0000950109-95-003769.txt : 19950918 0000950109-95-003769.hdr.sgml : 19950918 ACCESSION NUMBER: 0000950109-95-003769 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950914 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: 95573977 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 SEMI ANNUAL REPORT ================================================================================ [NEW ENGLAND FUNDS LOGO APPEARS HERE] New England Funds Where The Best Minds Meet -------------------------------------------------------------------------------- Semiannual Report and Performance Update -------------------------------------------------------------------------------- New England Star Advisers Fund [ARTWORK APPEARS HERE] ------------- June 30, 1995 ------------- ================================================================================ -------------------------------------------------------------------------------- July 20, 1995 Dear Shareholder: We have good news to present in this Semiannual Report for New England Star Advisers Fund, which includes your Portfolio Manager's commentary and complete financial information. Market Overview Investors who stayed the course in 1995 were amply rewarded. Major U.S. stock market indices soared to record highs and the bond market staged a spectacular comeback from its 1994 lows. Fueling the rally was clear evidence that the economy had begun to slow down as a result of the interest rate hikes engineered by the Federal Reserve Board to keep inflation in check. Indeed, with declining housing starts and rising unemployment numbers reported in the first half of 1995, expectations grew that the Fed's next move would be downward, to prevent the slowing economy from slipping into recession. The bond market surged at the prospect of lower rates, and the stock market followed suit, with the Standard & Poor's 500/(R)/ Index gaining 20.14% during the first half of the year. The large, blue-chip companies led the way, in part because a weak U.S. dollar gave them a competitive advantage overseas and contributed to surprisingly healthy earnings reports. Finally, on July 6, just after this reporting period ended, the Fed lowered a key short-term rate by 0.25%, a relatively modest move, but a significant psychological change in direction. Your Financial Adviser -- A Trusted Ally As a shareholder in New England Funds, you have a valuable ally you can turn to at all times -- your financial adviser. This experienced continued -------------------------------------------------------------------------------- ================================================================================ -------------------------------------------------------------------------------- professional can help you design an asset allocation program suitable to your goals and risk tolerance. Most important, during times of market volatility or uncertainty, your adviser can help you avoid making costly mistakes, such as trying to "time" the market. Investors who go it alone can overreact to short- term market events, buying and selling on the basis of this week's headlines, or chasing the latest "hot" investment. Such behavior can derail an otherwise prudent investment program. But investors who work with a financial adviser receive guidance throughout the market's ups and downs. Your adviser will help you place short-term market swings in their proper perspective and keep you focused on your long-term investment program. Your adviser is just one of the experts whose talents we have tapped in our effort to bring the best minds in the business to the task of managing your money. These experts are a vital part of the investment process at New England Funds, and we encourage you to take advantage of their skills to the fullest. We invite you to read the accompanying management commentary and financial highlights. If you have any questions or comments, please contact your financial adviser or New England Funds directly at 800-225-5478. Once again, we appreciate your continued confidence and investment in New England Funds. Sincerely, /s/ Peter S. Voss /s/ Henry L.P. Schmelzer Peter S. Voss Henry L.P. Schmelzer Chairman President -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 1995 Putting Performance into Perspective The graph comparing your Fund's performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. Your Fund's total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction costs and other expenses. 1 -------------------------------------------------------------------------------- New England Star Advisers Fund --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- Total Returns for Period Ended 6/30/95 -------------------------------------------------------------------------------- Class A (Inception 7/7/94) Year to Date Since Inception -------------------------------------------------------------------------------- Net Asset Value/1/ 15.17% 22.52% With Max. Sales Charge/2/ 8.54 15.49 Standard & Poor's 500/4/ 20.14 25.99 Lipper Growth Average/5/ 17.47 21.17 -------------------------------------------------------------------------------- Class B (Inception 7/7/94) Year to Date Since Inception -------------------------------------------------------------------------------- Net Asset Value/1/ 14.82% 21.70% With CDSC/3/ 10.82 18.09 Standard & Poor's 500/4/ 20.14 25.99 Lipper Growth Average/5/ 17.47 21.17 -------------------------------------------------------------------------------- Class C (Inception 7/7/94) Year to Date Since Inception -------------------------------------------------------------------------------- Net Asset Value/1/ 14.73% 21.66% Standard & Poor's 500/4/ 20.14 25.99 Lipper Growth Average/5/ 17.47 21.17 -------------------------------------------------------------------------------- Class Y (Inception 11/15/94)* Year to Date Since Inception -------------------------------------------------------------------------------- Net Asset Value/1/ 15.41% 12.92% Standard & Poor's 500/4/ 20.14 12.92 Lipper Growth Average/5/ 17.47 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. * Class Y shares are available only to certain institutional investors. Notes to Charts and Performance Update /1/ Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. /2/ With Maximum Sales Charge (MSC) performance assumes reinvestment of all distributions and reflects the maximum sales charge of 5.75% at the time of purchase of Class A shares. /3/ With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 4% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero five years after the purchase of shares. Class Y shares are not subject to a sales charge. /4/ Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing the performance of 500 major companies, most of which are listed on the New York Stock Exchange. The S&P 500 performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. /5/ 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. 2 -------------------------------------------------------------------------------- A $10,000 Investment Compared to Standard & Poor's 500 -------------------------------------------------------------------------------- A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class A Shares, since New England Star Advisers Fund's inception on 7/7/94, compared to Standard and Poor's 500 /4/. The data points from the graph are as follows: New England Star Advisers Fund - Net Asset Value/1/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,120 8/94 $10,600 9/94 $10,656 10/94 $10,960 11/94 $10,576 12/94 $10,637 1/95 $10,621 2/95 $10,958 3/95 $11,239 4/95 $11,423 5/95 $11,688 6/95 $12,250
New England Star Advisers Fund - With Maximum Sales Charge/2/
Month Amount ----- ------- 7/7/94 $ 9,425 7/94 $ 9,538 8/94 $ 9,990 9/94 $10,043 10/94 $10,329 11/94 $ 9,968 12/94 $10,026 1/95 $10,011 2/95 $10,328 3/95 $10,592 4/95 $10,766 5/95 $11,016 6/95 $11,546
S&P 500/4/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,315 8/94 $10,703 9/94 $10,489 10/94 $10,708 11/94 $10,285 12/94 $10,488 1/95 $10,743 2/95 $11,130 3/95 $11,507 4/95 $11,829 5/95 $12,258 6/95 $12,601
A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class B Shares, since New England Star Advisers Fund's inception on 7/7/94, compared to Standard and Poor's 500 /4/. The data points from the graph are as follows: New England Star Advisers Fund - Net Asset Value/1/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,120 8/94 $10,592 9/94 $10,639 10/94 $10,935 11/94 $10,544 12/94 $10,599 1/95 $10,574 2/95 $10,911 3/95 $11,175 4/95 $11,351 5/95 $11,608 6/95 $12,168
New England Star Advisers Fund - With Maximum Sales Charge/2/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,120 8/94 $10,592 9/94 $10,639 10/94 $10,935 11/94 $10,544 12/94 $10,599 1/95 $10,574 2/95 $10,911 3/95 $11,175 4/95 $11,351 5/95 $11,608 6/95 $11,768
S&P 500/4/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,315 8/94 $10,703 9/94 $10,489 10/94 $10,708 11/94 $10,285 12/94 $10,488 1/95 $10,743 2/95 $11,130 3/95 $11,507 4/95 $11,829 5/95 $12,258 6/95 $12,601
A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class C Shares, since New England Star Advisers Fund's inception on 7/7/94, compared to Standard and Poor's 500 /4/. The data points from the graph are as follows: New England Star Advisers Fund - Net Asset Value/1/
Month Amount ----- ------ 7/7/94 $10,000 7/94 $10,120 8/94 $10,592 9/94 $10,639 10/94 $10,935 11/94 $10,544 12/94 $10,604 1/95 $10,579 2/95 $10,907 3/95 $11,180 4/95 $11,357 5/95 $11,613 6/95 $12,166
Standard and Poor's 500/4/
Month Amount ----- ------- 7/7/94 $10,000 7/94 $10,315 8/94 $10,703 9/94 $10,489 10/94 $10,708 11/94 $10,285 12/94 $10,488 1/95 $10,743 2/95 $11,130 3/95 $11,507 4/95 $11,829 5/95 $12,258 6/95 $12,601
-------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- NEW ENGLAND STAR ADVISERS FUND New England Star Advisers Fund recently celebrated an anniversary -- July 7 marked the Fund's first full year of operation. And what a year it was. As investors recognized the wisdom and convenience of investing in a single Fund that pursues growth through separate strategies and varied styles, assets grew to over $340 million. We are pleased about the Fund's first-year performance and sales success and, more importantly, are most optimistic about its future. How Your Fund Performed For the first six months of the year, your Fund's net asset value return through June 30 was 15.17% for Class A shares. The following pages contain details about the investment activity of each of the Star Advisers over the past six months. As you read, you'll gain important insights into their differing investment strategies. And we think you'll come to appreciate even more how combining multiple styles can work together in pursuit of steadier performance and long- term growth. 4 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- [PHOTO APPEARS HERE] [LOGO APPEARS HERE] BERGER ASSOCIATES Rodney Linafelter, Berger Associates During the first half of 1995, the focus of the market began to shift. Value stocks, long the market's darlings, began gradually to relinquish that coveted position to growth stocks. Typically, blue-chip stocks -- the steady, long-term performers -- are the first beneficiaries of such a change in market emphasis. This has been the case once again in 1995 as large, well-established companies outperformed their smaller counterparts. As this cycle becomes more entrenched, however, we are beginning to see the market focus filter down to mid- and smaller-cap stocks. No matter what the market environment, however, I concentrate on finding companies with the potential for steady, predictable, high earnings growth over time. My process in a nutshell is this: I focus on the most profitable, most successful companies because they tend to become the most profitable, most successful investments. As evidence of this, technology stocks continue to make up a major portion of the portfolio. I'm very optimistic about the future of technology -- I think the demand for high tech products will increase dramatically as world economies become increasingly interdependent. In the near term, however, I've grown a little cautious and have cut back accordingly. Technology stocks, which at one time represented close to one-third of my portion of the Fund, now represent about 24%. 5 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- During the first six months of the year, newcomers to the portfolio included energy stocks, such as oil service companies. Positions were also beefed up in consumer cyclicals (stocks of companies whose performance moves from strong to weak and back again along with economic cycles). I maintained a rather heavy position in cash -- approximately 18% -- which tended to drag performance a bit during the first six months of the year. As new investment opportunities arise, however, I'm gradually becoming more fully invested. Over the coming months, the market may experience a bumpy ride. But I think any correction will be short-lived and may present a tremendous buying opportunity for investors. I remain optimistic on the long-term outlook for the market as rising corporate earnings and relatively stable interest rates provide a very constructive backdrop for the equity markets. -------------------------------------------------------------------------------- Largest Holdings, % of Fund's Net Assets -------------------------------------------------------------------------------- . Viking Office Products, Inc., 0.4% Direct marketer of office products . GTECH Holdings, 0.4% Computerized lottery systems . IDEXX Laboratories, Inc., 0.4% Biomedical test products manufacturer 6 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- [PHOTO APPEARS HERE] [LOGO APPEARS HERE] FOUNDERS Edward Keely, Founders Asset Management In my portion of the Star Advisers Fund, I focus on high-quality growth stocks from a universe of mid- to large-sized companies, as measured by market capitalization (the total market value of a company's stock). Lower interest rates, stable inflation and slow growth characterized the economy during the first half of the year -- an environment which proved favorable for the type of stocks in which I invest. For the first six months of 1995, I remained committed to the investment strategy that I established last year. I avoided major cyclicals (companies in industries whose performance tracks the strength and weakness of economic cycles), such as paper, automobiles and chemicals. This strategy worked to the Fund's advantage as these issues, on the whole, had mixed results in terms of stock performance. I continued to search instead for solid growth stocks -- firms that have shown their ability to grow regardless of economic activity -- and focused on industries, such as technology, telecommunications and computer software, that will benefit the most as our society's travel down the "information superhighway" accelerates. Of these industries, I believe that information technology is the most important area in which a company -- and, therefore, your Fund -- can invest today. It is the single most effective way for a company to create or gain a competitive advantage -- which is what defines success in the marketplace. 7 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- My sector of the Fund remains well diversified. In my quest for seasoned growth stocks, I don't limit my search to specific sectors or industries. Rather, I look for attractively priced stocks with better than average earnings growth and, most importantly, the potential for positive earnings surprises. One noticeable change from last year is that the Fund's exposure to healthcare stocks has been increased. Down and out last year, many healthcare and related issues are responding positively to a more favorable political and economic environment. I now think they have the potential to be top performers. I remain optimistic on the outlook for the market. Conditions are in place for continued slow economic expansion, which is good news for growth stocks. On the other hand, with the Federal Reserve Board lowering interest rates the economy may pick up steam. As the scenario develops, I will likely reposition some of the Fund's assets into cyclical issues, which tend to perform better during periods of rapid economic growth. In the meantime, I believe that 1995 will continue to be the year of the growth stock. -------------------------------------------------------------------------------- Largest Holdings, % of Fund's Net Assets -------------------------------------------------------------------------------- . Intel Corp., 0.9% Semiconductor and memory circuits manufacturer . SAP AG., 0.7% German software applications company . IBM, 0.6% World's largest computer manufacturer 8 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- [PHOTO APPEARS HERE] [LOGO APPEARS HERE] Janus Capital Corporation Warren Lammert, Janus Capital Corporation The first half of 1995 was marked by substantial gains in the U.S. markets and a strong economic outlook. The improving economic picture that emerged during the first half of the year -- moderate, sustainable growth with low inflation -- provided an excellent backdrop for the broad market, small-cap securities included. A number of groups where we are heavily invested moved substantially higher. Technology and semiconductors were the standouts, but telecommunications, especially wireless, also turned in good performance, as did financial services and pharmaceuticals. European interest rates began to soften a bit during the quarter, helped by the downward movement in U.S. rates. Several markets put in especially good performances, including Sweden, the United Kingdom, Finland and Germany, all of which ended the quarter with near records. Our European holdings also posted excellent gains. Nokia, the Finnish cellular telephone and equipment provider, SAP, the large German multinational network developer, and Astra, a fast-growing Swedish pharmaceutical company, were all higher at quarter end. After its record-shattering first half, the key to U.S. market performance in the second half of the year will be the strength of the economy and the course of interest rates. The question is whether the weakness displayed in 9 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- the first half of 1995 is merely a dip in the economy's upward trend or the beginning of sustained slower growth. By late June, automobile and housing sales had begun to move higher again, but retail sales remained slow. Consumer confidence, durable goods spending, and business investment remain at historically high levels. I intend to monitor economic strength closely as the year progresses. Our research effort remains focused on individual opportunities -- good businesses selling at discounts to their growth rates. I will try to capitalize on these situations and continue the performance momentum we have established in the first half of the year. -------------------------------------------------------------------------------- Largest Holdings, % of Fund's Net Assets -------------------------------------------------------------------------------- . Nokia AB, 1.5% Finnish manufacturer of cellular telephones . SAP AG, 1.1% German software applications company . First Data Corp., 1.1% Credit card processing service 10 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- [PHOTOS APPEAR HERE] [LOGO APPEAR HERE] Loomis, Sayles & Company Mary Champagne and Jeffrey Petherick Loomis, Sayles & Company During the early part of this year, large capitalization stocks were the focus of interest, as investors flocked to the relative safety of the biggest and most conservative companies. Despite a market that favored these well-established, proven companies, the smaller cap stocks in our portfolio held their own. In fact, although small caps lagged large caps for much of the first half of the year, this gap has begun to narrow. As the economy continues to slow, opportunity-minded stock market investors have begun to move beyond the giants to small- and mid-sized companies, in search of stocks that may deliver higher earnings growth. On the growth side, we emphasized companies with strong fundamentals -- above-average profitability, skilled management with a clear growth strategy, and most importantly, a clearly defined, attractive market niche. Although we generally concentrate our search on companies with a market capitalization of less than $500 million, we do have the flexibility to move into somewhat larger companies -- an option that we exercised during the first six months of the year. We kept up weightings in technology and healthcare and recently broadened the portfolio to include some retail and financial stocks, as well as some well- positioned cyclicals. 11 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- On the value side, the Fund remains well diversified. Because we add value through stock selection, rather than through sector bets, we're typically not dramatically overweighted or underweighted in any particular sector or industry. We are instead stock pickers, searching for those issues that are out of favor, yet have strong earnings potential. Stocks that met our demanding criteria included those in the financial services, energy and technology sectors. Looking ahead, our forecast is for slow economic growth with a possible pickup in the economy towards the latter half of the year. In such an environment, we expect the market to continue to perform well, and to expand its breadth beyond the blue chips. In the months ahead, we anticipate small cap stocks may be positioned to do well in a broadening market. This is a position we hope to take advantage of now that the Loomis, Sayles portion of the Fund will be managed in the small-cap value style. -------------------------------------------------------------------------------- Largest Holdings, % of Fund's Net Assets -------------------------------------------------------------------------------- . InterVoice, Inc., 0.3% Phone voice response system manufacturer . MediSense, Inc., 0.3% Blood glucose monitoring system manufacturer . Thermedics, Inc., 0.3% Biomedical products manufacturer 12 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- INDUSTRY CONCENTRATIONS REFLECT DIFFERENT MARKET EXPECTATIONS Diverse strategies and analytical styles focused on the same objective can lead to very different portfolio compositions. Far from canceling each other out, these individual strategies complement one another and lead to greater diversification for better performance potential over time. Top Industry Groups by Investment Adviser* June 30, 1995 A bar chart appears here, illustrating the allocation of each investment adviser's segment of New England Star Advisers Fund's investment portfolio by top industry groups on June 30, 1995. The percentage of New England Star Advisers Fund's total net assets in each top industry group as of June 30, 1995 is also depicted. The bar chart data is as follows:
Berger Founders Janus Loomis Star Advisers % ------ -------- ----- ------ --------------- Consumer Goods & 25.19% 26.02% 24.51% 24.27% 24.08% Services General Business 16.53% 23.04% 35.68% 24.76% 21.75% Technology 22.37% 46.67% 17.44% 13.52% 20.56% Finance 18.57% 3.81% 46.74% 30.88% 6.51% Capital Goods 32.11% 22.33% 18.61% 26.95% 4.49% Basic Industries 7.25% 13.55% 39.07% 40.13% 4.32% Energy 58.34% 3.61% 7.83% 30.23% 3.18% Cash Equivalents 35.77% 20.66% 17.76% 25.81% 13.31%
* Portfolio composition is subject to change. 13 [LOGO OF NEW ENGLAND FUNDS APPEARS HERE] NEW ENGLAND FUNDS Where The Best Minds meet Portfolio Composition, Financial Statements and Highlights NEW ENGLAND STAR ADVISERS FUND JUNE 30, 1995 PORTFOLIO COMPOSITION Investments as of June 30, 1995 (unaudited) COMMON STOCKS--88.4% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- BASIC INDUSTRIES --4.3% ALUMINUM--0.3% 50,900 Castech Aluminum Group, Inc. ....................... $ 909,838 CHEMICALS--1.4% 22,775 Du Pont E I De Nemours and Co. ..................... 1,565,781 12,800 IMC Global, Inc. (Rights) (c)....................... 692,800 30,300 Intertape Polymer Group, Inc. ...................... 712,050 12,400 Learonal, Inc. ..................................... 261,950 20,104 Potash Corp. Saskatchewan, Inc. .................... 1,123,311 87,518 Rentokil Group...................................... 375,853 ------------ 4,731,745 ------------ CONTAINERS AND GLASS--0.1% 7,000 Crown Cork & Seal, Inc. ............................ 350,875 ------------ ELECTRICAL EQUIPMENT--0.1% 10,000 American Electronic Components...................... 75,000 13,900 Gasonics International Corp. ....................... 396,150 ------------ 471,150 ------------ GOLD--0.1% 7,000 Newmont Mining Corp. ............................... 293,125 ------------ MINING--0.1% 11,400 Cleveland Cliffs, Inc. (Rights) (c)................. 438,900 ------------ MISCELLANEOUS --0.2% 6,000 APS Holding Corp. .................................. 158,250 15,100 Greenfield Inds., Inc. Delaware..................... 437,900 ------------ 596,150 ------------
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- NON-FERROUS METALS--0.6% 25,000 Engelhard Corp. .................................... $ 1,071,875 58,400 Johnstown America Industries, Inc. ................. 605,900 15,800 Wolverine Tube, Inc. ............................... 507,575 ------------ 2,185,350 ------------ PAPER--0.6% 11,550 Boise Cascade Corp. (Rights) (c).................... 467,775 12,775 Bowater, Inc. ...................................... 573,278 34,700 Caraustar Inds., Inc. .............................. 624,600 14,500 James River Corp. .................................. 400,563 ------------ 2,066,216 ------------ STEEL--0.8% 67,700 Cold Metal Prods, Inc. ............................. 465,438 45,100 Huntco, Inc. ....................................... 732,875 18,000 Quanex Corp. (Rights) (c)........................... 445,500 34,500 Republic Engineered Steels Inc. .................... 267,375 19,000 Steel Technologies, Inc. ........................... 218,500 82,300 UNR Industries, Inc. ............................... 606,962 ------------ 2,736,650 ------------ Total Basic Industries.............................. 14,779,998 ------------ CAPITAL GOODS --4.5% AGRICULTURAL MACHINERY--0.1% 10,600 Aptargroup, Inc. ................................... 340,525 ------------ BUILDING CONSTRUCTION --0.6% 9,500 W H Brady Co. ...................................... 646,000 71,700 Crossmann Communities, Inc. ........................ 734,925 39,050 NCI Building Systems, Inc. ......................... 654,088 ------------ 2,035,013 ------------
See accompanying notes to financial statements. 2 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--1.6% 55,450 Boston Scientific Corp. ............................ $ 1,767,469 3,000 Exide Corp. ........................................ 129,000 30,025 Gelman Sciences, Inc. .............................. 566,722 15,000 Millipore Corp. .................................... 1,012,500 35,300 Philips Electronics N V................................................ 1,509,075 21,100 Scotsman Industries, Inc. .......................... 390,350 ------------ 5,375,116 ------------ INDUSTRIAL MACHINERY --1.0% 17,550 Applied Materials, Inc. ............................ 1,520,269 30,000 Thermo Electron Corp. .............................. 1,207,500 15,000 Tyco Industries, Ltd. .............................. 810,000 ------------ 3,537,769 ------------ MISCELLANEOUS --0.7% 32,000 Atmel Corp. ........................................ 1,772,000 20,000 Roper Industries.................................... 700,000 ------------ 2,472,000 ------------ POLLUTION CONTROL --0.5% 7,800 Corrpro Cos., Inc. ................................. 51,675 31,350 International Recovery Corp. ....................... 462,413 41,200 Thermo Fibertek, Inc. .............................. 818,850 7,200 United Waste Systems, Inc. ......................... 259,200 ------------ 1,592,138 ------------ Total Capital Goods................................. 15,352,559 ------------ CONSUMER BASICS --14.8% DRUGS AND HEALTH CARE--12.6% 26,500 American Medical Response........................... 742,000 23,000 Amerisource Health Corp. ........................... 524,688 15,175 Amgen, Inc. ........................................ 1,220,639
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- DRUGS AND HEALTH CARE--(CONTINUED) 127,312 Astra AB Series A.................................... $ 3,930,842 21,000 Astra AB Series B.................................... 632,504 9,000 Chiron Corp. ........................................ 585,000 55,000 Columbia / HCA Healthcare Corp. ..................... 2,378,750 35,150 Community Health Systems, Inc. ...................... 1,190,706 13,750 Conmed Corp. ........................................ 340,313 27,000 Coram Healthcare Corp. .............................. 381,375 12,275 Coventry Corp. ...................................... 173,384 47,500 Evergreen Healthcare, Inc. .......................... 587,813 24,900 Genesis Health Ventures, Inc. ....................... 737,663 42,700 Health Images, Inc. ................................. 261,538 27,975 Healthsource, Inc. .................................. 979,125 35,800 Healthsouth Rehabilitation........................... 622,025 23,100 Horizon Mental Health Management, Inc. .............. 291,638 19,675 Hospitality Franchise Systems, Inc. ................. 681,247 35,000 Humana, Inc. ........................................ 616,875 23,775 I Stat Corp. ........................................ 867,788 50,000 IDEXX Labs, Inc. .................................... 1,300,000 8,400 Invacare Corp. ...................................... 348,600 14,500 Johnson & Johnson.................................... 980,563 21,700 Lunar Corp. ......................................... 613,025 28,000 Luxottica Group S P A (ADR) (d)...................... 1,039,500 26,050 Manor Care, Inc. .................................... 758,706 56,100 Medisense, Inc. ..................................... 1,086,938 39,500 Medpartners, Inc. ................................... 760,375 17,500 Medtronic, Inc. ..................................... 1,349,688 16,600 Mentor Corp. Minnesota............................... 462,725 62,675 Merck & Co., Inc. ................................... 3,071,075 26,600 Mylan Labs, Inc. .................................... 817,950 17,500 Nellcor, Inc. ....................................... 787,500 13,150 Oxford Health Plans, Inc. ........................... 621,338 5,675 Pacificare Health Systems, Inc. ..................... 289,425
See accompanying notes to financial statements. 3 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- DRUGS AND HEALTH CARE--(CONTINUED) 28,250 Pfizer, Inc. ....................................... $ 2,609,594 15,000 Physicians Health................................... 397,500 70,600 Regency Health Services............................. 741,300 4,525 Resmed, Inc. ....................................... 54,300 100 Roche Holdings AG................................... 644,376 25,500 Sierra Health Services, Inc. ....................... 624,750 33,400 Smithkline Beecham.................................. 302,283 32,325 Sofamor/Danek Group, Inc. .......................... 731,352 7,950 St. Jude Med., Inc. ................................ 398,493 24,200 Summit Care Corp. .................................. 441,650 28,000 Teva Pharmaceutical Industries, Ltd. (ADR) (d).......................................... 1,050,000 50,600 Thermedics, Inc. ................................... 986,700 20,000 United Healthcare Corp. ............................ 827,500 66,850 Vidamedinc.......................................... 434,524 25,000 Watson Pharmaceuticals, Inc. ....................... 975,000 ------------ 43,252,643 ------------ FOOD AND BEVERAGES--1.0% 15,625 Archer Daniels Midland Co. ......................... 291,016 31,333 Cultor OY........................................... 1,009,320 8,150 General Mills, Inc. ................................ 418,706 24,651 Huhtamaki OY........................................ 808,040 3,300 Kellogg Co. ........................................ 235,538 20,900 Universal Foods Corp. (Rights) (c).................. 676,637 ------------ 3,439,257 ------------ HOUSEHOLD PRODUCTS--0.7% 30,000 Black & Decker Corp. ............................... 926,250 22,000 Gillette Co. ....................................... 981,750 34,450 United States Can Corp. ............................ 538,281 ------------ 2,446,281 ------------
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- RETAIL GROCERY --0.5% 32,700 National Conveniece Stores, Inc. ................... $ 412,837 32,125 Safeway, Inc. ...................................... 1,200,672 ------------ 1,613,509 ------------ Total Consumer Basics............................... 50,751,690 ------------ CONSUMER DURABLE GOODS--2.0% AUTO PARTS--0.6% 26,056 Hahn Automotive Warehouse, Inc. .................... 254,046 30,000 Lear Seating Corp. ................................. 686,250 47,100 Masland Corp. ...................................... 606,412 33,900 Walbro Corp. ....................................... 610,200 ------------ 2,156,908 ------------ AUTOMOBILES--0.7% 24,100 Durakon Industries, Inc. ........................... 367,525 55,000 Elsag Bailey Process Auto NV........................ 1,512,500 25,380 Volvo AB............................................ 483,439 ------------ 2,363,464 ------------ HOUSEHOLD APPLIANCES & HOME FURNISHINGS--0.5% 21,900 Harman International Industries, Inc. New........... 886,950 18,125 Singer Co. N V...................................... 468,984 19,757 Thorn Emi........................................... 409,156 ------------ 1,765,090 ------------ MOBILE HOMES --0.2% 24,275 Oakwood Homes Corp. ................................ 622,047 ------------ Total Consumer Durable Goods...................................... 6,907,509 ------------
See accompanying notes to financial statements. 4 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- CONSUMER NON-DURABLES--4.2% APPAREL AND TEXTILES--0.3% 22,300 Jones Apparel Group, Inc. .......................... $ 666,213 13,000 Talbots, Inc. ...................................... 516,750 ------------ 1,182,963 ------------ PHOTOGRAPHY--0.5% 70,000 Digital Biometrics, Inc. ........................... 752,500 21,000 Polaroid Corp. (Rights) (c)......................... 855,750 ------------ 1,608,250 ------------ RETAIL TRADE--3.3% 40,000 Ann Taylor Stores Corp. ............................ 930,000 50,900 Cato Corp. New...................................... 413,563 41,000 Cole National Corp. ................................ 425,375 110,225 Federated Department Stores, Inc. .................. 2,838,293 30,000 Gap, Inc. .......................................... 1,046,250 49,000 Haverty Furniture Cos., Inc. ....................... 502,250 32,000 Home Depot, Inc. ................................... 1,300,000 30,950 Horizen Outlet Centers.............................. 719,588 30,000 Lillian Vernon Corp. ............................... 551,250 30,000 Limited The, Inc. .................................. 660,000 9,550 Lowes Cos., Inc. ................................... 285,306 13,500 Peoplesoft, Inc. ................................... 732,375 23,700 Sunglass Hut International, Inc. ................... 829,500 ------------ 11,233,750 ------------ TOYS AND AMUSEMENTS --0.1% 12,400 Coleman Co., Inc. .................................. 440,200 ------------ Total Consumer Non-Durables....................................... 14,465,163 CONSUMER SERVICES--3.0% AIR TRAVEL--0.7% 27,500 Continental Airlines, Inc. ......................... 690,937 20,000 Delta Air Lines, Inc. .............................. 1,475,000
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- AIR TRAVEL --(CONTINUED) 15,000 Singapore Airlines.................................. $ 138,462 ------------ 2,304,399 ------------ HOTELS AND RESTAURANTS --1.3% 25,125 Harrahs Entertainment, Inc. ........................ 550,485 8,600 La Quinta Inns, Inc. ............................... 232,200 25,000 Marriot International, Inc. ........................ 896,875 47,000 Mirage Resorts, Inc. ............................... 1,439,375 37,500 Promus Cos., Inc. .................................. 1,462,500 ------------ 4,581,435 ------------ LEISURE TIME--0.7% 11,750 Carmike Cinemas, Inc. .............................. 284,938 18,700 Circus Circus Enterprises, Inc. .................... 659,175 56,950 Monaco Coach Corp. ................................. 911,200 35,800 Supertel Hospitality................................ 483,300 ------------ 2,338,613 ------------ MISCELLANEOUS --0.3% 30,000 Loewen Group, Inc. ................................. 1,068,750 ------------ Total Consumer Services............................. 10,293,197 ------------ ENERGY--3.2% DOMESTIC OIL--0.4% 36,300 Cross Timbers Oil Co. .............................. 576,263 57,600 Lomak Petroleum, Inc. .............................. 439,200 10,000 Noble Affiliates, Inc. ............................. 255,000 ------------ 1,270,463 ------------ GAS EXPLORATION --1.0% 5,000 Apache Corp. ....................................... 136,875 36,600 Barrett Resources Corp. ............................ 850,950 40,700 Belden and Blake Corp. ............................. 661,375
See accompanying notes to financial statements. 5 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- GAS EXPLORATION --(CONTINUED) 50,000 BJ Services Co. .................................... $ 1,137,500 38,800 International Colin Energy Co. ..................... 203,700 26,900 Vintage Petroleum, Inc. ............................ 504,375 ------------ 3,494,775 ------------ PETROLEUM SERVICES--1.8% 50,000 Dresser Inds., Inc. (Rights) (c).................... 1,112,500 28,000 Halliburton Co. .................................... 1,001,000 30,000 Petroleum Geo Services (ADR) (d).......................................... 862,500 28,600 Production Operators Corp. ......................... 900,900 18,000 Schlumberger Ltd. .................................. 1,118,250 25,000 Western Atlas, Inc. ................................ 1,109,375 ------------ 6,104,525 ------------ Total Energy........................................ 10,869,763 ------------ FINANCE--6.5% BANKS--0.3% 400 Chase Manhattan Corp. (Rights) (c).................. 18,800 28,275 First Bank Systems, Inc. ........................... 1,159,275 ------------ 1,178,075 ------------ FINANCIAL SERVICES --2.1% 29,700 Aames Financial Corp. .............................. 538,313 10,600 Advanta Corp. ...................................... 400,150 18,350 Commercial Federal Corp. ........................... 500,037 13,575 Federal Home Loan Mortgage Corp. ................... 933,281 26,500 Federal National Mortgage Association............... 2,500,938 18,000 First USA, Inc. .................................... 798,750 45,900 Imperial Credit Industries, Inc. ................... 568,013 14,850 Money Store, Inc. .................................. 531,816 8,225 North American Mortgage Co. ........................ 190,203
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- FINANCIAL SERVICES --(CONTINUED) 85,000 Peregrine Investment................................ $ 120,835 5,577 Securitas AB........................................ 193,286 ------------ 7,275,622 ------------ INSURANCE--2.4% 25,000 Aflac, Inc. ........................................ 1,093,750 29,800 Capital RE Corp. ................................... 774,800 2,400 General Re Corp. ................................... 321,300 5,325 Mercury General Corp. New........................... 183,047 27,800 Progressive Corp. Ohio.............................. 1,066,825 25,800 Protective Life Corp. (Rights) (c).................. 703,050 26,000 Reinsurance Group America, Inc. .................... 744,250 18,500 Triad Guaranty, Inc. ............................... 388,500 42,500 Unum Corp. (Rights) (c)....................................... 1,992,187 60,000 USF&G Corp. ........................................ 975,000 ------------ 8,242,709 ------------ INVESTMENT COMPANIES --1.6% 27,100 Allied Group, Inc. ................................. 772,350 29,850 Eaton Vance Corp. .................................. 962,663 88,679 Kinnevik Investment Series B........................ 2,707,532 50,000 Waterhouse Investor Services, Inc. ................. 1,150,000 ------------ 5,592,545 ------------ Total Finance....................................... 22,288,951 ------------ GENERAL BUSINESS --21.8% BROADCASTING--2.1% 27,500 British Sky Broadcast Group PLC (ADR) (d).......................................... 718,438 12,000 CBS, Inc. .......................................... 804,000 8,650 Central European Media Entertainment Ltd. .......... 128,669 15,000 Clear Channel Communications........................ 965,625 55,500 Infinity Broadcasting Corp. ........................ 1,852,312
See accompanying notes to financial statements. 6 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- BROADCASTING --(CONTINUED) 23,200 International Cabletel, Inc. ....................... $ 754,000 17,300 Sinclair Broadcast Group, Inc. ..................... 484,400 5,000 Tele Danmark (ADR) (d).......................................... 140,000 13,500 Telecomunicacoes Brasileras (ADR) (d).......................................... 455,625 19,000 Viacom, Inc. ....................................... 881,125 ------------ 7,184,194 ------------ BUSINESS SERVICES--10.4% 16,000 America Online, Inc. ............................... 704,000 14,900 Analysts International Corp. (Rights) (c)........... 387,400 3,217 ASM Lithography Holding N V......................... 115,410 20,850 Banta Corp. ........................................ 693,263 24,575 Boca Research, Inc. ................................ 663,525 16,600 Bolt Beranek and Newman, Inc. (Rights) (c).......... 454,425 16,475 Chipcom Corp. ...................................... 391,281 47,250 CUC International, Inc. ............................ 1,984,500 79,362 First Data Corp. ................................... 4,513,714 14,000 First Financial Management Corp. ................... 1,197,000 3,450 Fiserv, Inc. ....................................... 97,031 26,500 General Motors Corp. ............................... 1,152,750 30,050 Global Directmail Corp. ............................ 593,488 50,000 GTECH Holdings Corp. ............................... 1,462,500 35,000 Gymboree Corp. ..................................... 1,017,188 65,800 InterVoice, Inc. ................................... 1,151,500 5,925 Legent Corp. ....................................... 259,218 27,825 Manpower Inc. Wisconsin............................. 709,537 106,168 Nokia AB OY Series A........................................... 6,214,470 2,000 Nokia Corp. ........................................ 119,020 23,500 Nokia Corp. (ADR) (d).......................................... 1,401,187 6,800 Olsten Corp. ....................................... 222,700
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- BUSINESS SERVICES --(CONTINUED) 5,155 Sap AG.............................................. $ 6,495,471 19,400 Sap AG (ADR) (d) (f)................................ 805,100 30,000 SPS Transaction Services, Inc. ..................... 1,038,750 10,800 Steris Corp. ....................................... 523,800 14,425 Stratacom, Inc. .................................... 703,219 9,100 Zilog, Inc. ........................................ 453,863 ------------ 35,525,310 ------------ COMMUNICATION SERVICES--1.3% 39,600 Davel Communications Group.......................... 499,950 19,550 Millicom International Cellular S A ................ 579,169 71,100 Paging Network, Inc. ............................... 2,435,175 24,600 Pronet, Inc. ....................................... 504,300 21,400 Valassis Communications, Inc. ...................... 358,450 ------------ 4,377,044 ------------ COMPUTERS AND BUSINESS EQUIPMENT--0.1% 7,375 ITI Technologies, Inc. ............................. 175,156 ------------ MISCELLANEOUS --4.3% 11,600 American Publishing Co. ............................ 124,700 43,050 American Standard Cos., Inc. Delaware............... 1,178,494 6,177 Assa Abloy.......................................... 32,282 38,500 Borders Group, Inc. ................................ 553,438 9,700 Bush Boake Allen, Inc. ............................. 294,638 1,100 Business Objects S A (ADR) (d)...................................... 36,300 2,780 Catena.............................................. 16,058 13,950 Ciber, Inc. ........................................ 247,613 19,100 Cole Kenneth Productions, Inc. ..................... 637,463 29,600 Congoleum Corp. New................................. 395,900 67,700 Corvita Corp. ...................................... 355,425
See accompanying notes to financial statements. 7 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- MISCELLANEOUS --(CONTINUED) 10,800 Cytec Industries, Inc. ............................. $ 441,450 9,450 Daig Corp. ......................................... 172,463 39 Ddi Corp. .......................................... 312,902 8,424 Elkjop.............................................. 168,166 4,375 Ensco International, Inc. .......................... 69,453 27,400 Firefox Communications, Inc. ....................... 705,550 56,000 Giant Cement Holding, Inc. ......................... 686,000 36,900 Greenbrier Cos., Inc. .............................. 484,313 83,900 Griffon Corp. ...................................... 671,200 9,000 Mark VII, Inc. ..................................... 147,375 65,000 Mastec, Inc. ....................................... 853,125 39,150 McDermott J Ray S A................................................ 866,193 39,116 Nordictel Holdings AB............................... 330,849 94,425 Numerex Corp. New York.............................. 1,062,281 9,000 PMI Group, Inc. .................................... 390,374 25,125 Softkey International, Inc. ........................ 800,859 28,675 United States Order, Inc. .......................... 422,955 79,921 Worldcom Inc. Georgia............................... 2,157,865 ------------ 14,615,684 ------------ NEWSPAPERS--0.4% 66,375 News Corporation Ltd. (ADR) (d)..................... 1,501,734 ------------ OFFICE FURNISHINGS & SUPPLIES--1.5% 59,800 Office Max, Inc. ................................... 1,666,925 75,000 Staples, Inc. ...................................... 2,165,625 40,000 Viking Office Products, Inc. ....................... 1,465,000 ------------ 5,297,550 ------------ PUBLISHING--0.6% 50,000 Citic Pacific Ltd. ................................. 125,682 10,600 Houghton Mifflin Co. ............................... 559,150 30,000 Time Warner, Inc. .................................. 1,233,750 ------------ 1,918,582 ------------
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- REAL ESTATE--0.4% 37,600 Chateau Properties, Inc. ........................... $ 784,900 32,300 Liberty Property.................................... 633,888 ------------ 1,418,788 ------------ TELECOMMUNICATION SERVICES--0.7% 9,950 Comnet Cellular, Inc. .............................. 278,600 32,900 Heartland Wireless Communications, Inc. ............ 781,375 12,400 Highwaymaster Comm., Inc. .......................... 189,100 7,577 Korea Mobile Telecomm Corp. (GDR) (f)............... 269,969 40,000 New World Communications............................ 835,000 4,904 USA Mobile Communications Holding................... 85,820 ------------ 2,439,864 ------------ Total General Business.............................. 74,453,906 ------------ MISCELLANEOUS --1.1% CONGLOMERATES --0.3% 4,000 Hunter Douglas NV................................... 174,250 1,561 Metra AB............................................ 66,519 15,511 Metra AB............................................ 682,760 ------------ 923,529 ------------ MISCELLANEOUS --0.8% 31,700 Inbrand Corp. ...................................... 515,125 83,238 Iro................................................. 841,412 15,000 New Envoy, Inc. .................................... 127,500 350,000 Rottneros Bruk AB................................... 553,561 23,692 Sensonor A/S........................................ 169,186 1,374 Sidel............................................... 481,198 4,777 Wetherspoon J D..................................... 40,992 ------------ 2,728,974 ------------ Total Miscellaneous................................. 3,652,503 ------------
See accompanying notes to financial statements. 8 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- SHELTER--0.2% FOREST PRODUCTS --0.2% 925 Georgia Pacific Corp. .............................. $ 80,244 10,772 MO Och Domsjo AB.................................... 621,481 6,561 Stora Kopparbergs................................... 87,744 ------------ 789,469 ------------ Total Shelter....................................... 789,469 ------------ TECHNOLOGY--20.6% AEROSPACE--0.6% 16,000 Boeing Co. ......................................... 1,002,000 15,000 Lockheed Martin Corp. .............................. 946,875 ------------ 1,948,875 ------------ COMPUTERS AND BUSINESS EQUIPMENT--4.1% 12,000 3Com Corp. (Rights) (c)....................................... 804,000 27,000 Apple Computer...................................... 1,253,813 40,000 Bay Networks, Inc. ................................. 1,655,000 22,900 Ceridian Corp. ..................................... 844,438 48,875 Cisco Systems, Inc. ................................ 2,471,241 44,525 Computer Horizons Corp. (Rights) (c)................ 712,400 36,900 Control Data Systems, Inc. ......................... 332,100 50,000 EMC Corp. Massachusetts............................. 1,212,500 37,950 Gilat Satellite Networks Ltd. ...................... 863,363 5,575 Hewlett Packard Co. ................................ 415,337 30,500 International Business Machines..................... 2,928,000 17,075 Keane Inc. ......................................... 424,741 ------------ 13,916,933 ------------ ELECTRONICS--10.9% 15,000 Adaptec, Inc. ...................................... 555,000 49,300 Altera Corp. ....................................... 2,132,225 26,400 Amphenol Corp. ..................................... 768,900 23,375 Applied Digital Access, Inc. ....................... 303,875 3,675 Avid Technology, Inc. .............................. 137,813
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- ELECTRONICS --(CONTINUED) 6,125 Bdm International, Inc. ............................. $ 124,797 27,700 Cable Design Technologies Corp. ..................... 595,550 2,575 California Microwave................................. 64,536 45,175 Comverse Technology, Inc. ........................... 801,856 45,000 Cypress Semiconductor Corp. ......................... 1,822,500 13,400 Cyrix Corp. ......................................... 323,275 17,500 Dallas Semiconductor Corp. .......................... 358,750 30,000 DSC Communications Corp. (Rights) (c)................ 1,395,000 85,000 Ericsson L M Telephone Co. (ADR) (d)................. 1,700,000 16,100 Exar Corp. .......................................... 474,950 18,175 Fulcrum Technologies, Inc. .......................... 399,850 49,000 General Instrument Corp. ............................ 1,880,375 97,675 Intel Corp. ......................................... 6,184,048 96,700 Intelcom Group, Inc. ................................ 864,256 5,000 Kyocera Corp. ....................................... 411,775 12,200 Lam Research Corp. .................................. 780,800 20,125 LSI Logic Corp. ..................................... 787,391 20,000 Maxim Integrated Products, Inc. ..................... 1,020,000 37,250 Microcom, Inc. ...................................... 558,750 17,275 Micron Technology Inc. .............................. 947,966 39,175 Motorola, Inc. ...................................... 2,629,622 14,925 National Semiconductor Corp. ........................ 414,169 21,500 Northern Telecom Ltd. ............................... 784,750 20,000 Picturetel Corp. .................................... 962,500 13,125 Pittway Corp. Delaware............................... 600,469 2,400 Samsung Electronics Ltd. (GDR) (f)................... 129,000
See accompanying notes to financial statements. 9 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) COMMON STOCKS--CONTINUED
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- ELECTRONICS --(CONTINUED) 4,693 Samsung Electronics Ltd. (GDR) (f).................. $ 448,182 9 Samsung Electrs Limited (GDR) (f)................... 0 45,000 Sci Systems, Inc. .................................. 1,125,000 30,000 Scientific Atlanta, Inc. (Rights) (c)............... 660,000 17,500 Seer Technologies, Inc. ............................ 363,124 35,000 Sensormatic Electronics Corp. ...................... 1,242,500 17,000 Tektronix, Inc. .................................... 837,250 3,100 Tellabs, Inc. ...................................... 149,188 12,900 Thermo Volter Corp. ................................ 185,437 46,600 Union Switch & Signal............................... 585,413 18,650 VLSI Technology, Inc. .............................. 561,830 4,500 Xilinx, Inc. (Rights) (c)....................................... 423,000 ------------ 37,495,672 ------------ MISCELLANEOUS --0.3% 4,000 Komag, Inc. ........................................ 208,000 4,300 United States Robotics Corp. ....................... 468,700 11,000 Uunet Technologies, Inc. ........................... 302,500 ------------ 979,200 ------------ SOFTWARE--4.7% 8,000 Adflex Solutions, Inc. ............................. 196,000 17,300 Adobe Systems, Inc. ................................ 1,003,400 31,350 Computer Associates International, Inc. ............ 2,123,963 20,000 HBO and Co. (Rights) (c)............................ 1,090,000 48,000 Informix Corp. ..................................... 1,218,000 27,400 Micronics Computers, Inc. .......................... 113,024 33,000 Microsoft Corp. .................................... 2,982,375 65,000 Oracle Systems Corp. ............................... 2,510,624 15,000 Parametric Technology Corp. ........................ 746,250
SHARES DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- SOFTWARE --(CONTINUED) 21,100 Pyxis Corp. ........................................ $ 477,388 30,000 Read Rite Corp. .................................... 802,500 13,750 Software Artistry, Inc. ............................ 305,938 35,000 Solectron Corp. .................................... 1,194,375 25,000 Spectrum Holobyte, Inc. ............................ 357,813 13,675 Sterling Software, Inc. ............................ 526,488 20,000 System Software Associates, Inc. ................... 400,000 ------------ 16,048,138 ------------ Total Technology.................................... 70,388,818 ------------ TRANSPORTATION --0.3% TRUCKING AND FREIGHT FORWARDING --0.3% 45,000 Tidewater, Inc. .................................... 1,130,625 ------------ UTILITIES--1.9% GAS AND PIPELINE UTILITIES--0.3% 30,000 Enron Corp. ........................................ 1,053,750 ------------ TELEPHONE--1.6% 44,575 Airtouch Communications, Inc. ...................... 1,270,388 35,100 Centennial Cellular Corp. .......................... 587,925 16,475 Century Telephone Enterprises, Inc. (Rights) (c)....................................... 467,478 161,156 Telecom Italia...................................... 436,808 10,450 Telephone and Data Systems, Inc. ................... 380,118 61,850 Vodafone Group PLC (ADR) (d).......................................... 2,342,569 ------------ 5,485,286 ------------ Total Utilities..................................... 6,539,036 ------------ Total Common Stocks (Identified Cost $265,166,742)..................... 302,663,187 ------------
See accompanying notes to financial statements. 10 PORTFOLIO COMPOSITION--Continued Investments as of June 30, 1995 (unaudited) SHORT-TERM INVESTMENTS--13.3%
FACE AMOUNT DESCRIPTION VALUE (A) ------------------------------------------------------------------------------- COMMERCIAL PAPER--5.2% $ 3,757,913 Associates Corporation North America 6.0000% 7/03/95................................... $ 3,757,913 4,000,000 Chevron Oil Finance Co. 5.9000% 7/03/95............ 4,000,000 2,000,000 Chevron Oil Finance Co. 5.9800% 7/07/95............ 1,998,007 4,000,000 Exxon Asset Management 5.8000% 7/03/95............. 4,000,000 4,100,000 Ford Motor Credit Company 6.0500% 7/03/95.......... 4,098,622 ------------ 17,854,542 ------------ REPURCHASE AGREEMENT 3.0% 10,310,000 Repurchase agreement with State Street Bank and Trust Company dated 6/30/95 at 5.50% to be repurchased at 10,314,725 on 7/3/95 collateralized by U.S. Treasury Bond 6.50% due 4/30/99 valued at 9,556,655 and U.S. Treasury Bond 4.375% due 8/15/96 valued at 916,490......................... 10,310,000 ------------
FACE AMOUNT DESCRIPTION VALUE (A) -------------------------------------------------------------------------------- U.S. GOVERNMENT --5.1% $ 2,000,000 Federal National Mortgage Assn. 5.9000% 7/13/95................................... $ 1,996,067 11,150,000 U. S. Treasury Bills 5.5000% 7/13/95................................... 11,129,558 4,300,000 U. S. Treasury Bills 5.2900% 8/17/95................................... 4,270,303 ------------ 17,395,928 ------------ TOTAL SHORT-TERM INVESTMENTS (Identified Cost $45,560,470)..................... 45,560,470 ------------ Total Investments-- 101.7% (Identified Cost $310,727,212)................................ 348,223,656 Cash, receivables and other assets................. 8,241,676 Liabilities........................................ (14,171,661) ------------ Total Net Assets--100%...................................... $342,293,671 ============
See accompanying notes to financial statements. 11 PORTFOLIO COMPOSITION--Continued FORWARD CURRENCY CONTRACTS OUTSTANDING at June 30, 1995
LOCAL UNREALIZED DELIVERY CURRENCY AGGREGATE TOTAL APPRECIATION/ DATE AMOUNT FACE VALUE VALUE (DEPRECIATION) -------- ---------- ---------- ---------- -------------- Swiss Franc (sold)...... 8/16/95 176,070 $ 147,147 $ 153,497 $ (6,350) Swiss Franc (sold)...... 9/25/95 398,000 350,632 348,014 2,618 Deutsch Mark (sold)..... 7/12/95 2,339,375 1,701,570 1,692,066 9,504 Deutsch Mark (sold)..... 8/10/95 735,900 541,115 533,051 8,064 Deutsch Mark (sold)..... 8/16/95 953,035 661,389 690,483 (29,098) Finnish Marka (sold).... 7/11/95 7,756,200 1,805,111 1,815,992 (10,881) Finnish Marka (sold).... 7/12/95 259,880 60,512 60,846 (334) Finnish Marka (sold).... 8/10/95 11,199,000 2,664,122 2,621,981 42,141 Finnish Marka (sold).... 8/16/95 3,744,891 848,947 876,772 (27,825) Finnish Marka (sold).... 9/26/95 2,024,000 474,538 473,774 764 French Franc (sold)..... 9/25/95 1,816,000 371,363 373,500 (2,137) British Pounds (sold)... 8/29/95 597,000 938,585 948,402 (9,817) British Pounds (sold)... 9/25/95 697,000 1,118,401 1,106,512 11,889 Japanese Yen (sold)..... 7/21/95 20,404,000 256,254 241,457 14,797 Swedish Krona (sold).... 7/11/95 9,571,300 1,291,761 1,315,171 (23,410) Swedish Krona (sold).... 7/12/95 10,800,000 1,465,898 1,483,883 (17,985) Swedish Krona (sold).... 7/25/95 15,130,652 2,024,655 2,076,704 (52,049) Swedish Krona (sold).... 7/31/95 6,423,578 874,468 881,216 (6,748) Swedish Krona (sold).... 9/25/95 156,000 21,394 21,293 101 -------- $(96,756) ========
(a) See Note 1a. (b) Federal Tax Information: At June 30, 1995 the net unrealized appreciation on investments based on cost of $310,727,212 for federal income tax pur- poses was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost................. $42,895,232 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value................. (5,398,788) ----------- Net unrealized appreciation..................................... $37,496,444 ===========
At December 31, 1994, the fund had a capital loss carryforward of approximately $1,302,000 which ex- pires December 31, 2002. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Non-income producing security. (d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs are significantly influenced by trading on exchanges not located in the United States or Canada. (e) Including deposits in foreign denominated currencies with a value of $33,866 and a cost of $33,551. (f) Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. See accompanying notes to financial statements. 12 STATEMENT OF ASSETS & LIABILITIES June 30, 1995 (unaudited) ASSETS Investments at value............................... $348,223,656 Cash............................................... 80,323 Foreign Cash at value (cost $33,551)............... 33,866 Receivable for: Fund shares sold.................................. 2,610,013 Securities sold................................... 5,225,131 Accrued dividends and Interest.................... 150,003 Foreign withholding taxes......................... 9,885 Unamortized organization expense................... 132,455 ------------ 356,465,332 LIABILITIES Payable for: Fund shares redeemed.............................. $ 754,037 Securities purchased.............................. 12,884,489 Open Forward Currency Contracts--net.............. 96,756 Dividends declared................................ 1,209 Foreign withholding tax........................... 5,669 Accrued expenses: Management fees................................... 282,530 Deferred trustees' fees........................... 953 Accounting and administrative..................... 4,019 Other expenses.................................... 141,999 ----------- 14,171,661 ------------ NET ASSETS.......................................... $342,293,671 ============ Net Assets consist of: Capital paid in................................... $300,372,953 Accumulated net investment loss................... (617,347) Accumulated net realized gains.................... 5,137,917 Unrealized appreciation on investments, forward contacts and foreign currency................... 37,400,148 ------------ NET ASSETS.......................................... $342,293,671 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($163,092,056 divided by 10,685,940 shares of beneficial interest)........................... $15.26 ====== Offering price per share (100/94.25 of $15.26)...... $16.19* ====== Net asset value and offering price of Class B shares ($144,824,756 divided by 9,534,499 shares of beneficial interest).............................. $15.19** ====== Net asset value and offering price of Class C shares ($32,472,842 divided by 2,137,046 shares of beneficial interest).............................. $15.20 ====== Net asset value and offering price of Class Y shares ($1,904,017 divided by 124,604 shares of beneficial interest).............................. $15.28 ====== Identified cost of investments...................... $310,727,212 ============
* Based upon single purchases of less than $50,000. Reduced sales charges apply for purchases in excess of these amounts. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. See accompanying notes to financial statements. 13 STATEMENT OF OPERATIONS Six Months Ended June 30, 1995 (unaudited) INVESTMENT INCOME Dividends.......................................... $ 904,219 Interest........................................... 1,420,511 ----------- 2,324,730 Expenses Management fees................................... $ 1,342,403 Service fees--Class A............................. 156,315 Service and distribution fees--Class B............ 521,475 Service and distribution fees--Class C............ 126,954 Trustees' fees and expenses....................... 12,288 Accounting and administrative..................... 26,852 Custodian......................................... 212,819 Transfer agent.................................... 365,925 Audit and tax services............................ 20,000 Legal............................................. 14,067 Printing.......................................... 44,152 Registration...................................... 77,406 Amortization of organization expenses............. 16,449 Miscellaneous..................................... 4,972 ----------- Total expenses..................................... 2,942,077 ----------- Net investment loss................................ (617,347) ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments--net.................................. 7,033,357 Foreign currency transactions--net................ (359,792) ----------- Total realized gain on investments and foreign currency transactions........................... 6,673,565 ----------- Unrealized appreciation (depreciation) on: Investments--net.................................. 32,603,195 Foreign currency transactions--net................ (279,894) ----------- Total unrealized appreciation on investments, forward currency contracts and foreign currency transactions.................................... 32,323,301 ----------- Net gain on investment transactions................ 38,996,866 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS.......... $38,379,519 ===========
See accompanying notes to financial statements. 14 STATEMENT OF CHANGES IN NET ASSETS (unaudited)
JULY 7, (A) THROUGH SIX MONTHS ENDED DECEMBER 31, JUNE 30, 1994 1995 ------------ ---------------- FROM OPERATIONS Net investment income (loss).................... $ 382,549 $ (617,347) Net realized gain (loss) on investments......... (1,540,733) 6,673,565 Unrealized appreciation on investments.......... 5,076,847 32,323,301 ------------ ------------ Increase in net assets from operations.......... 3,918,663 38,379,519 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A........................................ (282,197) 0 Class B........................................ (90,894) 0 Class C........................................ (19,726) 0 Class Y........................................ (748) 0 Paid-in capital Class A........................................ (34,557) 0 Class B........................................ (11,131) 0 Class C........................................ (2,415) 0 Class Y........................................ (92) 0 ------------ ------------ (441,760) 0 ------------ ------------ Increase in net assets derived from capital share transactions............................ 180,921,938 119,515,311 ------------ ------------ Total increase in net assets.................... 184,398,841 157,894,830 NET ASSETS Beginning of the period......................... 0 184,398,841 ------------ ------------ End of the period............................... $184,398,841 $342,293,671 ============ ============ OVERDISTRIBUTED NET INVESTMENT INCOME Beginning of the period......................... $ 0 $ 0 ============ ============ End of the period............................... $ 0 $ (617,347) ============ ============
(a) Commencement of operations. See accompanying notes to financial statements. 15 FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS C CLASS Y JULY 7, SIX JULY 7, SIX JULY 7, SIX NOVEMBER 15, 1994 (A) MONTHS 1994 (A) MONTHS 1994 (A) MONTHS (A) THROUGH ENDED THROUGH ENDED THROUGH ENDED THROUGH DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 1994 1995 1994 1995 1994 1995 1994 ------------ -------- ------------ -------- ------------ -------- ------------ Net Asset Value, Beginning of Period... $ 12.50 $ 13.25 $ 12.50 $ 13.23 $ 12.50 $ 13.24 $13.59 ------- -------- ------- -------- ------- ------- ------ Income From Investment Operations Net Investment Income... 0.05 (0.01) 0.02 (0.05) 0.02 (0.05) 0.06 Net Realized and Unrealized Gain (Loss) on Investments........ 0.75 2.02 0.73 2.01 0.74 2.01 (0.35) ------- -------- ------- -------- ------- ------- ------ Total From Investment Operations............ 0.80 2.01 0.75 1.96 0.76 1.96 (0.29) ------- -------- ------- -------- ------- ------- ------ Less Distributions Distributions From Net Investment Income..... (0.05) 0.00 (0.02) 0.00 (0.02) 0.00 (0.06) ------- -------- ------- -------- ------- ------- ------ Total Distributions..... (0.05) 0.00 (0.02) 0.00 (0.02) 0.00 (0.06) ------- -------- ------- -------- ------- ------- ------ Net Asset Value, End of Period......... $ 13.25 $ 15.26 $ 13.23 $ 15.19 $ 13.24 $ 15.20 $13.24 ======= ======== ======= ======== ======= ======= ====== Total Return (%) (c).... 6.4 15.2 6.0 14.8 6.0 14.7 (2.1) Ratio of Operating Expenses to Average Net Assets (%) (d).... 1.94 (b) 1.92 (b) 2.69 (b) 2.67 (b) 2.69 (b) 2.67 (b) 1.79 (b) Ratio of Net Investment Income to Average Net Assets (%)............ 1.06 (b) (0.48)(b) 0.31 (b) (1.23)(b) 0.31 (b) (1.23)(b) 2.26 (b) Portfolio Turnover Rate (%).............. 100 135 (b) 100 135 (b) 100 135 (b) 100 Net Assets, End of Period (000)... $91,218 $163,092 $72,889 $144,825 $20,096 $32,473 $ 196 SIX MONTHS ENDED JUNE 30, 1995 ----------- Net Asset Value, Beginning of Period... $13.24 ----------- Income From Investment Operations Net Investment Income... (0.01) Net Realized and Unrealized Gain (Loss) on Investments........ 2.05 ----------- Total From Investment Operations............ 2.04 ----------- Less Distributions Distributions From Net Investment Income..... 0.00 ----------- Total Distributions..... 0.00 ----------- Net Asset Value, End of Period......... $15.28 =========== Total Return (%) (c).... 15.4 Ratio of Operating Expenses to Average Net Assets (%) (d).... 1.66 (b) Ratio of Net Investment Income to Average Net Assets (%)............ (0.23)(b) Portfolio Turnover Rate (%).............. 135 (b) Net Assets, End of Period (000)... $1,904
(a) Commencement of operations. (b) Computed on an annualized basis. (c) A sales charge of 5.75% maximum was not reflected in Class A total return calculations. Periods less than one year are not annualized. (d) The Manager agreed to voluntarily reduce the management fee to an annual rate of 1.00%, and the Advisers agreed to reduce their advisory fee to the annual rate of 0.50%, until December 31, 1994. The ratio of operating expenses to average net assets for Class A, B, C, and Y without giving effect to the voluntary expense limitations would have been 1.98%, 2.75%, 2.75% and 1.90% respectively for the period ended December 31, 1994. See accompanying notes to financial statements. 16 NOTES TO FINANCIAL STATEMENTS June 30, 1995 (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 A, Class B and Class C shares on July 7, 1994. Class Y shares commenced operations November 15, 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, 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 other class of shares, but they do pay a higher ongoing distribution fee than Class A shares. Class Y shares do not pay a front end sales charge, a contingent deferred sales charge or distribution fees. They are intended for institutional investors with a minimum of $1,000,000 to invest. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 plan. Shares of each class would receive their pro-rata share of the net assets attributable to their class, if the Fund were liquidated. In addition, the Trustees declare 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. A. SECURITY VALUATION. Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees, which 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 value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income for the Fund is increased by the accretion of discount. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. 17 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited) C. FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Reported net realized foreign exchange gains or losses arise from: sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities including investments in securities at fiscal year end, resulting from changes in the exchange rate. FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the Funds' currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Funds' investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. The U.S. dollar value of the currencies the Fund has committed to buy or sell is shown in the schedule of investments under the caption "Forward Foreign Currency Contracts." This amount represents the aggregate exposure to each currency each fund has acquired or hedged through currency contracts at period end. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. Contracts that have been offset with different counterparties are reflected as both a contract to buy and a contract to sell in the schedule of investments under the caption "Forward Foreign Currency Contracts." 18 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited) D. 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. E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on the ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for organization costs and foreign currency transactions for book and tax purposes. Permanent book and tax basis differences will result in reclassification to capital accounts. F. 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. Each adviser 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. G. ORGANIZATION EXPENSE. Costs incurred in fiscal 1994 in connection with the Fund's organization and registration, amounting to approximately $165,000 in the aggregate, were paid by the Fund and are being amortized by the Fund over 60 months. 2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the Fund for the six months ended June 30, 1995 were $269,393,104 and $139,244,586, respectively. Transactions in forward currency contracts for the Star Advisers Fund for the six months ended June 30, 1995 are summarized as follows:
SALES OF CONTRACTS ------------------ AGGREGATE FACE VALUE OF CONTRACTS Open at December 31, 1994................................ $ 5,222,139 Contracts opened......................................... 28,229,662 Contracts closed......................................... (15,833,942) ----------- Open at June 30, 1995.................................... $17,617,859 ===========
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays management fees to its manager, New England Investment Companies, L.P. (the "Manager") at the annual rate of 1.05% of the Fund's average daily net assets. The 19 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited) Manager pays the Fund's four investment advisers, Berger Associates, Inc., Founders Asset Management, Inc., Janus Capital Corporation and Loomis, Sayles & Company, L.P. (the "Advisers") at the rate of 0.55% of the first $50 million of the average daily net assets of the segment of the Fund that Adviser manages and 0.50% of such assets in excess of $50 million. Certain officers and directors of the Manager and Loomis, Sayles are also officers or trustees of the Fund. Loomis, Sayles is a wholly owned subsidiary of the Manager, which is a majority owned subsidiary of New England Mutual Life Insurance Company. Fees earned by the Manager and each Adviser under the management agreement in effect during the six months ended June 30, 1995 are as follows:
FEES EARNED ----------- $ 653,927 New England Investment Companies, L.P. 169,439 Berger Associates, Inc. 173,774 Founders Asset Management, Inc. 178,079 Janus Capital Corporation 167,184 Loomis, Sayles & Company, L.P. ---------- $1,342,403 ==========
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of the Manager 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, 1995 these expenses amounted to $26,852 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 to the Fund. For the six months ended June 30, 1995, the Fund paid New England Funds $269,926 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"). 20 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited) 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 for the maintenance of shareholder accounts. For the six months ended June 30, 1995, the Fund paid New England Funds $156,315 in fees under the Class A Plan. Under the Class B and Class C Plans, the Fund pays New England Funds monthly service fees at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by New England Funds in providing personal services to investors in Class B shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1995, the Fund paid New England Funds $130,369 and $31,739 in service fees under the Class B and Class C Plans respectively. Also under the Class B and Class C Plan, the Fund pays New England Funds 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, 1995, the Fund paid New England Funds $391,106 and $95,216 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, 1995 amounted to $1,606,953. 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, New England Investment Companies or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $2,400 Meeting Fee $125/meeting Committee Meeting Fee $75/meeting Committee Chairman Retainer $125/year
21 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited) 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 SHARE TRANSACTIONS. At June 30, 1995 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:
FOR PERIOD ENDED SIX MONTHS JULY 7, (A) THROUGH ENDED DECEMBER 31, 1994 JUNE 30, 1995 ---------------------- ----------------------- CLASS A SHARES AMOUNT SHARES AMOUNT ------- --------- ----------- --------- ------------ Shares sold.................. 7,055,843 $91,678,940 4,654,980 $ 65,059,945 Shares issued in connection with the reinvestment of: Dividends from net investment income......... 22,963 302,422 0 0 --------- ----------- --------- ------------ 7,078,806 91,981,362 4,654,980 65,059,945 Shares repurchased........... (194,900) (2,569,369) (852,946) (12,098,587) --------- ----------- --------- ------------ Net increase................. 6,883,906 $89,411,993 3,802,034 $ 52,961,358 ========= =========== ========= ============ FOR PERIOD ENDED SIX MONTHS JULY 7, (A) THROUGH ENDED DECEMBER 31, 1994 JUNE 30, 1995 ---------------------- ----------------------- CLASS B SHARES AMOUNT SHARES AMOUNT ------- --------- ----------- --------- ------------ Shares sold.................. 5,594,561 $72,768,453 4,316,997 $ 60,431,880 Shares issued in connection with the reinvestment of: Dividends from net investment income......... 7,373 97,026 0 0 --------- ----------- --------- ------------ 5,601,934 72,865,479 4,316,997 60,431,880 Shares repurchased........... (93,876) (1,217,228) (290,556) (4,082,296) --------- ----------- --------- ------------ Net increase................. 5,508,058 $71,648,251 4,026,441 $ 56,349,584 ========= =========== ========= ============
22 NOTES TO FINANCIAL STATEMENTS--Continued June 30, 1995 (unaudited)
FOR PERIOD ENDED SIX MONTHS JULY 7, (A) THROUGH ENDED DECEMBER 31, 1994 JUNE 30, 1995 -------------------------- ----------------------- CLASS C SHARES AMOUNT SHARES AMOUNT ------- ------------ ------------- --------- ------------ Shares sold.............. 1,579,105 $ 20,467,118 879,292 $ 12,310,533 Shares issued in connection with the reinvestment of: Dividends from net investment income..... 1,572 20,688 0 0 ----------- ------------- --------- ------------ 1,580,677 20,487,806 879,292 12,310,533 Shares repurchased....... (62,704) (827,121) (260,219) (3,648,743) ----------- ------------- --------- ------------ Net increase............. 1,517,973 $ 19,660,685 619,073 $ 8,661,790 =========== ============= ========= ============ FOR PERIOD ENDED SIX MONTHS NOVEMBER 15, (A) THROUGH ENDED DECEMBER 31, 1994 JUNE 30, 1995 -------------------------- ----------------------- CLASS Y SHARES AMOUNT SHARES AMOUNT ------- ------------ ------------- --------- ------------ Shares sold.............. 14,720 $ 200,196 118,784 $ 1,678,712 Shares issued in connection with the reinvestment of: Dividends from net investment income..... 64 839 0 0 ----------- ------------- --------- ------------ 14,784 201,035 118,784 1,678,712 Shares repurchased....... (2) (26) (8,962) (136,133) ----------- ------------- --------- ------------ Net increase............. 14,782 $ 201,009 109,822 $ 1,542,579 =========== ============= ========= ============ Increase derived from capital shares transactions........... 13,924,719 $ 180,921,938 8,557,370 $119,515,311 =========== ============= ========= ============
(a)Commencement of Operations. 23 As a New England Funds stock fund shareholder, it's important that you're kept up-to-date on all changes to the stock funds prospectus. Since there's been a change in management for New England Star Advisers Fund, we've included a copy of the supplement to the prospectus below. NEW ENGLAND FUNDS TRUST I NEW ENGLAND STAR ADVISERS FUND Supplement dated July 13, 1995 to New England Star Advisers Fund Prospectus dated May 1, 1995 and New England Stock Funds Prospectus dated May 1, 1995 The following information reflects changes in the investment management and policies of the Loomis, Sayles & Company, L.P. ("Loomis Sayles") segment of New England Star Advisers Fund (the "Fund"): [_] Jeffrey C. Petherick, Vice President of Loomis Sayles and New England Funds Trust I, and Mary Champagne, Vice President of Loomis Sayles, have day-to-day management responsibility for the segment of the Fund that is allocated to Loomis Sayles. Mr. Petherick has co-managed the Loomis Sayles segment of the Fund since the Fund's inception. Mr. Petherick was an investment manager at Masco Corporation prior to joining Loomis Sayles in 1990. Ms. Champagne has co-managed the Loomis Sayles segment of the Fund since July 1995. Prior to joining Loomis Sayles in 1993, Ms. Champagne served as a portfolio manager at NBD Bank for 10 years. [_] Loomis Sayles manages its segment of the portfolio by investing primarily in stocks of small cap companies with good earnings growth potential, that Loomis Sayles believes are undervalued by the market. Typically, such companies range in size from $100 million to $500 million in market capitalization, have better than average growth rates at below average price/earnings ratios and have strong balance sheets and cash flow. Loomis Sayles seeks to build a core small cap portfolio of solid growth companies' stock, with a smaller emphasis on special situations and turnarounds (companies that have experienced significant business problems but which Loomis Sayles believes have favorable prospects for recovery), as well as unrecognized stocks. 24 -------------------------------------------------------------------------------- New England Star Advisers Fund -------------------------------------------------------------------------------- Stock Funds International Equity Fund Growth Fund Star Advisers Fund Capital Growth Fund Value Fund Growth Opportunities Fund Balanced Fund Bond Funds High Income Fund Strategic Income Fund Government Securities Fund Bond Income Fund Limited Term U.S. Government Fund Adjustable Rate U.S. Government Fund Tax Exempt Funds Tax Exempt Income Fund Massachusetts Tax Free Income Fund Intermediate Term Tax Free Fund of California Intermediate Term Tax Free Fund of New York Money Market Funds Cash Management Trust -- Money Market Series -- U.S. Government Series Tax Exempt Money Market Trust To learn more, and for a free prospectus, contact your financial representative. New England Funds, L.P. 399 Boylston Street Boston, MA 02116 Toll Free 800-225-5478 This material is authorized for distribution to prospective investors when it is preceded or accompanied by the Fund's current prospectus, which contains information about distribution charges, management and other items of interest. Investors are advised to read the prospectus carefully before investing. [NEW ENGLAND FUNDS LOGO APPEARS HERE] New England Funds Where The Best Minds Meet -------------------------------- 399 Boylston Street Boston, Massachusetts 02116 -------------------------------- 95-0754 (SA58) [RECYCLED PAPER LOGO APPEARS HERE] Printed on Recycled Paper