-----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, U2Guy7pEuqPMWJvrsHHm5bGpx5aIsPsTfjJzU82UR8m/9UvEISDkhZ1XbkYaYoZb Ptmh/rk2o18ELxouQnx15w== 0000950156-96-000789.txt : 19960910 0000950156-96-000789.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950156-96-000789 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960906 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: 1940 Act SEC FILE NUMBER: 811-04323 FILM NUMBER: 96626797 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 - CAPITAL GROWTH FUND [LOGO] NEW ENGLAND FUNDS Where The Best Minds Meet(TM) - -------------------------------------------------------------------------------- SEMIANNUAL REPORT AND PERFORMANCE UPDATE - -------------------------------------------------------------------------------- NEW ENGLAND CAPITAL GROWTH FUND - ----------------------- June 30, 1996 - ----------------------- July 25, 1996 DEAR SHAREHOLDER, New England Funds welcomes the opportunity to present you with the 1996 Semiannual Report for New England Capital Growth Fund, containing your portfolio manager commentary and complete financial information. ECONOMIC GROWTH IN THE FIRST HALF OF 1996 Moderate growth with low inflation was the economic story during the first half of 1996. U.S. Gross Domestic Product (GDP), a bellwether of economic growth, remained strong at 2.3% through June, just shy of what most economists consider optimal growth. As a result, the Federal Reserve Board opted not to tinker with interest rates through the first half of the year, save for a quarter-point ease in short-term rates in late January. The relatively calm economic waters had a stimulating effect on the domestic equity market, boosting stocks 537 points to 5,654 at the end of June, as measured by the Dow Jones Industrial Average. Bond yields did not fare as well, rising to 7.00% at the end of June from 6.65% earlier in the year. Money market yields remained stable, falling back only slightly during the past six months. THE BENEFITS OF MAINTAINING A LONG-TERM FOCUS But the market volatility of the first three weeks in July claimed 5.5% of the Dow Jones Industrial Average's first-half gains. Again, we are reminded that no bull market lasts forever. Long-term financial goals are key in times like these and it's important to anticipate this type of market volatility and remain committed to your financial plan. It's also a good idea to ask your financial representative for help. A financial representative can guide you through volatile markets and help you meet your long-term financial goals. A recent study by Dalbar, Inc., a mutual fund monitoring and analytical service, shows that, on average, mutual fund investors who bought and held shares, with the assistance of a financial representative, enjoyed the benefits of a long-term commitment. Consequently, they benefitted from higher returns than direct investors and others who bought and sold, although this does not occur in every case. CELEBRATING THE BIRTHDAYS OF THREE NEW ENGLAND FUNDS During the past two months, we've celebrated the birthdays of three of our most popular funds: New England Growth Opportunities Fund; New England Strategic Income Fund and New England Star Advisers Fund. Demonstrating the remarkable scope and breadth of our funds, the Growth Opportunities Fund celebrated its 65th birthday in May while the fast-growing Strategic Income and Star Advisers Funds marked their first and second birthdays, respectively. We're proud of all of our funds, but take special pride in recognizing that, whether six months or 65-years-old, all New England Funds are designed to help investors achieve their goals. NEW ENGLAND FUNDS: THE PLACE "WHERE THE BEST MINDS MEET"(TM) The longevity of our more seasoned funds and the potential for growth of our newer ones illustrates the ongoing progress of New England Funds. Our unique multiple-adviser approach brings together some of the best minds in the investment business. The ability to attract top-notch investment advisers and our multiple-adviser approach to fund management are the cornerstones of New England Funds' investment philosophy and the essence of our corporate logo, Where The Best Minds Meet(TM). OUTLOOK FOR THE REST OF 1996 Going forward, we anticipate that the economy will continue to grow moderately and that inflationary pressures will not be excessive. While we estimate the GDP may rise somewhat from its current level of 2.3%, the Federal Reserve should be reluctant to tighten the money supply by raising short-term interest rates. We also believe that the equity markets will continue to be volatile through the rest of the year. We believe that you will find your portfolio manager commentary informative. If you have any questions or comments, please contact your financial representative or New England Funds directly at 800-225-5478. Sincerely, /S/Henry L.P. Schmelzer Henry L.P. Schmelzer, President - -------------------------------------------------------------------------------- NEW ENGLAND CAPITAL GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 1996 Putting Performance into Perspective The graph comparing your Fund's performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. Your Fund's total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction costs and other expenses. [A chart in the form of a line graph appears here illustrating a $10,000 investment in the Fund since inception 8/3/92 compared to the S&P 500 Index over the same period. The data of this chart are as follows:] - -------------------------------------------------------------------------------- A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- Capital Growth Year NAV POP S&P 500 - ------ ------- ------- ------- 8/3/92 $10,000 $9,425 $10,000 1993 $11,838 $11,157 $10,918 1994 $11,221 $10,576 $11,112 1995 $14,696 $13,851 $14,000 1996 $17,609 $16,597 $17,630 - -------------------------------------------------------------------------------- This illustration represents past performance of Class A shares and cannot predict future results. Investment return and principal value may vary, resulting in a gain or loss on the sale of shares. Class B and Class C 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. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS 6/30/96 - -------------------------------------------------------------------------------- CLASS A (Inception 8/3/92) 1 YEAR 3 YEAR SINCE INCEPTION - ------------------------- ------ ------ --------------- Net Asset Value(1) 19.82% 14.15% 15.57% With Max. Sales Charge(2) 12.96 11.93 13.84 Lipper Growth Average(5) 22.20 15.09 14.55 CLASS B (Inception 9/13/93) 1 YEAR SINCE INCEPTION - -------------------------- ------ --------------- Net Asset Value(1) 18.91% 14.04% With CDSC(3) 14.91 13.19 Standard & Poor's 500(4) 25.93 17.32 Lipper Growth Average(5) 22.20 n/a CLASS C (Inception 12/30/94) 1 YEAR SINCE INCEPTION - --------------------------- ------ --------------- Net Asset Value(1) 18.85% 26.76% Standard & Poor's 500(4) 25.93 32.43 Lipper Growth Average(5) 22.20 n/a These returns represent past performance. Investment return and principal value will fluctuate so that shares, upon redemption, may be worth more or less than original cost. NOTES TO CHARTS AND PERFORMANCE UPDATE 1 Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. 2 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 Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 4% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero five years after the purchase of shares. 4 Standard & Poor's 500(R) Index (S&P 500) is an unmanaged index representing the performance of 500 major companies, most of which are listed on the New York Stock Exchange. The S&P 500 performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. 5 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. - --------------- Photo of Scott Pape and Bruce Ebel - --------------- NEW ENGLAND CAPITAL GROWTH FUND Portfolio Managers: Scott Pape/Bruce Ebel Loomis, Sayles & Co., L.P. Economic Overview Buoyed by an acceleration of activity in key areas such as retail sales, employment and housing, the general economic environment was solid during the first six months of 1996. Inflation remained under control during the period with very little evidence of commodity or labor cost pressures that traditionally ignite higher inflation. The only negative trend developing during the first half of 1996 was the rise of long-term interest rates. Yields on the 30-year long-term Treasury bond rose from 5.8% in January to 7.2% by late June. That has led to some consternation and subsequent volatility in both the fixed income and equity markets. How Your Fund Performed Thanks to a boost from consumer and technology stocks, your Fund continued to post strong gains. For the six months ending June 30, 1996, New England Capital Growth Fund returned 10.4% for Class A shares, based on net asset value. How We Managed Your Fund The Fund's continued strong performance was fueled primarily by stocks that benefited from accelerated consumer spending and retail sales. Holdings that boosted the overall performance of the Fund came from the technology, financial and consumer staples sectors, particularly from companies that make telecommunications, software, personal care and beverage products. Energy, an area where the Fund increased its exposure, also performed admirably, with oil field service companies driving returns. Overall, growth stocks fared better than value stocks year to date. Sectors that underperformed included heavy industrials, especially companies that sell basic materials, such as steel, construction and home building materials. Utilities were a substandard performer as well, attributable chiefly to the rising interest rate environment during the first half of the year. Fortunately, your Fund was underweighted in both categories during this period. The Fund, however, continued to emphasize emerging growth stocks (33% of the Fund as of January 1, 1996), which also performed very well over the first six months of 1996. Allocating a third of the Fund to emerging growth stocks follows a general strategy of uncovering dynamic growth companies earlier in their life cycles, before discovery by other growth investors. Combined with core stocks that have already established a pattern of growth and earnings, your Fund's emerging growth allocation targets the upside potential you want from a growth fund, with the market correlation and limitation of risk sought by an index fund. Individual stocks that contributed to the growth of the Fund during the period included Microsoft, Cintas and Paychex. Microsoft -- the world's largest software company and our second largest holding in the Fund -- reflects the Fund's management strategy. It's a premier company that dominates its industry and one with the potential to earn above average rates of return over long periods of time. Cintas, the market leader in the uniform rental industry, underscores another tenet under which the Fund operates: finding companies with a history of above average earnings that they have predicted quarter after quarter. Cintas has experienced an average growth rate of 20% annually over the last ten years, with no single year showing less than 15% earnings growth. Paychex illustrates the emerging growth investment strategy that the Fund employs. A rapidly growing company that does payroll processing for small businesses, Paychex presents an investment opportunity with high recurring revenues and consistently strong growth in a market that is not yet saturated. Outlook We believe that economic growth will slow moderately through the rest of 1996. Interest rates should remain stable and low inflation should be the norm for the period. We expect that corporate earnings will continue to be strong even if the economy loses some momentum. Companies are still enjoying increased productivity and are working hard to bolster their bottom lines. That combination of factors should result in further growth for these companies in particular and the economy in general during the second half of 1996. In the meantime, the Fund will continue to focus on America's premier companies - -- leaders in their respective industries, with strong management and excellent prospects for increased revenues and earnings. We feel these stocks offer investors the best opportunities for long-term growth. - -------------------------------------------------------------------------------- YOUR FUND'S FIVE LARGEST INVESTMENTS 6/30/96 - -------------------------------------------------------------------------------- PERCENTAGE COMPANY OF ASSETS ----------------------------------------------------- 1. FIRST DATA CORP. 2.73% Credit-card processing services ----------------------------------------------------- 2. MICROSOFT CORP. 2.70% Software for microcomputers ----------------------------------------------------- 3. HEWLETT PACKARD CO. 2.54% Manufacturer of precision electronic products and systems for data management ----------------------------------------------------- 4. GENERAL ELECTRIC CO. 2.43% Consumer/industrial production, broadcast ----------------------------------------------------- 5. STARBUCKS CORP. 2.17% Retails high quality coffees - -------------------------------------------------------------------------------- YOUR FUND'S TEN LARGEST INDUSTRY POSITIONS 6/30/96 - -------------------------------------------------------------------------------- PERCENTAGE COMPANY OF ASSETS ------------------------------------------------------ 1. BUSINESS SERVICES 11.1% ------------------------------------------------------ 2. COMPUTER SOFTWARE & SERVICES 9.8% ------------------------------------------------------ 3. COMMUNICATIONS 9.5% ------------------------------------------------------ 4. HEALTHCARE-DRUGS 7.7% ------------------------------------------------------ 5. HOTEL & RESTAURANT 6.0% ------------------------------------------------------ 6. HEALTHCARE 5.7% ------------------------------------------------------ 7. ELECTRONIC COMPONENTS 5.6% ------------------------------------------------------ 8. HOUSEHOLD PRODUCTS 3.5% ------------------------------------------------------ 9. HEALTHCARE SERVICES 3.5% ------------------------------------------------------ 10. RETAIL 3.1% Portfolio holdings subject to change. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO] NEW ENGLAND FUNDS Where The Best Minds Meet(TM) - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS - -------------------------------------------------------------------------------- NEW ENGLAND CAPITAL GROWTH FUND - ----------------------- June 30, 1996 - ----------------------- - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Invetments as of June 30, 1996 (unaudited) COMMON STOCK--98.9% OF TOTAL NET ASSETS SHARES DESCRIPTION VALUE (A) - -------------------------------------------------------------------------------- AEROSPACE--1.1% 20,400 Boeing Co. ......................................... $ 1,777,350 ------------ AIRLINES--0.5% 30,000 Southwest Airlines ................................. 873,750 ------------ APPAREL & TEXTILES--0.2% 3,400 Nike, Inc., Class B ................................ 349,350 ------------ BANKS--1.5% 44,000 First Bank Systems, Inc. ........................... 2,552,000 ------------ BUSINESS SERVICES--11.1% 35,000 Ceridian Corp. (c) ................................. 1,767,500 66,000 Checkfree Corp. (c) ................................ 1,311,750 55,600 Cintas Corp. ....................................... 2,974,600 50,000 Danka Business Systems (ADR) (d) ................... 1,462,500 58,000 First Data Corp. ................................... 4,618,250 110,250 Fiserv, Inc. (c) ................................... 3,307,500 45,000 Medaphis Corp. (c) ................................. 1,788,750 30,000 Paychex, Inc. ...................................... 1,443,750 2,500 Sykes Enterprises, Inc. (c) ........................ 123,125 ------------ 18,797,725 ------------ CHEMICALS--2.6% 28,000 Air Products & Chemicals, Inc. ..................... 1,617,000 75,000 Monsanto Co. ....................................... 2,437,500 9,200 Morton International, Inc. ......................... 342,700 ------------ 4,397,200 ------------ COMMUNICATION--9.5% 10,000 Cascade Communications Corp. (c) ................... 680,000 59,000 Cisco Systems, Inc. (c) ............................ 3,340,875 38,000 Glenayre Technologies, Inc. (c) .................... 1,900,000 42,000 Motorola, Inc. ..................................... 2,640,750 12,200 Paging Network, Inc. (c) ........................... 292,800 66,000 Qualcomm, Inc. (c) ................................. 3,506,250 40,000 Tellabs, Inc. (c) .................................. 2,675,000 12,600 U. S. Robotics Corp. (c) ........................... 1,077,300 ------------ 16,112,975 ------------ COMPUTER SOFTWARE & SERVICES--9.8% 30,000 Adobe Systems, Inc. ................................ 1,076,250 30,000 Automatic Data Processing, Inc. .................... 1,158,750 25,600 HBO & Co. .......................................... 1,734,400 127,000 Informix Corp. (c) ................................. 2,857,500 38,000 Microsoft Corp. (c) ................................ 4,564,750 51,000 Oracle Systems Corp. (c) ........................... 2,011,312 71,000 Parametric Technology Corp. (c) .................... 3,079,625 ------------ 16,482,587 ------------ COMPUTERS & BUSINESS EQUIPMENT--2.5% 43,000 Hewlett Packard Co. ................................ 4,283,875 ------------ ELECTRIC--2.4% 47,500 General Electric Co. ............................... 4,108,750 ------------ ELECTRONIC COMPONENTS--5.6% 45,500 Intel Corp. ........................................ 3,341,406 85,000 LSI Logic Corp. (c) ................................ 2,210,000 25,000 Molex, Inc. ........................................ 793,750 40,000 Molex, Inc. Class A ................................ 1,175,000 51,200 Solectron Corp. (c) ................................ 1,939,200 ------------ 9,459,356 ------------ ENERGY--0.7% 7,000 Amoco Corp. ........................................ 506,625 8,200 Schlumberger, Ltd. ................................. 690,850 ------------ 1,197,475 ------------ FINANCIAL SERVICES--2.5% 55,000 MBNA Corp. ......................................... 1,567,500 40,000 MGIC Investment Corp. .............................. 2,245,000 14,100 Charles Schwab Corp. ............................... 345,450 ------------ 4,157,950 ------------ FOOD & BEVERAGES--2.8% 39,000 Coca Cola Co. ...................................... 1,906,125 80,000 PepsiCo, Inc. ...................................... 2,830,000 ------------ 4,736,125 ------------ GAS & PIPELINE UTILITIES--0.5% 21,900 Enron Corp. ........................................ 895,163 ------------ HEALTH CARE--5.7% 50,000 Boston Scientific Corp. (c) ........................ 2,250,000 46,000 Idexx Laboratories (c) ............................. 1,805,500 58,000 Medtronic, Inc. .................................... 3,248,000 69,000 Summit Technology, Inc. (c) ........................ 966,000 84,000 Ventritex, Inc. (c) ................................ 1,438,500 ------------ 9,708,000 ------------ HEALTH CARE-DRUGS--7.7% 60,000 Amgen, Inc. (c) .................................... 3,240,000 16,000 Biogen, Inc. (c) ................................... 878,000 67,000 Johnson & Johnson .................................. 3,316,500 52,500 Merck & Co., Inc. .................................. 3,392,812 230,000 Oncor, Inc. (c) .................................... 1,265,000 65,000 Somatogen, Inc. (c) ................................ 918,125 ------------ 13,010,437 ------------ HEALTH CARE-SERVICES--3.5% 47,800 Columbia/HCA Healthcare Corp. ...................... 2,551,325 74,300 Healthsouth Rehabilitation (c) ..................... 2,674,800 10,500 Phycor, Inc. (c) ................................... 399,000 5,500 United Healthcare Corp. ............................ 277,750 ------------ 5,902,875 ------------ HOTELS & RESTAURANTS--6.0% 30,000 Boston Chicken, Inc. (c) ........................... 975,000 18,600 Circus Circus Enterprises, Inc. (c) ................ 762,600 50,000 Lone Star Steakhouse & Saloon (c) .................. 1,887,500 30,000 McDonalds Corp. .................................... 1,402,500 60,000 Primadonna Resorts, Inc. (c) ....................... 1,380,000 129,500 Starbucks Corp. (c) ................................ 3,658,375 ------------ 10,065,975 ------------ HOUSEHOLD PRODUCTS--3.5% 47,500 Duracell International, Inc. ....................... 2,048,438 58,000 Gillette Co. ....................................... 3,617,750 3,600 Procter & Gamble Co. ............................... 326,250 ------------ 5,992,438 ------------ INSURANCE--2.9% 31,000 American International Group, Inc. ................. 3,057,375 26,000 Exel, Ltd. ......................................... 1,833,000 ------------ 4,890,375 ------------ LEISURE TIME--1.6% 34,000 Eastman Kodak Co. .................................. 2,643,500 ------------ MACHINERY--1.5% 38,000 Illinois Tool Works, Inc. .......................... 2,569,750 ------------ MEDIA & ENTERTAINMENT--2.6% 38,000 Tele-Communications, Inc. Class A (c) .............. 688,750 4,800 Tribune Co. ........................................ 348,600 27,300 U.S. West Media Group (c) .......................... 498,225 44,500 Walt Disney Co. .................................... 2,797,938 ------------ 4,333,513 ------------ METAL--0.3% 8,400 Nucor Corp. ........................................ 425,250 ------------ OIL--2.6% 60,000 Anadarko Petroleum Corp. ........................... 3,480,000 29,800 Enron Oil And Gas Co. .............................. 830,675 ------------ 4,310,675 ------------ OIL SERVICES--0.8% 20,600 Baker Hughes, Inc. ................................. 677,225 49,000 Rowan Companies, Inc. (c) .......................... 722,750 ------------ 1,399,975 ------------ RETAIL--3.1% 75,000 Office Max, Inc. (c) ............................... 1,790,625 71,500 Petsmart, Inc. (c) ................................. 3,414,125 ------------ 5,204,750 ------------ RETAIL--SPECIALTY--1.8% 86,000 CUC International, Inc. (c) ........................ 3,053,000 ------------ TELECOMMUNICATION--0.5% 5,400 AT&T Corp. ......................................... 334,800 17,000 MCI Communications ................................. 435,625 ------------ 770,425 ------------ TOBACCO--1.5% 25,000 Philip Morris Companies, Inc. ...................... 2,600,000 ------------ Total Common Stock (Identified Cost $133,876,182) ... 167,062,569 ------------ SHORT TERM INVESTMENT--0.5% FACE AMOUNT DESCRIPTION VALUE - -------------------------------------------------------------------------------- $886,535 Associates Corp. of North America 5.4500% 7/01/96 . $ 886,535 ------------ Total Short Term Investment (Identified Cost $886,535) ...................... 886,535 ------------ Total Investments--99.4% (Identified Cost $134,762,717) (b) .............. 167,949,104 Other assets less liabilities .................... 995,569 ------------ Total Net Assets--100% ............................ $168,944,673 ============ (a) See Note 1a. (b) Federal Tax Information: At June 30, 1996 the net unrealized appreciation on investments based on cost of $134,762,717 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 ......... $ 36,760,173 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ......... (3,573,786) ------------ Net unrealized appreciation ................................ $ 33,186,387 ============ (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, 1996 (unaudited) ASSETS Investments at value ......................... $167,949,104 Receivable for: Fund shares sold ........................... 300,247 Securities sold ............................ 3,835,498 Dividends and interest ..................... 126,926 Unamortized organization expense ............. 26,008 Prepaid registration expense ................. 8,000 ------------ 172,245,783 LIABILITIES Payable for: Securities purchased ....................... $2,819,762 Fund shares redeemed ....................... 299,092 Withholding taxes .......................... 545 Accrued expenses: Management fees ............................ 104,464 Deferred trustees' fees .................... 6,264 Accounting and administrative .............. 3,526 Other expenses ............................. 67,457 ---------- 3,301,110 ------------ NET ASSETS ................................................ $168,944,673 ============ Net Assets consist of: Capital paid in ....................................... $121,867,551 Undistributed net investment loss ..................... (670,855) Accumulated net realized gains ........................ 14,561,590 Unrealized appreciation on investments ................ 33,186,387 ------------ NET ASSETS ................................................ $168,944,673 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($135,353,015 divided by 6,656,601 shares of beneficial interest) ............................................... $20.33 ====== Offering price per share (100/94.25 of $20.33) ............ $21.57* ====== Net asset value and offering price of Class B shares ($32,999,082 divided by 1,658,239 shares of beneficial interest) ............................................... $19.90** ====== Net asset value and offering price of Class C shares ($592,576 divided by 29,777 shares of beneficial interest) ............................................... $19.90 ====== Identified cost of investments ............................ $134,762,717 ============ *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, 1996 (unaudited) INVESTMENT INCOME Dividends .................................. $ 564,331(a) Interest ................................... 103,090 ---------- 667,421 Expenses Management fees ......................... $594,986 Service fees--Class A ................... 161,039 Service and distribution fees--Class B .. 146,952 Service and distribution fees--Class C ... 2,201 Trustees' fees and expenses .............. 11,812 Accounting and administrative ............ 25,944 Custodian ................................ 37,406 Transfer agent ........................... 256,874 Audit and tax services ................... 23,000 Legal .................................... 9,394 Printing ................................. 20,926 Registration ............................. 31,074 Amortization of organization expenses .... 10,576 Miscellaneous ............................ 3,992 --------- Total expenses ............................. 1,336,176 ----------- Net investment loss .......................... (668,755) ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized gain on Investments--net .......... 10,380,340 Unrealized appreciation on Investments-net . 6,043,238 ----------- Net gain on investment transactions ........ 16,423,578 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS ... $15,754,823 =========== (a) Net of foreign taxes of: $380. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (unaudited) YEAR ENDED SIX MONTHS DECEMBER 31, ENDED 1995 JUNE 30, 199 ------------ ------------ FROM OPERATIONS Net investment loss ....................... $ (1,037,488) $ (668,755) Net realized gain on investments .......... 15,135,922 10,380,340 Unrealized appreciation on investments .... 19,442,310 6,043,238 ------------ ------------ Increase in net assets from operations .... 33,540,744 15,754,823 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized gain on investments Class A ................................. (7,789,254) 0 Class B ................................. (1,581,720) 0 Class C ................................. (14,547) 0 ------------ ------------ (9,385,521) 0 ------------ ------------ Increase in net assets derived from capital share transactions ...................... 14,743,856 3,097,943 ------------ ------------ Total increase in net assets .............. 38,899,079 18,852,766 NET ASSETS Beginning of the period ................... 111,192,828 150,091,907 ------------ ------------ End of the period ......................... $150,091,907 $168,944,673 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) Beginning of the period ................... $ (578,964) $ 0 ============ ============ End of the period ......................... $ 0 $ (670,855) ============ ============ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (unaudited) CLASS A ----------------------------------------------------- AUGUST 3 (C) SIX MONTHS THROUGH YEAR ENDED DECEMBER 31, ENDED DECEMBER 31, ------------------------- JUNE 30, 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Net Asset Value, Beginning of Period ............. $12.50 $14.23 $15.27 $15.02 $18.41 ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss) ......... 0.02 0.00 (0.08) (0.11)(b) (0.07) Net Realized and Unrealized Gain (Loss) on Investments . 1.84 1.12 (0.17) 4.74 1.99 ------ ------ ------ ------ ------ Total From Investment Operations ............ 1.86 1.12 (0.25) 4.63 1.92 ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ..... (0.02) 0.00 0.00 0.00 0.00 Distributions From Net Realized Capital Gains. (0.11) (0.08) 0.00 (1.24) 0.00 ------ ------ ------ ------ ------ Total Distributions .... (0.13) (0.08) 0.00 (1.24) 0.00 ------ ------ ------ ------ ------ Net Asset Value, End of Period ......... $14.23 $15.27 $15.02 $18.41 $20.33 ====== ====== ====== ====== ====== Total Return (%) (e) ... 14.9 7.9 (1.6) 30.7 10.4 Ratio of Operating Expenses to Average Net Assets (%) (a) .... 1.00 (d) 1.23 1.63 1.61 1.54 (d) Ratio of Net Investment Income (loss) to Average Net Assets (%). 0.74 (d) (0.03) (0.45) (0.67) (0.70)(d) Portfolio Turnover Rate (%) .............. 15 77 82 69 92 (d) Average Commission Rate (f) .............. -- -- -- -- $0.0321 Net Assets, End of Period (000) .......... $34,772 $98,735 $95,803 $123,504 $135,353 (a) The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitations described in Note 4 to the Financial Statements would have been (%) ........ 2.20 (d) 1.58 -- -- -- (b) Per share net investment income (loss) does not reflect the current period's reclassification of permanent differences between book and tax basis net investment income (loss). See Note 1d. (c) Commencement of Operations. (d) Computed on annualized basis. (e) A sales charge is not reflected in total return calculations. Periods less than one year are not annualized. (f) 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 B CLASS C ----------------------------------------------------------------- ----------------------------- SEPTEMBER 13 (C) YEAR YEAR SIX MONTHS YEAR SIX MONTHS THROUGH ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, 1993 1994 1995 1996 1995 1996 ------------ ------------ ----------- ---------- ------------ ----------- Net Asset Value, Beginning of Period ............... $14.79 $15.24 $14.89 $18.09 $14.89 $18.08 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss) .................. 0.00 (0.08) (0.16)(b) (0.13) (0.09)(b) (0.11) Net Realized and Unrealized Gain (Loss) on Investments ............. 0.53 (0.27) 4.60 1.94 4.52 1.93 ------ ------ ------ ------ ------ ------ Total From Investment Operations .............. 0.53 (0.35) 4.44 1.81 4.43 1.82 ------ ------ ------ ------ ------ ------ Less Distributions Dividends From Net Investment Income ....... 0.00 0.00 0.00 0.00 0.00 0.00 Distributions From Net Realized Capital Gains .. (0.08) 0.00 (1.24) 0.00 (1.24) 0.00 ------ ------ ------ ------ ------ ------ Total Distributions ....... (0.08) 0.00 (1.24) 0.00 (1.24) 0.00 ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period ................... $15.24 $14.89 $18.09 $19.90 $18.08 $19.90 ====== ====== ====== ====== ====== ====== Total Return (%) (e) ...... 3.6 (2.3) 29.7 10.0 29.7 10.1 Ratio of Operating Expenses to Average Net Assets (%) (a) ..... 2.29 (d) 2.38 2.36 2.29 (d) 2.36 2.29 (d) Ratio of Net Investment Income (loss) to Average Net Assets (%) .......... (1.15)(d) (1.20) (1.42) (1.45)(d) 1.42 (1.45)(d) Portfolio Turnover Rate (%) 77 82 69 92 (d) 69 92 (d) Average Commission Rate (f) -- -- -- $0.0321 -- $0.0321 Net Assets, End of Period (000) ............. $6,748 $15,390 $26,234 $32,999 $ 354 $ 593 (a) The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitations described in Note 4 to the Financial Statements would have been (%) .............. 2.29 (d) -- -- -- -- -- (b) Per share net investment income (loss) does not reflect the current period's reclassification of permanent differences between book and tax basis net investment income (loss). See Note 1d. (c) Commencement of Operations. (d) Computed on an annualized basis. (e) 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. The 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, 1996 (unaudited) 1. The Fund is a Series of New England Funds Trust I, a Massachusetts business trust (the "Trust"), and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (each such series of shares a "Fund"). The Fund offers Class A, Class B and Class C shares. The Fund commenced its public offering of Class B shares on September 13, 1993 and of Class C shares on December 30, 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 five years of purchase. 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. 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 INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income for the Funds 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 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. 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 portfolio's ability to dispose of the underlying securities. F. ORGANIZATION EXPENSE. Costs incurred in fiscal 1992 in connection with the Fund's organization and registration, amounting to approximately $75,980 in the aggregate, were paid by the Fund and are being amortized by the Fund based on projected annual average net assets over 60 months. 2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the Fund for the six months ended June 30, 1996 were $78,539,725 and $71,907,934, 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 0.60% of the first $25 million of the Fund's average daily net assets, 0.55% of the next $75 million and 0.50% of the next $100 million, 0.35% of the next $300 million and 0.300% of such assets in excess of $500 million. Certain officers and directors of NEFM and Loomis Sayles & Company, L.P. are also officers or trustees of the Fund. NEFM and Loomis Sayles & Company, L.P. are wholly owned subsidiaries of New England Investment Companies, L.P. ("NEIC") which is a subsidiary of New England Mutual Life Insurance Company. Fees earned by NEFM and Loomis Sayles & Company, L.P. under the management agreement in effect during the six months ended June 30, 1996 are as follows: FEES EARNED - ----------- $177,495 New England Funds Management, L.P. $417,491 Loomis Sayles & Company, L.P. B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of NEIC and performs certain accounting and administrative services for the Fund. The Fund reimburses New England Funds for all or part of New England Funds' expenses of providing these services which include the following: (i) expenses for personnel performing bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Fund, (ii) expenses for services required in connection with the preparation of registration statements and prospectuses, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance, and (iii) registration, filing and other fees in connection with requirements of regulatory authorities. For the six months ended June 30, 1996 these expenses amounted to $25,944 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, 1996, the Fund paid New England Funds $195,537 as compensation for its services in that capacity. D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to the Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by the New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1996, the Fund paid New England Funds $161,039 in fees under the Class A Plan. If the expenses of New England Funds that are otherwise reimbursable under the Class A Plan incurred in any year exceed the amounts payable by the Fund under the Class A Plan, the unreimbursed amount (together with unreimbursed amounts from prior years) may be carried forward for reimbursement in future years in which the Class A Plan remains in effect. The amount of unreimbursed expenses carried forward at June 30, 1996 is $563,284. 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, 1996, the Fund paid New England Funds $36,738 and $550 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, 1996, the Fund paid New England Funds $110,214 and $1,651 in distribution fees under the Class B and Class C plans, respectively. Commissions (including contingent deferred sales charges) on Fund shares paid to New England Funds by investors in shares of the Fund during the six months ended June 30, 1996 amounted to $317,363. E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation directly to its officers or trustees who are directors, officers or employees of Loomis, Sayles, New England Funds, NEIC or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $2,203 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting Committee Chairman Retainer $71/year A deferred compensation plan is available to the trustees on a voluntary basis. Each participating trustee will receive an amount equal to the value that such deferred compensation would have had, had it been invested in the Fund on the normal payment date. 4. CAPITAL SHARES. At June 30, 1996 there was an unlimited number of shares of beneficial interest authorized, divided into three classes, Class A, Class B and Class C capital stock. Transactions in capital shares were as follows:
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 -------------------------------- ------------------------------ CLASS A SHARES AMOUNT SHARES AMOUNT - ------- -------------- ---------------- ------------- --------------- Shares sold 1,535,548 $27,180,134 636,031 $12,322,366 Shares issued in connection with the reinvestment of: Distributions from net realized gain ............................ 401,895 7,531,962 0 0 --------- ------------ --------- ------------ 1,937,443 34,712,096 636,031 12,322,366 Shares repurchased .................. (1,605,071) (27,758,920) (688,946) (13,374,270) --------- ------------ --------- ------------ Net increase (decrease) ............. 332,372 6,953,176 (52,915) (1,051,904) --------- ------------ --------- ------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 -------------------------------- ------------------------------ CLASS B SHARES AMOUNT SHARES AMOUNT - ------- -------------- ---------------- ------------- --------------- Shares sold 486,105 8,582,384 311,165 5,911,476 Shares issued in connection with the reinvestment of: Distributions from net realized gain .............................. 82,435 1,520,869 0 0 --------- ------------ --------- ------------ 568,540 10,103,253 311,165 5,911,476 Shares repurchase ................... (152,230) (2,660,581) (102,958) (1,962,440) --------- ------------ --------- ------------ Net increase ........................ 416,310 7,442,672 208,207 3,949,036 --------- ------------ --------- ------------ YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 -------------------------------- ------------------------------ CLASS C SHARES AMOUNT SHARES AMOUNT - ------- -------------- ---------------- ------------- --------------- Shares sold 19,788 352,389 11,271 220,427 Shares issued in connection with the reinvestment of: Distributions from net realized gain .............................. 772 14,201 0 0 --------- ------------ --------- ------------ 20,560 366,590 11,271 220,427 Shares repurchased .................. (997) (18,582) (1,057) (19,616) --------- ------------ --------- ------------ Net increase ........................ 19,563 348,008 10,214 200,811 --------- ------------ --------- ------------ Increase derived from capital share transactions ...................... 768,245 $14,743,856 165,506 $ 3,097,943 ========= =========== ========= ============
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