574 $0.0590 Net Assets, End of Period (000) ....... $4,001 $6,738 $12,716 $20,745 (a) Commencement of operations. (b) Computed on an annualized basis. (c) Periods less than one year are not computed on an annualized basis. (d) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades upon which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- June 30, 1997 (unaudited) 1. The Fund is a Series of New England Funds Trust I, a Massachusetts business trust (the "Trust"), and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (each such series of shares a "Fund"). The Fund offers Class A, Class B, Class C and Class Y shares. The Fund commenced its public offering of Class B shares on September 13, 1993, of Class C shares on December 30, 1994 and of its Class Y shares on March 31, 1994. 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 (or five years if purchased before May 1, 1997). Class C shares do not pay front end or contingent deferred sales charges and do not convert to any class of shares, but they do pay a higher ongoing distribution fee than Class A shares. Class Y shares do not pay a front end sales charge, a contingent deferred sales charge or distribution fee. They are intended for institutional investors with a minimum of $1,000,000 to invest. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 plan. Shares of each class would receive their pro-rata share of the net assets of the Fund, if the Fund were liquidated. In addition, the Trustees approve separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles for investment companies. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION. Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees, which service provides the last reported sale price for securities listed on an applicable securities exchange or on the NASDAQ national market system, or, if no sale was reported and in the case of over-the counter securities not so listed, the last reported bid price. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS AND RELATED INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income for the Fund is increased by the accretion of discount. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the Internal Revenue Code applicable to regulated investment companies, and to distribute to its shareholders all of its income and any net realized capital gains, at least annually. Accordingly, no provision for federal income tax has been made. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on the ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from generally accepted accounting principles. Permanent book and tax basis differences will result in reclassification to the capital accounts. E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is the Fund's policy that the market value of the collateral be at least equal to 100% of the repurchase price. The Fund's subadviser is responsible for determining that the value of the collateral is at all times at least equal to the repurchase price. Repurchase agreements could involve certain risks in the event of default or insolvency of the other party including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. 2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the Fund for the six months ended June 30, 1997 were $85,710,613 and $72,389,440, respectively. 3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays management fees to its investment adviser, New England Funds Management L.P. ("NEFM") at the annual rate of 0.75% of the first $200 million of the Fund's average daily net assets, 0.70% of the next $300 million and 0.65% of such assets in excess of $500 million. NEFM pays the Fund's investment subadviser, Loomis Sayles & Company, L.P. at the rate of 0.535% of the first $200 million of the Fund's average daily net assets, 0.350% of the next $300 million and 0.300% of such assets in excess of $500 million. Certain officers and directors of NEFM are also officers or trustees of the Fund. NEFM and Loomis Sayles & Company, L.P. are wholly owned subsidiaries of New England Investment Companies, L.P. ("NEIC") which is a subsidiary of Metropolitan Life Insurance Company ("Met Life"). Fees earned by NEFM and Loomis Sayles & Company, L.P. under the management agreement in effect during the six months ended June 30, 1997 are as follows: FEES EARNED ----------- $534,616 New England Funds Management, L.P. $851,985 Loomis Sayles & Company, L.P. B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of NEIC and performs certain accounting and administrative services for the Fund. The Fund reimburses New England Funds for all or part of New England Funds' expenses of providing these services which include the following: (i) expenses for personnel performing bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Fund, (ii) expenses for services required in connection with the preparation of registration statements and prospectuses, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance, and (iii) registration, filing and other fees in connection with requirements of regulatory authorities. For the six months ended June 30, 1997 these expenses amounted to $34,953 and are shown separately in the financial statements as accounting and administrative. C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder servicing agent for the Fund. For the six months ended June 30, 1997, the Fund paid New England Funds $263,106 as compensation for its services in that capacity. D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to the Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by the New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1997, the Fund paid New England Funds $382,912 in fees under the Class A Plan. If the expenses of New England Funds that are otherwise reimbursable under the Class A Plan incurred in any year exceed the amounts payable by the Fund under the Class A Plan, the unreimbursed amount (together with unreimbursed amounts from prior years) may be carried forward for reimbursement in future years in which the Class A Plan remains in effect. The amount of unreimbursed expenses carried forward at June 30, 1997 is $1,651,994. Under the Class B and Class C 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 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, 1997, the Fund paid New England Funds $70,145 and $5,244 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 up to 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by New England Funds in connection with the marketing or sale of Class B and Class C shares. For the six months ended June 30, 1997, the Fund paid New England Funds $210,436 and $15,731 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, 1997 amounted to $526,080. 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, NEIC or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $2,099 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting Committee Chairman Retainer $152/year A deferred compensation plan is available to the trustees on a voluntary basis. Each participating trustee will receive an amount equal to the value that such deferred compensation would have been, had it been invested in the Fund on the normal payment date. 4. CAPITAL SHARES. At June 30, 1997 there was an unlimited number of shares of beneficial interest authorized, divided into four classes, Class A, Class B, Class C and Class Y capital stock. Transactions in capital shares were as follows:
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 --------------------------- --------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 4,640,471 $43,287,185 2,757,054 $27,477,566 Shares issued in connection with the reinvestment of: Dividends from net investment income ............................ 189,563 1,810,327 0 0 Distributions from net realized gain 3,878,685 35,082,583 0 0 --------- ----------- --------- ----------- 8,708,719 80,180,095 2,757,054 27,477,566 Shares repurchased ................... (5,137,827) (47,889,236) (3,241,338) (32,519,569) --------- ----------- --------- ----------- Net increase (decrease) .............. 3,570,892 $32,290,859 (484,284) $(5,042,003) --------- ----------- --------- ----------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 --------------------------- --------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 1,765,384 $16,311,333 1,691,325 $16,601,793 Shares issued in connection with the reinvestment of: Dividends from net investment income ............................ 4,900 46,158 0 0 Distributions from net realized gain 582,246 5,194,870 0 0 --------- ----------- --------- ----------- 2,352,530 21,552,361 1,691,325 16,601,793 Shares repurchased ................... (471,337) (4,330,620) (377,599) (3,694,735) --------- ----------- --------- ----------- Net increase ......................... 1,881,193 $17,221,741 1,313,726 $12,907,058 --------- ----------- --------- ----------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 --------------------------- --------------------------- CLASS C SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 289,530 $ 2,676,616 320,372 $ 3,144,864 Shares issued in connection with the reinvestment of: Dividends from net investment income ............................ 372 3,501 0 0 Distributions from net realized gain 37,948 339,671 0 0 --------- ----------- --------- ----------- 327,850 3,019,788 320,372 3,144,864 Shares repurchased ................... (73,512) (674,174) (240,475) (2,319,294) --------- ----------- --------- ----------- Net increase ......................... 254,338 $ 2,345,614 79,897 $ 825,570 --------- ----------- --------- ----------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 --------------------------- --------------------------- CLASS Y SHARES AMOUNT SHARES AMOUNT - ------- --------- ----------- --------- ----------- Shares sold .......................... 473,688 $ 4,397,728 671,111 $ 6,744,915 Shares issued in connection with the reinvestment of: Dividends from net investment income............................. 11,141 105,840 0 0 Distributions from net realized gain 151,895 1,371,593 0 0 --------- ----------- --------- ----------- 636,724 5,875,161 671,111 6,744,915 Shares repurchased ................... (75,923) (709,177) (81,645) (813,268) --------- ----------- --------- ----------- Net increase ......................... 560,801 5,165,984 589,466 5,931,647 --------- ----------- --------- ----------- Increase derived from capital shares transactions ....................... 6,267,224 $57,024,198 1,498,805 $14,622,272 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEW ENGLAND BALANCED FUND NEW ENGLAND VALUE FUND SUPPLEMENT DATED AUGUST 1, 1997 TO NEW ENGLAND STOCK FUNDS CLASSES A, B AND C PROSPECTUS DATED MAY 1, 1997 AND NEW ENGLAND STOCK FUNDS CLASS Y PROSPECTUS DATED MAY 1, 1997 (AS SUPPLEMENTED JULY 28, 1997) THE FOLLOWING INFORMATION SUPPLEMENTS THE SECOND PARAGRAPH IN THE "FUND MANAGEMENT" SECTION: Carol C. McMurtrie, Tricia H. Mills and (beginning in August 1997) Roderic Dillon are the portfolio managers of the Value Fund. Ms. McMurtrie and Ms. Mills have served in that capacity since 1993. Ms. McMurtrie, Ms. Mills and (beginning in August 1997) Mr. Dillon are also the portfolio managers of the equity portion of the Balanced Fund and are responsible for allocating the assets of the Balanced Fund between equity and fixed-income securities. Ms. McMurtrie and Ms. Mills have served in these capacities since July 1997. The portfolio management team for the fixed-income portion of the Balanced Fund consists of Meri Anne Beck, John Hyll and Barr Segal, who have had portfolio management responsibility for the Fund's fixed-income investments since 1990, 1994 and 1996, respectively. Messrs. Dillon, Hyll and Segal are Vice Presidents of Loomis Sayles. Mr. Hyll has been employed by Loomis Sayles for more than five years. Mr. Segal was a Senior Portfolio Manager at TCW Group before joining Loomis Sayles in 1996. Mr. Dillon rejoins Loomis Sayles in August 1997 following several years as principal of Dillon Capital Management. - -------------------------------------------------------------------------------- NEW ENGLAND FUNDS - -------------------------------------------------------------------------------- STOCK FUNDS Star Small Cap Fund Growth Fund Star Advisers Fund Capital Growth Fund Growth Opportunities Fund Value Fund Balanced Fund INTERNATIONAL STOCK FUNDS International Equity Fund Star Worldwide Fund BOND FUNDS High Income Fund Strategic Income Fund Bond Income Fund Government Securities Fund Limited Term U.S. Government Fund Adjustable Rate U.S. Government Fund TAX EXEMPT FUNDS Municipal Income Fund Massachusetts Tax Free Income Fund Intermediate Term Tax Free Fund of California Intermediate Term Tax Free Fund of New York MONEY MARKET FUNDS Cash Management Trust -- Money Market Series -- U.S. Government Series Tax Exempt Money Market Trust To learn more, and for a free prospectus, contact your financial representative. Visit our World Wide Web site at 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. -------------- (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 --------------------- - --------------------- --------------------- [Logo] [Logo] QUALITY QUALITY TESTED SERVICE TESTED SERVICE 1995 1996 - --------------------- --------------------- DALBAR DALBAR HONORS COMMITMENT TO: HONORS COMMITMENT TO: INVESTORS INVESTORS - --------------------- --------------------- VL58-0697 [recycle symbol] Printed On Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----