-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vy/Ndt2x/h7bPvRrRO52/krMfN6D3HGObz7uMaT1Ie7tXgHtF0V7UKHsKDXDgEAd w3A7xE4cms7ZszJHItz2Mg== 0000950156-97-000756.txt : 19970912 0000950156-97-000756.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950156-97-000756 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970904 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND FUNDS TRUST I CENTRAL INDEX KEY: 0000770540 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04323 FILM NUMBER: 97675141 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 STAR SMALL CAP FUND - NEF TRUST I - ------------------------------------------------------------------------------- SEMIANNUAL REPORT - ------------------------------------------------------------------------------- [graphic omitted](R) NEW ENGLAND FUNDS(R) Where The Best Minds Meet(R) New England Star Small Cap Fund [graphic omitted] - --------------- June 30, 1997 - --------------- August 1997 - -------------------------------------------------------------------------------- Dear New England Funds Shareholder, [Photo of Henry L.P. Schmelzer] Spurred by bright economic prospects, the broader U.S. stock market continued its record run during the first half of the year, experiencing only short-lived setbacks along the way. These fresh gains come on top of significant increases in 1995 and 1996, leaving many investors wary of what might come next. Bond markets, meanwhile, contended with some volatility in interest rates, but have been relatively stable this year. Building a portfolio for variable markets Investors should not abandon well-conceived financial programs for fear of a down market. Whether today's market levels are excessive -- only hindsight will tell. So you should remain patient and realistic, alert to the possibility of periodic market declines. Consultation with your financial representative should be a regular part of your planning. Your representative can help you take prudent steps to adjust your portfolio, whatever the next trend may bring. Strategic initiatives deliver shareholder benefits Four years ago New England Funds embarked on a new strategic direction. Expressed in our corporate slogan Where The Best Minds Meet(R), this new thrust has meant improved performance for many of our funds, award-winning service and a host of behind-the-scenes enhancements designed to help our shareholders and their financial representatives. Our sights, like yours, are focused on the long term. At the same time, we work to enhance service every day. We also keep a disciplined eye on the performance that each fund manager achieves. Through these persistent efforts we're convinced we'll merit your continued commitment and loyalty. Thank you for your confidence in New England Funds. Sincerely, /s/ Henry L.P. Schmelzer Henry L.P. Schmelzer, President - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- AWARD WINNING SERVICE -- TWO YEARS RUNNING - -------------------------------------------------------------------------------- - --------------------- For two years running we're proud to announce that DALBAR, DALBAR, an independent evaluator of mutual fund QUALITY service, has awarded New England Funds its Quality TESTED SERVICE Tested Service Seal for "providing the highest 1996 tier of service excellence in the mutual fund - --------------------- industry." New England Funds is one of just three DALBAR mutual fund companies to earn this distinction in HONORS COMMITMENT TO: each of the last two years -- another reason why INVESTORS we are becoming known as the mutual fund company - --------------------- Where The Best Minds Meet. INVESTMENT RESULTS THROUGH JUNE 30, 1997 - -------------------------------------------------------------------------------- Putting Performance in Perspective The charts comparing your Fund's performance to a benchmark index provide you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. Your Fund's total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction costs and other expenses. See next page [symbol - hand pointing right] - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD ENDED 6/30/97 - -------------------------------------------------------------------------------- CLASS A (Inception 12/31/96) SINCE INCEPTION Net Asset Value(1) 10.40% With Max. Sales Charge(2) 4.07 - -------------------------------------------------------------------------------- CLASS B (Inception 12/31/96) SINCE INCEPTION Net Asset Value(1) 10.00% With CDSC(3) 5.00 - -------------------------------------------------------------------------------- CLASS C (Inception 12/31/96) SINCE INCEPTION Net Asset Value(1) 10.00% - -------------------------------------------------------------------------------- COMPARATIVE PERFORMANCE SINCE 12/31/96 Russell 2000(4) 10.20% Lipper Small Cap Fund Avg.(5) 8.99 These returns represent past performance. Investment return and principal value will fluctuate so that shares, upon redemption, may be worth more or less than original cost. NOTES TO CHARTS AND PERFORMANCE UPDATE (1) Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. (2) 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 5% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero six years after the purchase of shares. (4) Russell 2000 Small Stock Index is a popular measure of the stock price performance of small companies. The Index performance has not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. (5) Lipper Average is an average of the total return performance (calculated on the basis of net asset value) of funds with similar investment objectives as calculated by Lipper Analytical Services, an independent mutual fund ranking service. - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- A $10,000 Investment Compared to Russell 2000(4) [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in the Star Small Cap Fund's Class A shares compared to Russell 2000. The data points to this chart are as follows:] Class A Shares Inception 12/31/96 Net Asset With Maximum Value(1) Sales Charge(2) Russell 2000(4) 12/31/96 $10,000 $ 9,425 $10,000 1/97 $10,192 $ 9,606 $10,200 2/97 $ 9,920 $ 9,349 $ 9,953 3/97 $ 9,351 $ 8,814 $ 9,483 4/97 $ 9,264 $ 8,731 $ 9,510 5/97 $10,447 $ 9,847 $10,567 6/97 $11,040 $10,005 $11,021 [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in the Star Small Cap Fund's Class B shares compared to Russell 2000. The data points to this chart are as follows:] Class B Shares Inception 12/31/96 Net Asset Value(1) CDSC(3) Russell 2000(4) 12/31/96 $10,000 $10,000 $10,000 1/97 $10,184 $10,184 $10,200 2/97 $ 9,912 $ 9,912 $ 9,953 3/97 $ 9,336 $ 9,336 $ 9,483 4/97 $ 9,248 $ 9,248 $ 9,510 5/97 $10,425 $10,425 $10,567 6/97 $11,009 $10,509 $11,021 [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in the Star Small Cap Fund's Class C shares compared to Russell 2000. The data points to this chart are as follows:] Class C Shares Inception 12/31/96 Net Asset Value(1) Russell 2000(4) 12/31/96 $10,000 $10,000 1/97 $10,192 $10,200 2/97 $ 9,912 $ 9,953 3/97 $ 9,336 $ 9,483 4/97 $ 9,248 $ 9,510 5/97 $10,424 $10,567 6/97 $11,008 $11,021 These illustrations represent past performance and cannot predict future results. Investment return and principal value may vary, resulting in a gain or loss on the sale of shares. All Index and Fund performance assumes reinvested distributions. - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- HOW YOUR FUND PERFORMED - -------------------------------------------------------------------------------- Although just six months young, New England Star Small Cap Fund has already made a name for itself. As investors recognize the convenience and wisdom of investing in a single fund that pursues growth through separate strategies and styles, assets have grown to over $70 million, as of June 30, 1997. The Fund's sales success is testimony to the broad appeal of its approach. We are pleased with the Fund's performance -- and think you will be too. More importantly, we are most optimistic about its future. Economic Overview During the continued upward climb of the broad investment market, two factors in the past sixth months caused a temporary stall: concern over higher interest rates and the possibility of weaker corporate earnings. Concerns fueled performance of large company stocks as investors seeking liquidity drove up prices. Nonetheless, the stall was temporary: news of favorable investment conditions -- moderate economic growth, low inflation and a reasonable interest rate environment -- helped the overall market to recover and return to a more normal pace. At the start of the year, small company stocks continued to lag their larger counterparts. But, by the second quarter, their relative underperformance turned into a buying opportunity, prompting a small cap rally as investors found more attractive valuations (a measure that indicates how much one pays for a company's earning power) in this market. For the semiannual period ending June 30, 1997, New England Star Small Cap Fund returned 10.40%, 10.00% and 10.00% at net asset value for Class A, B and C shares, respectively. This compared favorably to its benchmark, the Russell 2000 Index, which posted 10.20% for the same period. Your Fund is the latest of three New England Star funds, each with a multiple-adviser approach. New England Star Small Cap Fund has four different segments, each managed by a separate subadvisory firm with its own management approach. On the following pages, commentary from the Fund's portfolio managers will give you insight into each investment style and market perspective. - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- ROBERTSON STEPHENS INVESTMENT MANAGEMENT - -------------------------------------------------------------------------------- [Photo of John Wallace] John Wallace, Robertson Stephens Investment Management Small cap stocks have underperformed dramatically since May of 1996, while the earnings momentum for large cap stocks has been surprisingly strong. But, I am convinced that the large cap out-performance will eventually end. Some smaller companies can and will grow their sales and earnings at a 25-30% rate, while many of the large cap companies simply cannot. We remain committed to our small- to mid-cap bias, and continue to apply our bottom-up, research-intensive approach to selecting securities. We target small- to mid-cap companies with good growth potential as a result of improved management, new products, and/or market expansion. Currently, the areas we are looking at include: oil service, technology, telecom equipment, capital goods, and industrial companies. LARGEST HOLDINGS IN ROBERTSON STEPHENS SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Vans, Inc. 0.51% Southern Electronics Corp. 0.46% Key Energy Group, Inc. 0.44% - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- MONTGOMERY ASSET MANAGEMENT - -------------------------------------------------------------------------------- [Photo of Andrew Pratt] Andrew Pratt, Montgomery Asset Management With valuations more normal, a number of attractive small cap stocks have became available. In addition to evaluating new prospects, we also routinely re-expose all our portfolio holdings to our time-tested, three-step stock selection process: quantitative screening, independent fundamental research and careful valuation. As of June 30, our portfolio contains a broad mix of high-quality and interesting companies, with good diversification among sectors. For new stock selection, we are currently focusing on two primary areas: service and technology. Outbound/inbound teleservicing and customer retention services seem to be emerging with momentum and a well-defined future. Likewise, in the area of technology, a growing number of agile and responsive, solutions-driven companies are reaping the benefits of The Year 2000 challenge. As larger companies outsource functions like teleservicing and technology problem-solving, some of these smaller, ambitious companies are getting good visibility. We see this as an accelerating factor that can work favorably for the small cap investor. LARGEST HOLDINGS IN MONTGOMERY SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Cooper Companies, Inc. 0.72% Whole Foods Market, Inc. 0.54% Octel Communications Corp. 0.53% - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- LOOMIS, SAYLES & CO., L.P. - -------------------------------------------------------------------------------- [Photo of David Smith, Philip Fine & Christopher Ely] David Smith, Philip Fine & Christopher Ely, Loomis, Sayles & Co., L.P. During the first six months of 1997, small cap stock performance was eclipsed by the continued extraordinary performance of large caps. Excessive valuations and a flight to liquidity caused small cap growth stocks to underperform through the end of April. Then two things happened. The momentum of large cap stock growth slowed, and the small cap valuation correction attracted more investors. This was enhanced by a favorable economy, good growth, and low inflation. Another factor was the prospect of a capital gains tax cut, which prompted many investors to increase their exposure to growth-oriented investments. These developments and the strong fundamentals of the small companies we invest in worked to the advantage of our portfolio in the second quarter. At the end of the period, our largest exposure was in technology, specifically, software and electronics. We're also looking at biotechnology, which seems to be undergoing a renaissance. In fact, we will look at any sector for emerging, high-growth companies that dominate their industry niche or are exceptionally well-positioned to benefit from change -- a change in technology, an improved regulatory climate, or encouraging demographic trends. LARGEST HOLDINGS IN LOOMIS SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Advanced Technology Materials, Inc. 0.73% Sipex Corp. 0.66% FirstFed Financial 0.63% - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- OAKMARK/HARRIS ASSOCIATES L.P. - -------------------------------------------------------------------------------- [Photo of Steven Reid] Steven Reid, Oakmark/Harris Associates During the semiannual period it seemed like a lot happened, but very little changed. While no one knows exactly why, it appears that Wall Street became obsessed with several short-term events: the Fed's decision to raise interest rates, anticipation of second quarter earnings, and the fear of companies not meeting expectations. And finally, many investors became concerned about the possibility of an overall market correction. We were not exempt from the overall market decline, and several of our holdings did not or were not expected to produce the near-term results on which other investors seem to focus so closely. But, as long-term investors, we see these situations as opportunities, and we try to take advantage of them. Our strategy for Star Small Cap Fund continues to follow our value-oriented philosophy. We buy and hold stocks of companies that may trade at a significant discount to their business value. We pursue returns by identifying attractively-priced stocks and sticking with those companies until we feel they have realized their full market potential. The basic attributes of the small cap universe are still quite attractive, and right now, it's a good, investable environment. LARGEST HOLDINGS IN OAKMARK/HARRIS SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- SPX Corp. 1.38% Catellus Development Corp. 1.28% U.S. Industries, Inc. 1.11% - -------------------------------------------------------------------------------- NEW ENGLAND STAR SMALL CAP FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOP PORTFOLIO SECTORS 6/30/97* - -------------------------------------------------------------------------------- Percentage of Net Assets ---------------------------------------------- 1. Services 5.6 ---------------------------------------------- 2. Software 5.4 ---------------------------------------------- 3. Industrial Goods & Services 4.2 ---------------------------------------------- 4. Technology 4.2 ---------------------------------------------- 5. Retail 4.0 ---------------------------------------------- 6. Electronics 3.7 ---------------------------------------------- 7. Insurance 3.7 ---------------------------------------------- 8. Broadcasting 3.6 ---------------------------------------------- 9. Drugs & Health Care 3.4 ---------------------------------------------- 10. Petroleum Services 3.2 ---------------------------------------------- 11. Real Estate 2.8 ---------------------------------------------- 12. Machinery 2.7 ---------------------------------------------- 13. Banks 2.7 ---------------------------------------------- 14. Food & Beverages 2.7 ---------------------------------------------- 15. Consumer Cyclicals 2.7 *Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Investments as of June 30, 1997 (unaudited) COMMON STOCK -- 95.3% OF TOTAL NET ASSETS SHARES DESCRIPTION VALUE(A) - -------------------------------------------------------------------------------- AEROSPACE--0.7% 10,000 Logicon, Inc. ....................................... $ 530,000 ------------ AIR TRAVEL--0.2% 6,000 Southwest Airlines .................................. 155,250 ------------ APPAREL & TEXTILES--0.3% 7,000 Nautica Enterprises, Inc. ........................... 185,063 ------------ BANKS--2.7% 12,500 Bank Plus Corp. ..................................... 135,938 5,000 Fidelity Bankshares, Inc. (c) ....................... 98,750 20,000 Northwest Savings Bank .............................. 310,000 30,000 Peoples Bank of Bridgeport, Connecticut ............. 776,250 8,000 Resource Bancshares Mortgage Group .................. 158,000 1,200 TCF Financial Corp. ................................. 59,250 4,000 Union Planters Corp. ................................ 207,500 2,500 United States Bancorp ............................... 160,312 ------------ 1,906,000 ------------ BASIC MATERIALS--0.6% 5,500 Carpenter Technology Corp. .......................... 251,625 5,000 Libbey, Inc. ........................................ 175,000 ------------ 426,625 ------------ BROADCASTING--3.6% 12,000 Cablevision Systems Corp. (c) ....................... 648,000 8,000 Comcast Corp. ....................................... 171,000 32,000 Granite Broadcasting Corp. (c) ...................... 328,000 5,200 Heftel Broadcasting Corp. (c) ....................... 287,300 14,800 Metro Networks, Inc. (c) ............................ 358,900 50,000 TCI Satellite Entertainment, Inc. (c) ............... 393,750 11,400 Westwood One, Inc. (c) .............................. 367,650 ------------ 2,554,600 ------------ BUILDING MATERIAL & CONSTRUCTION--0.5% 22,000 NVR, Inc. (c) ....................................... 335,500 ------------ BUSINESS SERVICES--2.2% 9,500 Abacus Direct Corp. (c) ............................. 308,750 9,000 Childrens Comprehensive Services .................... 127,125 13,500 Equity Corp. International (c) ...................... 326,531 1,500 G & K Services ...................................... 55,875 9,500 Outdoor Systems, Inc. (c) ........................... 363,375 6,000 Universal Outdoor Holdings, Inc. (c) ................ 209,250 9,200 Waste Industries, Inc. (c) .......................... 162,150 ------------ 1,553,056 ------------ CAPITAL GOODS--2.3% 6,100 Boston Technology, Inc. (c) ......................... 180,331 5,100 Comverse Technology, Inc. (c) ....................... 265,200 9,500 MRV Communications, Inc. (c) ........................ 280,250 15,900 Octel Communications Corp. (c) ...................... 372,656 6,900 P-COMM, Inc. (c) .................................... 227,700 8,800 Woodhead Industries ................................. 166,100 8,400 X-Rite, Inc. ........................................ 159,600 ------------ 1,651,837 ------------ CHEMICALS--1.0% 17,500 Advanced Technology Materials, Inc. (c) ............. 514,063 8,500 Giant Cement Holding, Inc. .......................... 159,375 ------------ 673,438 ------------ COMMUNICATION--1.1% 5,000 General Cable Corp. (c) (d) ......................... 128,125 21,000 IWL Communications Inc. ............................. 112,875 4,000 PairGain Technologies, Inc. (c) ..................... 62,000 3,000 QUALCOMM, Inc. (c) .................................. 152,625 12,000 Westell Technologies ................................ 300,000 ------------ 755,625 ------------ COMPUTERS--1.6% 5,000 3Com Corp. (c) ...................................... 225,000 8,500 ADAC Labs ........................................... 200,812 4,000 Citrix Systems, Inc. ................................ 175,500 6,000 Data General Corp. .................................. 156,000 10,000 Iomega Corp. ........................................ 198,750 700 NeoMagic Corp. (c) .................................. 15,663 20,000 UniComp, Inc. ....................................... 140,000 ------------ 1,111,725 ------------ COMPUTERS & BUSINESS EQUIPMENT--1.1% 8,100 ENCAD, Inc. (c) ..................................... 336,150 11,400 Natural Microsystems Corp. (c) ...................... 410,400 ------------ 746,550 ------------ CONSTRUCTION MATERIALS--0.3% 7,000 Simpson Manufacturing Co. ........................... 185,500 ------------ CONSUMER CYCLICALS--2.7% 9,900 Borders Group, Inc. (c) ............................. 238,838 12,400 Corporate Express, Inc. (c) ......................... 179,025 3,000 Ethan Allen Interiors, Inc. ......................... 171,000 4,600 Kimball International, Inc., Class B ................ 185,150 7,400 Mac Frugals Corp. (c) ............................... 201,650 12,500 Miller Industries, Inc. (c) ......................... 200,000 5,900 Proffitts (c) ....................................... 258,862 5,600 Samsonite Corp. (c) ................................. 247,100 8,200 World Color Press, Inc. (c) ......................... 194,750 ------------ 1,876,375 ------------ CONSUMER GOODS & SERVICES--1.8% 15,000 First Brands Corp. .................................. 344,062 10,500 GC Companies, Inc. (c) .............................. 480,375 11,000 Scotsman Industries, Inc. ........................... 313,500 86,957 U-Ship, Inc. ........................................ 117,392 ------------ 1,255,329 ------------ CONSUMER PRODUCTS--2.4% 11,500 Action Performance Companies, Inc. (c) .............. 278,875 8,500 General Cigar Holdings, Inc. (c) .................... 250,219 6,500 Jones Apparel Group, Inc. (c) ....................... 310,375 8,200 Maxicare Health Plans (c) ........................... 183,475 10,600 Sola International, Inc. (c) ........................ 355,100 11,200 The Men's Wearhouse, Inc. (c) ....................... 352,800 ------------ 1,730,844 ------------ DIVERSIFIED CONGLOMERATES--1.1% 22,000 U.S. Industries, Inc. (c) ........................... 783,750 ------------ DRUGS & HEALTH CARE--3.4% 1,800 Agouron Pharmaceuticals, Inc. (c) ................... 145,575 12,500 American Oncology Resources, Inc. ................... 210,937 12,500 Columbia Laboratories. .............................. 204,687 5,200 Gilead Sciences, Inc. (c) ........................... 143,650 5,900 Guilford Pharmaceuticals, Inc. (c) .................. 143,075 3,000 HealthCare Compare Corp. ............................ 157,125 4,800 Immunex Corp. (c) ................................... 174,000 6,300 Intercardia, Inc. ................................... 144,900 2,500 Living Centers of America, Inc. ..................... 98,750 14,000 Matritech Inc. ...................................... 97,125 10,000 Medical Resources, Inc. ............................. 165,000 25,000 Meridian Diognostic ................................. 209,375 6,200 Sepracor, Inc. (c) .................................. 160,038 6,800 Tenet Healthcare Corp. (c) .......................... 201,025 900 Theragenics Corp. (c) ............................... 20,700 3,300 Vertex Pharmaceuticals, Inc. (c) .................... 126,225 ------------ 2,402,187 ------------ ELECTRIC--0.2% 12,000 Antec Corp. ......................................... 141,000 ------------ ELECTRONIC COMPONENTS--1.3% 11,100 3Dfx Interactive, Inc. (c) .......................... 148,463 12,800 Sipex Corp. (c) ..................................... 464,000 9,500 Vitesse Semiconductor Corp. (c) ..................... 310,531 ------------ 922,994 ------------ ELECTRONICS--3.7% 5,200 CFM Technologies, Inc. (c) .......................... 170,300 6,900 Cymer, Inc. (c) ..................................... 336,375 9,000 Cypress Semiconductor Corp. ......................... 130,500 8,500 Input/Output, Inc. (c) .............................. 154,063 9,100 Kulicke & Soffa Industries, Inc. (c) ................ 295,466 7,700 Lam Research Corp. (c) .............................. 285,381 6,500 PRI Automation, Inc. (c) ............................ 246,594 7,600 Sanmina Corp. (c) ................................... 482,600 12,500 Scientific Atlanta, Inc. (c) ........................ 273,437 4,400 Uniphase Corp. (c) .................................. 256,300 ------------ 2,631,016 ------------ ENERGY--0.9% 10,000 Hvide Marine, Inc. (c) .............................. 221,250 11,800 Marine Drilling Companies, Inc. (c) ................. 231,575 8,000 Pride Petroleum Services, Inc. (c) .................. 192,000 ------------ 644,825 ------------ FINANCE--1.2% 15,200 BA Merchant Services, Inc. (c) ...................... 289,750 3,200 Commercial Federal Corp. ............................ 118,800 1,500 Great Plains Software, Inc. (c) ..................... 40,500 9,700 Imperial Credit Industries (c) ...................... 199,456 3,500 W. R. Berkley Corp. ................................. 206,063 ------------ 854,569 ------------ FINANCIAL SERVICES--0.5% 12,000 Duff & Phelps Credit Rating Co. ..................... 364,500 ------------ FOOD - AGRIBUSINESS--0.5% 10,733 Delta & Pine Land Co. ............................... 382,363 ------------ FOOD & BEVERAGES--2.7% 9,500 Fine Host Corp. (c) ................................. 299,250 20,500 International Multifoods Corp. ...................... 515,062 29,500 Ralcorp Holdings, Inc. (c) .......................... 435,125 7,500 Tasty Baking Corp. .................................. 131,250 25,000 Triarc Companies, Inc. (c) .......................... 509,375 ------------ 1,890,062 ------------ HEALTH CARE - MEDICAL TECHNOLOGY--2.2% 13,700 Arterial Vascular Engineering, Inc. (c) ............. 440,969 11,800 Cytyc Corp. (c) ..................................... 320,075 7,400 Fisher Scientific ................................... 351,500 18,400 Novoste Corp. (c) ................................... 301,300 6,100 Perclose, Inc. (c) .................................. 152,500 ------------ 1,566,344 ------------ HEALTH CARE - SERVICES--0.8% 8,000 ARV Assisted Living ................................. 88,000 12,000 CardioThoracic Systems, Inc. ........................ 168,000 6,200 Pediatrix Medical Group (c) ......................... 284,038 ------------ 540,038 ------------ HOUSEHOLD APPLIANCES & HOME FURNISHINGS--0.5% 25,000 Southern Electronics Corp. .......................... 321,875 ------------ HOME BUILDERS--0.2% 8,000 Walter Industries, Inc. ............................. 134,000 ------------ HOTELS & RESTAURANTS--0.3% 7,800 Logans Roadhouse, Inc. (c) .......................... 185,250 ------------ INDUSTRIAL GOODS & SERVICES--4.2% 15,000 Binks Manufacturing Co. ............................. 693,750 20,000 Essex International, Inc. (c) ....................... 557,500 22,000 MagneTek, Inc. (c) .................................. 365,750 15,000 SPX Corp. ........................................... 972,187 13,500 Zurn Industries, Inc. ............................... 388,125 ------------ 2,977,312 ------------ INDUSTRIAL MACHINERY--0.4% 3,500 Applied Power, Inc. ................................. 180,688 4,000 Graco, Inc. ......................................... 120,500 ------------ 301,188 ------------ INSURANCE--3.7% 16,500 Chartwell Re Corp. .................................. 495,000 3,500 Equitable of Iowa Companies ......................... 196,000 5,000 Hartford Life, Inc. (c) ............................. 187,500 25,000 Highlands Insurance Group, Inc. (c) ................. 503,125 3,500 Provident Companies, Inc. ........................... 187,250 15,000 PXRE Corp. .......................................... 461,250 15,000 RenaissanceRe Holdings .............................. 571,875 ------------ 2,602,000 ------------ INVESTMENT COMPANIES--0.3% 11,200 Ocwen Asset Investment Corp. ........................ 226,800 ------------ LEISURE TIME--0.6% 3,000 Ascent Entertainment Group, Inc. .................... 27,375 4,500 King World Productions, Inc. ........................ 157,500 18,000 Penn National Gaming, Inc. (c) ...................... 267,750 ------------ 452,625 ------------ MACHINERY--2.7% 20,000 Gardner Denver Machinery, Inc. (c) .................. 595,000 11,500 Mathews International Corp. ......................... 419,750 18,000 Northwest Pipe Co. (c) .............................. 330,750 25,000 The Carbide/Graphite Group, Inc. (c) ................ 581,250 ------------ 1,926,750 ------------ MANUFACTURING--0.3% 12,000 MotivePower Industries .............................. 192,000 ------------ MISCELLANEOUS--2.4% 21,900 Cooper Companies, Inc. (c) .......................... 509,175 7,400 ESC Medical Systems, Ltd. (c) ....................... 188,700 7,800 Intelligroup, Inc. .................................. 75,075 40,000 M & F Worldwide Corp. ............................... 350,000 7,100 Santa Fe International Corp. (c) .................... 241,400 10,100 Waters Corp. (c) .................................... 362,337 ------------ 1,726,687 ------------ OFFICE EQUIPMENT & SUPPLIES--0.4% 7,600 Network Appliance, Inc. (c) ......................... 288,800 ------------ OIL & GAS--0.8% 45,000 Titan Exploration, Inc. (c) ......................... 545,625 ------------ OIL - INDEPENDANT PRODUCERS--1.2% 9,900 St. Mary Land & Exploration Co. ..................... 347,737 8,000 Stone Energy Corp. (c) .............................. 219,000 10,900 Swift Energy Co. (c) ................................ 260,238 ------------ 826,975 ------------ OIL SERVICES--0.3% 5,000 EVI, Inc. ........................................... 210,000 ------------ PAPER--0.2% 20,000 Gaylord Container Corp. ............................. 153,750 ------------ PETROLEUM SERVICES--3.2% 3,800 Atwood Oceanics, Inc. (c) ........................... 254,600 5,500 Camco International, Inc. ........................... 301,125 9,000 Drilex International, Inc. .......................... 141,750 17,500 Key Energy Group, Inc. (c) .......................... 311,719 8,000 Nabors Industries, Inc. ............................. 200,000 10,100 Patterson Energy, Inc. (c) .......................... 458,287 7,500 Reading & Bates (c) ................................. 200,625 5,000 Rowan Companies, (c) ................................ 140,938 4,000 Smith International, Inc. (c) ....................... 243,000 ------------ 2,252,044 ------------ PRODUCER OF GOODS--0.2% 5,000 Chicago Miniature Lamp (c) .......................... 124,375 ------------ PUBLISHING--0.8% 4,000 Central Newspapers, Inc. ............................ 286,500 10,000 Lee Enterprises, Inc. ............................... 263,750 ------------ 550,250 ------------ REAL ESTATE--2.8% 25,000 Castle & Cooke, Inc. (c) ............................ 414,062 50,000 Catellus Development Corp. (c) ...................... 906,250 10,000 CRIIMI MAE, Inc. .................................... 160,000 5,500 JP Reality, Inc. .................................... 149,188 12,000 Prime Retail, Inc. .................................. 161,250 7,500 Walden Residential Properties, Inc. ................. 192,187 ------------ 1,982,937 ------------ RETAIL--4.0% 20,000 Candies, Inc. ....................................... 88,750 10,500 Carson Pirie Scott & Co. (c) ........................ 333,375 13,300 Central Garden & Pet Co. (c) ........................ 332,500 12,500 Cole National Corp. (c) ............................. 550,000 7,800 Gadzooks, Inc. (c) .................................. 152,100 9,000 Genesco, Inc. ....................................... 127,687 8,000 Global DirectMail Corp. ............................. 208,500 6,800 Linens 'N Things, Inc. .............................. 201,450 8,000 Pier 1 Imports, Inc. ................................ 212,000 24,000 Vans, Inc. .......................................... 363,000 8,700 Wet Seal, Inc. (c) .................................. 274,594 ------------ 2,843,956 ------------ RETAIL - GROCERY--1.0% 22,100 Whole Foods Market, Inc. (c) ........................ 732,063 ------------ RETAIL - SPECIALTY--0.4% 7,500 Black Box Corp. (c) ................................. 301,875 ------------ SAVINGS & LOAN--2.1% 8,900 Astoria Financial Corp. ............................. 422,750 14,200 FirstFed Financial (c)............................... 441,087 5,000 Glendale Federal Savings Bank, Warrants ............. 77,500 11,500 Reliance Bancorp, Inc. .............................. 338,531 9,900 Roslyn Bancorp ...................................... 226,463 ------------ 1,506,331 ------------ SERVICES--5.6% 9,600 Alternative Resources (c) ........................... 195,600 5,400 Applied Graphics Technologies, Inc. (c) ............. 214,650 8,800 Budget Group, Inc. (c) .............................. 303,600 7,400 Caribiner International, Inc. (c) ................... 241,425 4,600 Catalina Marketing Corp. (c) ........................ 221,375 7,300 Computer Task Group, Inc. ........................... 271,925 5,800 Fair Issac & Company, Inc. .......................... 258,463 11,000 FPA Medical Management, Inc. (c) .................... 260,562 10,300 HA-LO Industries, Inc. (c) .......................... 243,338 9,100 Interstate Hotels Co. (c) ........................... 267,881 14,500 Orthodontic Centers of America, Inc. (c) ............ 263,719 16,900 PMT Services, Inc. (c) .............................. 257,725 11,600 Precision Response Corp. (c) ........................ 191,400 11,900 Prime Hospitality Corp. (c) ......................... 235,025 10,700 Renal Treatment Centers, Inc. (c) ................... 287,562 5,400 Technology Solutions (c) ............................ 213,300 ------------ 3,927,550 ------------ SOFTWARE--5.4% 3,000 Adobe Systems, Inc. ................................. 105,188 10,000 Avid Technology, Inc. (c) ........................... 263,750 17,700 Aware, Inc. ......................................... 261,075 13,300 Cambridge Technology Partners (c) ................... 425,600 4,000 CIBER, Inc. ......................................... 136,750 8,000 Data Dimensions, Inc. ............................... 176,000 15,000 Discreet Logic, Inc. ................................ 247,500 10,900 Geotel Communications Corp. (c) ..................... 145,788 8,500 JDA Software Group, Inc. ............................ 290,062 12,500 Pure Atria Corp. .................................... 176,562 4,800 Registry, Inc. (c) .................................. 220,800 16,900 Synopsys, Inc. (c) .................................. 621,075 7,500 Veritas Software Co. (c) ............................ 376,875 8,800 Wind River Systems (c) .............................. 336,600 ------------ 3,783,625 ------------ STEEL--0.9% 20,000 Atchison Casting Corp. .............................. 332,500 7,000 Lone Star Technologies, Inc. (c) .................... 200,375 16,200 WHX Corp. ........................................... 123,525 ------------ 656,400 ------------ TECHNOLOGY--4.2% 19,500 Actel Corp. (c) ..................................... 332,719 15,800 Acxiom Corp. (c) .................................... 323,900 5,200 Analysts International .............................. 174,200 11,000 Boole and Babbage, Inc. (c) ......................... 233,750 11,400 Genrad, Inc. (c) .................................... 257,925 8,250 Henry Jack & Associates, Inc. ....................... 200,062 1,900 Keane, Inc. (c) ..................................... 98,800 9,600 Kronos, Inc. (c) .................................... 264,000 25,000 Network Computing Devices, Inc. ..................... 290,625 12,400 SBS Technologies, Inc. (c) .......................... 286,750 8,900 Structural Dynamics (c) ............................. 233,625 8,700 United States Office Products Co. (c) ............... 265,894 ------------ 2,962,250 ------------ TELECOMMUNICATION--0.9% 9,500 ICG Communications, Inc. ............................ 182,875 20,000 Metromedia International Group, Inc. ................ 253,750 6,000 WorldCom, Inc. (c) .................................. 192,000 ------------ 628,625 ------------ TIRES & RUBBER--0.2% 6,000 Cooper Tire & Rubber Co. ............................ 132,000 ------------ TRANSPORTATION--1.2% 7,100 Atlas Air, Inc. (c) ................................. 244,950 4,900 Expeditors International ............................ 139,037 7,200 Halter Marine Group, Inc. (c) ....................... 172,800 10,000 USFreightways Corp. ................................. 258,750 ------------ 815,537 ------------ TRUCKING & FREIGHT FORWARDING--0.3% 12,500 Consolidated Freightways Corp. ...................... 204,688 ------------ Total Common Stocks (Identified Cost $57,448,096) ... 67,233,108 ------------ BONDS AND NOTES--0.3% FACE AMOUNT - ------------------------------------------------------------------------------- U.S. GOVERNMENT--0.3% $ 750,000 United States Treasury Security, Strip, Zero coupon, 11/15/17 183,735 ------------ Total Bonds and Notes (Identified Cost $172,622) 183,735 ------------ 3,037,000 Repurchase Agreement with State Street Bank & Trust Co. dated 6/30/97 at 5.00% to be repurchased at $3,037,422 on 7/01/97 collateralized by $2,940,000 U.S. Treasury Bonds 7.25% due 5/15/16 valued at $3,103,996 .. 3,037,000 458,000 Repurchase Agreement with State Street Bank & Trust dated 6/30/97 at 5.85% to be repurchased at $458,074 on 7/01/97 collateralized by $445,000 U.S. Treasury Bond 7.25%, due 5/15/16 valued at $469,823 ............................ 458,000 ------------ Total Short Term Investments (Identified Cost $3,495,000) .................. 3,495,000 ------------ Total Investments--100.5% (Identified Cost $61,115,718) (b) ............. 70,911,843 Other assets less liabilities ................... (382,310) ------------ Total Net Assets--100% .......................... $ 70,529,533 ============ SECURITIES SOLD SHORT AGAINST THE BOX MARKET SHARES ISSUER VALUE - -------------------------------------------------------------------------------- 4,000 CIBER, Inc. $136,750 -------- Total Securities Sold Short (Total Proceeds $159,255) $136,750 ======== (a)See Note 1a. (b)Federal Tax Information: At June 30, 1997 the net unrealized appreciation on investments based on cost of $61,115,718 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost. $10,551,943 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value. (755,818) ----------- Net unrealized appreciation $ 9,796,125 =========== (c)Non-income producing security. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES - -------------------------------------------------------------------------------- June 30, 1997 (unaudited) ASSETS Investments at value ............................ $70,911,843 Cash ............................................ 2,068 Cash - Segregated ............................... 268,316 Receivable for: Fund shares sold .............................. 659,920 Securities sold ............................... 453,168 Dividends and interest ........................ 15,787 Prepaid registration expense .................... 12,500 Unamortized organization expense ................ 35,006 ----------- 72,358,608 LIABILITIES Payable for: Securities purchased .......................... $1,513,679 Open short sales - net ........................ 136,750 Fund shares redeemed .......................... 85,488 Accrued expenses: Management fees ............................... 57,630 Deferred trustees' fees ....................... 571 Accounting and administrative ................. 1,843 Other expenses ................................ 33,114 ---------- 1,829,075 ----------- NET ASSETS ........................................ $70,529,533 =========== Net Assets consist of: Capital paid in ............................... $64,050,279 Undistributed net investment loss ............. (432,016) Accumulated net realized loss ................. (2,907,360) Unrealized appreciation on investments and short sale transactions ..................... 9,818,630 ----------- NET ASSETS ........................................ $70,529,533 =========== Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($31,692,428 divided by 2,296,893 shares of beneficial interest) ................. $13.80 ------ Offering price per share (100/94.25 of $13.80) .... $14.64* ====== Net asset value and offering price of Class B shares ($30,334,338 divided by 2,205,979 shares of beneficial interest) ................. $13.75** ====== Net asset value and offering price of Class C shares ($8,502,767 divided by 618,27 shares of beneficial interest) ................. $13.75 ====== Identified cost of investments .................... $61,115,718 =========== * Based upon single purchases of less than $50,000. Reduced sales charges apply for purchases in excess of this amount. **Redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- Six Months Ended June 30, 1997 (unaudited) INVESTMENT INCOME Dividends ............................................... $ 103,642 (a) Interest ................................................ 105,904 ---------- 209,546 Expenses Management fees ....................................... $ 235,077 Service fees - Class A ................................ 25,703 Service and distribution fees - Class B ............... 91,449 Service and distribution fees - Class C ............... 29,624 Trustees' fees and expenses ........................... 5,773 Accounting and administrative ......................... 10,500 Custodian ............................................. 104,709 Transfer agent ........................................ 81,235 Audit and tax services ................................ 10,000 Legal ................................................. 7,612 Printing .............................................. 3,951 Registration .......................................... 29,261 Amortization of organization expenses ................. 2,668 Miscellaneous ......................................... 4,000 ---------- Total expenses .......................................... 641,562 ---------- Net investment loss ..................................... (432,016) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND SHORT SALE TRANSACTIONS Realized loss on: Investments - net ..................................... (2,856,130) Short Sale Transactions - net ......................... (51,230) ---------- Total realized loss on investments and short sale transactions ........................................ (2,907,360) ---------- Unrealized appreciation on: Investments -- net .................................... 9,796,125 Short Sale Transactions -- net ........................ 22,505 ---------- Net unrealized appreciation on investments and short sale transactions ................................... 9,818,630 ---------- Net gain on investment transactions ..................... 6,911,270 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS ................ $6,479,254 ========== (a) Net of foreign taxes of: $295.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (unaudited)
SIX MONTHS ENDED JUNE 30, 1997 ----------- FROM OPERATIONS Net investment loss ................................................... $ (432,016) Net realized loss on investments and short sale transactions .......... (2,907,360) Net unrealized appreciation on investments and short sale transactions 9,818,630 ----------- Increase in net assets from operations ................................ 6,479,254 ----------- Increase in net assets derived from capital share transactions ........ 64,050,279 ----------- Total increase in net assets .......................................... 70,529,533 NET ASSETS Beginning of the period ............................................... 0 ----------- End of the period ..................................................... $70,529,533 =========== UNDISTRIBUTED NET INVESTMENT LOSS Beginning of the period ............................................... $ 0 =========== End of the period ..................................................... $ (432,016) ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (unaudited)
CLASS A CLASS B CLASS C ---------- ---------- ---------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, 1997 1997 1997 ---------- ---------- ---------- Net Asset Value, Beginning of Period .... $12.50 $12.50 $12.50 ------ ------ ------ Income (Loss) From Investment Operations Net Investment Loss (a) ................. (0.08) (0.12) (0.12) Net Realized and Unrealized Gain on Investments ........................... 1.38 1.37 1.37 ------ ------ ------ Total From Investment Operations ........ 1.30 1.25 1.25 ------ ------ ------ Net Asset Value, End of Period .......... $13.80 $13.75 $13.75 ====== ====== ====== Total Return (%) (b) .................... 10.4 10.0 10.0 Ratio of Operating Expenses to Average Net Assets (%) ........................ 2.46 (c) 3.21 (c) 3.21 (c) Ratio of Net Investment Loss to Average Net Assets (%) ........................ (1.48)(c) (2.23)(c) (2.23)(c) Portfolio Turnover Rate (%) ............. 132 (c) 132 (c) 132 (c) Average Commission Rate ................. $0.0538 $0.0538 $0.0538 Net Assets, End of Period (000) ......... $31,692 $30,334 $8,503 (a) Per share net investment loss has been calculated using the average shares outstanding during the year. (b) A sales charge in the case of Class A Shares and a contingent deferred sales charge in the case of Class B Shares is not reflected in total return calculations. Periods less than one year are not annualized. (c) Computed on an annualized basis.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- June 30, 1997 (unaudited) 1. The Fund is a series of New England Funds Trust I, a Massachusetts business trust (the "Trust"), and is registered under the Investment Company Act of 1940, as amended, (the "1940 Act") as an open-end management investment company. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (each such series of shares a "Fund"). The Fund offers Class A, Class B, and Class C shares. The Fund commenced its public offering of Class A, Class B and Class C shares on December 31, 1996. Class A shares are sold with a maximum front end sales charge of 5.75%. Class B shares do not pay a front end sales charge, but pay a higher ongoing distribution fee than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase (or five years if purchased before May 1, 1997). Class C shares do not pay front end or contingent deferred sales charges and do not convert to any other class of shares, but they do pay a higher ongoing distribution fee than Class A shares. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 plan. Shares of each class would receive their pro-rata share of the net assets of the Fund, if the Fund were liquidated. In addition, the Trustees approve separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles for investment companies. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION. Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees, which service provides the last reported sale price for securities listed on an applicable securities exchange or on the NASDAQ national market system, or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value as determined in good faith by New England Funds Management, L.P., the Fund's adviser and the appropriate subadviser, under the supervision of the Fund's trustees. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date or when the Fund learns of the dividend, and interest income is recorded on the accrual basis. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. 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. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Reported net realized foreign exchange gains or losses arise from: 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 resulting from changes in the exchange rate. 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 sub-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. SHORT SALES. A short sale is a transaction in which the Fund sells securities it does not own (but has borrowed) in anticipation of a decline in the market price of the securities. When the Fund makes a short sale, the proceeds it receives from the sale will be held on behalf of the broker effecting the sale until the Fund replaces the borrowed securities. To deliver the securities to the buyer, the Fund arranges through the broker to borrow the securities and, in doing so, the Fund becomes obligated to replace the securities borrowed at their market value at the time of replacement, whatever that price may be. The Fund may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the borrowed securities until the securities are replaced. H. SHORT SALES AGAINST THE BOX. In a short sale against the box, the Fund sells a borrowed security, while at the same time owning an identical security in the portfolio. While the short sale is outstanding, the Fund will not dispose of the security hedged by the short sale. When the Fund sells short against the box, it will establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale, and the Fund pledges securities or cash as additional collateral. The Fund earns interest from the broker on the proceeds of the short sale and accrues such interest on a daily basis. I. ORGANIZATION EXPENSE. Costs incurred in connection with the Fund's organization and initial registration, amounting to approximately $37,674 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 period ended June 30, 1997 were $90,006,424 and $29,641,308 respectively. 3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays management fees to its investment adviser, New England Funds Management, L.P. ("NEFM") at the annual rate of 1.05% of the Fund's average daily net assets. NEFM pays the Fund's four investment sub-advisers, Harris Associates, L.P., Loomis, Sayles & Company, L.P., Montgomery Asset Management, L.P. and Robertson, Stephens & Company Investment Management, L.P. a sub-advisory fee as follows: Harris Associates, L.P., at the annual rate of 0.70% of the average daily net assets of their segment of the Fund, Loomis, Sayles & Company, L.P. and Robertson, Stephens & Company Investment Management, L.P. at the annual rate of 0.55% of the first $50 million of the average daily net assets of the segment of the Fund which that sub-adviser manages, and 0.50% of such assets in excess of $50 million, and Montgomery Asset Management, L.P. at the annual rate of 0.65% of the first $50 million of the average daily net assets of the segment of the Fund which that sub-adviser manages, and 0.50% of such assets in excess of $50 million. Certain officers and directors of NEFM are also officers or trustees of the Fund. NEFM, Harris Associates, L.P. and Loomis Sayles & Company, L.P. are wholly owned subsidiaries of New England Investment Companies, L.P. which is a subsidiary of Metropolitan Life Insurance Company. Fees earned by NEFM and the sub-advisers under the management agreement in effect during the period ended June 30, 1997, are as follows: FEES EARNED - ----------- $ 97,521 New England Funds Management, L.P. 41,699 Harris Associates, L.P. 28,933 Loomis, Sayles & Company, L.P. 35,653 Montgomery Asset Management, L.P. 31,271 Robertson, Stephens & Company Investment Management, L.P. - -------- $235,077 ======== B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. New England Funds, L.P. ("New England Funds"), the Fund's distributor, is a wholly owned subsidiary of New England Investment Companies, L.P. 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 period ended June 30, 1997, these expenses amounted to $10,500 and are shown separately in the financial statements as accounting and administrative. C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder servicing agent for the Fund. For the period ended June 30, 1997, the Fund paid New England Funds $62,671 as compensation for its services in that capacity. D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to the Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the period ended June 30, 1997, the Fund paid New England Funds $25,703 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 and Class C shares and/or the maintenance of shareholder accounts. For the period ended June 30, 1997 the Fund paid New England Funds $22,862 and $7,406 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 period ended June 30, 1997, the Fund paid New England Funds $68,587 and $22,218 in distribution fees under the Class B and Class C plans, respectively. Commissions (including contingent deferred sales charges) on Fund shares paid to New England Funds by investors in shares of the Fund during the six months ended June 30, 1997 amounted to $805,058. E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation directly to its officers or trustees who are directors, officers or employees of NEFM, New England Funds, New England Investment Companies, L.P. or their affiliates, other than registered investment companies. Each other trustee is compensated by the Fund as follows: Annual Retainer $714 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting A deferred compensation plan is available to the trustees on a voluntary basis. Each participating trustee will receive an amount equal to the value that such deferred compensation would have been, had it been invested in the Fund on the normal payment date. 4. CAPITAL SHARE TRANSACTIONS. At June 30, 1997 there was an unlimited number of shares of beneficial interest authorized, divided into three classes, Class A, Class B and Class C capital stock. Transactions in capital shares were as follows:
SIX MONTHS ENDED JUNE 30, 1997 ---------------------------- CLASS A SHARES AMOUNT - ------- --------- ------------- Shares sold ................................................ 3,881,952 $ 48,519,675 Shares repurchased ......................................... (1,585,059) (19,893,453) --------- ------------- Net increase ............................................... 2,296,893 $ 28,626,222 --------- ------------- SIX MONTHS ENDED JUNE 30, 1997 ---------------------------- CLASS B SHARES AMOUNT - ------- --------- ------------- Shares sold ................................................ 2,353,018 $ 29,464,157 Shares repurchased ......................................... (147,039) (1,788,377) --------- ------------- Net increase .............................................. 2,205,979 $ 27,675,780 --------- ------------- SIX MONTHS ENDED JUNE 30, 1997 ---------------------------- CLASS C SHARES AMOUNT - ------- --------- ------------- Shares sold ................................................ 821,795 $ 10,301,965 Shares repurchased ......................................... (203,520) (2,553,688) --------- ------------- Net increase ............................................... 618,275 $ 7,748,277 --------- ------------- Increase derived from capital shares transactions .......... 5,121,147 $ 64,050,279 ========= =============
NEW ENGLAND STAR FUNDS SUPPLEMENT DATED JULY 28, 1997 TO NEW ENGLAND STAR FUNDS PROSPECTUS DATED MAY 1, 1997 (AS SUPPLEMENTED JUNE 30, 1997), NEW ENGLAND STOCK FUNDS CLASS Y PROSPECTUS DATED MAY 1, 1997 AND NEW ENGLAND STAR SMALL CAP FUND PROSPECTUS DATED DECEMBER 31, 1996 (AS SUPPLEMENTED MAY 1, 1997 AND JUNE 30, 1997) NEW ENGLAND STAR ADVISERS FUND On July 25, 1997, the Board of Trustees of New England Funds Trust I (the "Trust") approved a Sub-Advisory Agreement (the "Agreement") relating to one segment of the portfolio of New England Star Advisers Fund (the "Fund") between New England Funds Management, L.P. ("NEFM"), the Fund's adviser, and Harris Associates L.P. ("Harris Associates"). The Agreement is effective July 25, 1997 and continues in effect for a period of 120 days or until shareholders of the Fund approve a new Sub-Advisory Agreement between NEFM and Harris Associates, whichever occurs first. A special shareholder meeting will be held in mid-October for shareholder approval of a second new Sub-Advisory Agreement between NEFM and Harris Associates, and a notice of such meeting and proxy statement will be sent to shareholders in late August. Accordingly, Harris Associates succeeds Berger Associates, Inc. ("Berger") as subadviser to this segment of the Fund, and is responsible for day-to-day management of the segment's investment operations under the oversight of NEFM. The sub-advisory fees payable by NEFM to Harris Associates under the Agreement are at the same rate as those previously payable by NEFM to Berger to manage this segment of the Fund, as set forth in the Prospectus. Following shareholder approval of the second new Sub-Advisory Agreement between NEFM and Harris Associates, the subadvisory fees payable by NEFM to Harris Associates will be at the annual rate of 0.65% of the first $50 million of the average daily net assets of the segment of the Fund managed by Harris Associates, 0.60% of the next $50 million of such assets and 0.55% of any such assets in excess of $100 million. In addition, Harris Associates has agreed to waive the entire sub-advisory fee payable to Harris Associates by NEFM under the Agreement through August 31, 1997, and NEFM will pay such waived fees to Berger. Neither the change in the sub-advisory fee rate payable to Harris Associates nor this waiver by Harris Associates will affect the management fee payable by the Fund to NEFM. Robert Sanborn, CFA, Partner and Portfolio Manager of Harris Associates, is the portfolio manager of the segment of the Fund managed by Harris Associates. Mr. Sanborn has 14 years of investment experience, and joined Harris Associates as a Portfolio Manager and Analyst in 1988. In the event that the Fund's shareholders do not approve the new Sub-Advisory Agreement between NEFM and Harris Associates at the special shareholder meeting, then the Trust's Board of Trustees will consider alternative arrangements for the management of this segment of the Fund's investment portfolio. In conjunction with Harris Associates becoming subadviser to a segment of the Fund, the paragraph under the heading entitled "Star Advisers Fund -- Berger Associates, Inc." in the Investment Strategy section of the Prospectus is revised to read as follows: HARRIS ASSOCIATES L.P. ("HARRIS ASSOCIATES") Harris Associates' investment philosophy is predicated on the belief that over time market price and value converge and that investment in securities priced significantly below long-term value presents the best opportunity to achieve long term growth of capital. Its segment of the Fund's portfolio invests primarily in common stocks and securities convertible into common stock, but may also invest in other securities that are suited to the Fund's investment objective, including preferred stocks and fixed-income securities (including lower quality fixed-income securities). The following information is added to the Prospectus: PAST PERFORMANCE OF STAR ADVISERS FUND'S SUBADVISER The data presented below under "Oakmark Fund" represent the total return, as adjusted, of The Oakmark Fund, a mutual fund managed by Harris Associates. The Oakmark Fund has investment objectives substantially similar to the segment of the Fund managed by Harris Associates and was managed using styles and strategies substantially similar (although not necessarily identical) to those that are employed by Harris Associates in managing its segment of the Fund. THE FOLLOWING INFORMATION DOES NOT REPRESENT THE FUND'S PERFORMANCE. THE FUND COMMENCED OPERATIONS IN JULY 1994 AND HAS A PERFORMANCE RECORD OF ITS OWN. THE FOLLOWING INFORMATION SHOULD NOT BE CONSIDERED A PREDICTION OF FUTURE PERFORMANCE OF THE FUND. THE FUND'S PERFORMANCE MAY BE HIGHER OR LOWER THAN THAT SHOWN BELOW. During the entire period that Harris Associates has managed The Oakmark Fund, Mr. Sanborn has been the portfolio manager. As explained more fully in the Prospectus under "Investment Risks -- Special Considerations Regarding the Multi-Adviser Approach," capital that is available for investment by the Fund is currently allocated equally among the Fund's four subadvisers. Due to a variety of factors, the relative performance of the four segments is likely to vary, which in turn will affect their relative size. Thus, a particular subadviser's performance (expressed as a percentage) may have a greater or lesser impact on the total return of the Fund depending on the size of the subadviser's segment relative to the other segments. LIPPER GROWTH OAKMARK FUND FUND INDEX S&P 500 INDEX ------------ ---------- ------------- July 1, 1996 to June 30, 1997 ...... 29.25% 23.84% 34.72% July 1, 1994 to June 30, 1997 ...... 24.44% 23.09% 28.85% July 1, 1992 to June 30, 1997 ...... 25.56% 17.05% 19.78% August 8, 1991 (inception date) to 30.25% 15.55% 18.04% June 30, 1997 .................... The performance information shown above for The Oakmark Fund is adjusted to give effect to the actual expenses relating to Class A shares of the Fund for the corresponding periods (or, for the periods prior to the Fund's inception, for the first period of the Fund's operation). The performance information for The Oakmark Fund has not been adjusted to reflect deduction of the sales charge payable on the Fund's Class A shares, nor does it give effect to the higher expense levels of the Fund's Class B and Class C shares. Performance would be lower if it were adjusted for these charges and expenses. NEW ENGLAND STAR SMALL CAP FUND Robertson, Stephens & Company Investment Management, L.P. ("Robertson Stephens") has informed the Trust that the Robertson Stephens group of companies, of which Robertson Stephens is an affiliate, will be acquired by BankAmerica Corp. ("BankAmerica"). BankAmerica is a global financial services company with $250 billion in assets and an equity capital base of $20 billion. Completion of the acquisition is subject to a number of conditions, including certain regulatory approvals, and is expected to take place in the fourth quarter of this year. The acquisition does not contemplate any changes in the management or operations of Robertson Stephens. The acquisition will likely result in the automatic termination of the current subadvisory agreement between NEFM and Robertson Stephens for the segment of New England Star Small Cap Fund (the "Fund") managed by Robertson Stephens. A new subadvisory agreement for this segment following the acquisition, which will be substantially similar to the current subadvisory agreement for this segment, has been approved by the Board of Trustees of the Trust. Unless an exemptive order from the Securities and Exchange Commission (as discussed in the Prospectus) relieves the Fund of such requirement, such agreement would be subject to approval by the Fund's shareholders. - -------------------------------------------------------------------------------- NEW ENGLAND FUNDS - -------------------------------------------------------------------------------- STOCK FUNDS Star Small Cap Fund Growth Fund Star Advisers Fund Capital Growth Fund Growth Opportunities Fund Value Fund Balanced Fund INTERNATIONAL STOCK FUNDS International Equity Fund Star Worldwide Fund BOND FUNDS High Income Fund Strategic Income Fund Bond Income Fund Government Securities Fund Limited Term U.S. Government Fund Adjustable Rate U.S. Government Fund TAX EXEMPT FUNDS Municipal Income Fund Massachusetts Tax Free Income Fund Intermediate Term Tax Free Fund of California Intermediate Term Tax Free Fund of New York MONEY MARKET FUNDS Cash Management Trust -- Money Market Series -- U.S. Government Series Tax Exempt Money Market Trust To learn more, and for a free prospectus, contact your financial representative. Visit our World Wide Web site at www.mutualfunds.com New England Funds, L.P., Distributor 399 Boylston Street Boston, MA 02116 Toll Free 800-225-5478 This material is authorized for distribution to prospective investors when it is preceded or accompanied by the Fund's current prospectus, which contains information about distribution charges, management and other items of interest. Investors are advised to read the prospectus carefully before investing. -------------- (Logo)(R) BULK RATE NEW ENGLAND FUNDS(R) U.S. POSTAGE Where The Best Minds Meet(R) PAID BROCKTON, MA PERMIT NO. 770 -------------- --------------------- 399 Boylston Street Boston, Massachusetts 02116 --------------------- - --------------------- --------------------- [Logo] [Logo] QUALITY QUALITY TESTED SERVICE TESTED SERVICE 1995 1996 - --------------------- --------------------- DALBAR DALBAR HONORS COMMITMENT TO: HONORS COMMITMENT TO: INVESTORS INVESTORS - --------------------- --------------------- SC58-0697 [recycle symbol] Printed On Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----