-----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, N1K/s6Rmo5uRrZYva8a3E8xpTD82e9LeVmjX3SL2QDtmxiSZGsqgZmOJtHVtDt1F xWiYotEEdawzsauD92w7Qw== 0000950156-97-000762.txt : 19970912 0000950156-97-000762.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950156-97-000762 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: 97675159 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 WORLDWIDE FUND - NEF TRUST I - -------------------------------------------------------------------------------- SEMIANNUAL REPORT - -------------------------------------------------------------------------------- [logo](R) NEW ENGLAND FUNDS(R) Where The Best Minds Meet(R) - -------------------------------------------------------------------------------- New England Star Worldwide 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 WORLDWIDE FUND - -------------------------------------------------------------------------------- AWARD WINNING SERVICE -- TWO YEARS RUNNING - -------------------------------------------------------------------------------- - --------------------- For two years running we're proud to announce that [LOGO] DALBAR, an independent evaluator of mutual fund QUALITY service, has awarded New England Funds its Quality TESTED SERVICE Tested Service Seal for "providing the highest 1996 tier of service excellence in the mutual fund - --------------------- industry." New England Funds is one of just three DALBAR mutual fund companies to earn this distinction in HONORS COMMITMENT TO: each of the last two years -- another reason why INVESTORS we are becoming known as the mutual fund company - --------------------- Where The Best Minds Meet. INVESTMENT RESULTS THROUGH JUNE 30, 1997 - -------------------------------------------------------------------------------- Putting Performance in Perspective The charts comparing your Fund's performance to a benchmark index provide you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. Your Fund's total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction costs and other expenses. See next page [symbol - hand pointing right] - -------------------------------------------------------------------------------- NEW ENGLAND STAR WORLDWIDE FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 - -------------------------------------------------------------------------------- CLASS A (Inception 12/29/95) YTD 1 YEAR SINCE INCEPTION Net Asset Value(1) 16.80% 21.93% 22.75% With Max. Sales Charge(2) 10.08 14.94 18.04 - -------------------------------------------------------------------------------- CLASS B (Inception 12/29/95) YTD 1 YEAR SINCE INCEPTION Net Asset Value(1) 16.36% 21.07% 21.88% With CDSC(3) 11.36 16.07 19.48 - -------------------------------------------------------------------------------- CLASS C (Inception 12/29/95) YTD 1 YEAR SINCE INCEPTION Net Asset Value(1) 16.35% 21.06% 21.93% - -------------------------------------------------------------------------------- COMPARATIVE PERFORMANCE YTD 1 YEAR SINCE 12/29/95 MSCI EAFE(4) 11.36% 13.16% 11.87% Lipper Global Average(5) 12.88 19.22 20.12 NOTES TO CHARTS Returns represent past performance. Investment return and principal value will fluctuate so that shares, upon redemption, may be worth more or less than original cost. (1)Net Asset Value (NAV) performance assumes reinvestment of all distributions and does not reflect the payment of a sales charge at the time of purchase. (2)With Maximum Sales Charge performance assumes reinvestment of all distributions and reflects the maximum sales charge of 5.75% at the time of purchase of Class A shares. (3)With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 5% sales charge is applied to a redemption of Class B shares. The sales charge will decrease over time, declining to zero six years after the purchase of shares. (4)Morgan Stanley Capital International (MSCI) Europe Australasia Far East Index (EAFE) is an arithmetical average (weighted by market value) of the performance (in U.S. dollars) of 1,036 companies representing stock markets in Europe, Australia, New Zealand and the Far East. 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 WORLDWIDE FUND - -------------------------------------------------------------------------------- [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class A Shares compared to Morgan Stanley EAFE Index(4).] A $10,000 INVESTMENT COMPARED TO MSCI EAFE(4) WITH MAXIMUM NET ASSET SALES MSCI CLASS A VALUE(1) CHARGE(2) EAFE(4) - ------- --------- ---------- ------- 12/29/95 $10,000 $ 9,425 $10,000 1Q96 $10,528 $ 9,923 $10,297 2Q96 $11,177 $10,534 $10,468 3Q96 $11,136 $10,496 $10,463 4Q96 $11,667 $10,997 $10,637 1Q97 $12,267 $11,562 $10,478 2Q97 $13,629 $12,445 $11,846 [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class B Shares compared to Morgan Stanley EAFE Index(4).] NET ASSET MSCI CLASS B VALUE(1) CDSC(3) EAFE(4) - ------- --------- ---------- ------- 12/29/95 $10,000 $10,000 $10,000 1Q96 $10,512 $10,512 $10,297 2Q96 $11,136 $11,136 $10,468 3Q96 $11,081 $11,081 $10,463 4Q96 $11,587 $11,087 $10,637 1Q97 $12,163 $11,638 $10,478 2Q97 $13,484 $12,902 $11,846 [A chart in the form of a line graph appears here, illustrating the growth of a $10,000 investment in Class C Shares compared to Morgan Stanley EAFE Index(4).] NET ASSET MSCI CLASS C VALUE(1) EAFE(4) - ------- --------- ------- 12/29/95 $10,000 $10,000 1Q96 $10,520 $10,297 2Q96 $11,144 $10,468 3Q96 $11,088 $10,463 4Q96 $11,595 $10,637 1Q97 $12,170 $10,478 2Q97 $13,490 $11,846 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 WORLDWIDE FUND - -------------------------------------------------------------------------------- HOW YOUR FUND PERFORMED - -------------------------------------------------------------------------------- For the six-month period ended June 30, l997, New England Star Worldwide Fund outperformed the 11.36% return of its benchmark, the MSCI Europe Australasia Far East (EAFE) Index(4), by posting total returns of 16.80%, 16.36% and 16.35% at net asset value for Class A, B and C shares, respectively. Economic trends around the world were generally positive during the first half of 1997. Economic growth was relatively strong in most major markets as well as in many emerging countries. Inflation was moderate and interest rates were either flat or slightly lower. This was a positive environment for stock investments, and many markets generated strong returns. For the third year in a row, U.S. stocks produced record-breaking returns, with large-company stocks leading the market. Early in the period, robust economic growth raised concerns about the possibility of higher inflation, and the Federal Reserve Board boosted short-term interest rates by one-quarter of a percentage point. This increase led to a sharp sell-off in stocks, pushing prices lower. As economic growth moderated, however, stocks resumed an upward course. Most European markets posted double-digit returns in the 12% to 15% range based on local currencies. Because of the strong U.S. dollar, however, returns were lower when converted to U.S. dollars. After years of sluggish economic growth and lackluster returns, Japan appeared to make some headway toward solving its economic problems. For the first half of l997, the Japanese stock market (as measured by MSCI Japan Index) rose 9.07%, with some of the strongest performances coming from small- and medium-sized company stocks. These types of Japanese stocks appealed to investors because they were attractively priced and the underlying companies had greater potential for growth than some of the larger Japanese businesses. Among the emerging markets, Latin America was the most attractive region. More stable governments, the trend toward privatization and freer and open markets have paid off in this area of the world. In addition, Mexico, which is a strong influence in the area, has recovered from its currency crisis of two years ago. As the Mexican economy improved, other economies in Latin America also gained strength. Some of the best-performing markets were Brazil, which rose 55.2%; Argentina, up 22.9%; Chile, with a 31.8% return; and Venezuela, up 39.2%, as measured by the IFC Global Index. Asian markets, other than Japan, that are sensitive to U.S. interest rates, fared poorly. This is because many investors expected U.S. interest rates to rise. Higher interest rates usually have a negative effect on stock prices. Slower economic growth in several Asian countries also dampened stock performance. As economic growth slowed, corporate earnings forecasts weakened and, in turn, stock prices declined. In the next several pages, Star Worldwide Fund's portfolio managers present their views on the investment environment ahead. FOUNDERS ASSET MANAGEMENT - -------------------------------------------------------------------------------- [Photo of Michael Gerding] Michael Gerding, Founders Asset Management We don't expect any dramatic changes going forward. We believe the trend toward stronger economies, relatively low interest rates and moderate inflation should persist. We believe that as economies continue to improve in Europe, that region will be an area of emphasis for us. The Japanese economy, while sluggish, seems to be improving. Even though we think it's going to be a slow recovery, we'll continue to pursue select investments there. In the emerging markets we intend to continue our focus on Latin America, which is a very attractive region. We think the lackluster performance of some Asian markets is a temporary situation. While we will probably have fewer assets in Asia in the short term, we have a favorable opinion about the region in the long term. We will continue to select stocks for the portfolio on a company-by-company basis and expect to find attractive investment opportunities across a broad range of countries and industries. LARGEST HOLDINGS IN FOUNDERS SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Volkswagen, Preferred 0.50% Telebras (ADR) 0.49% Marschollek Lauten, Preferred 0.45% Sony Corp. 0.43% Ladbroke Group PLC 0.43% MONTGOMERY ASSET MANAGEMENT - -------------------------------------------------------------------------------- [Photo of Josephine Jimenez & Bryan Sudweeks] Josephine Jimenez & Bryan Sudweeks, Montgomery Asset Management We analyze each market individually but, in general, our outlook for the emerging markets is very positive. We favor select Latin American countries, such as Brazil, that have made significant progress toward developing market economies. In Asia, we favor Korea and Taiwan, countries that we believe should profit from a stronger Japanese economy and from a rising yen. We are also optimistic about the long-term outlook for the emerging European countries and believe they should benefit if further progress is made towards a European Union and single currency. Some Russian stocks also appeal to us, mainly because Russia is in the process of reforming its legal structure, particularly the way companies write business contracts. A solid legal foundation should make it easier for companies throughout the world to do business with Russian companies and, in the long run, improve the country's business opportunities. LARGEST HOLDINGS IN MONTGOMERY SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Banco Bradesco PN S.A. 0.75% Tatneft (ADR) 144A 0.55% China Development Corp. 0.51% Telebras 0.49% Telebras (ADR) 0.45% OAKMARK/HARRIS ASSOCIATES - -------------------------------------------------------------------------------- [Photo of Robert Sanborn] Robert Sanborn Oakmark/Harris Associates Looking ahead, I expect solid economic growth and relatively low inflation and interest rates in the United States. In terms of managing this segment, which acts as a domestic anchor to the Fund as a whole, I don't plan to make significant changes. I'll continue to seek opportunities in all market sectors and among small, medium and large companies. However, I expect to maintain our emphasis on larger-company stocks. The portfolio's holdings in financial, consumer non-durables and cable stocks have performed well during the first half of the year, and we believe they still have room to grow. We will continue our "value" approach to stock selection -- that is, we will seek investments that we believe are selling at a significant discount to their potential long-term value. LARGEST HOLDINGS IN OAKMARK/HARRIS (DOMESTIC) SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Philip Morris Companies, Inc. 1.05% Knight-Ridder, Inc. 1.01% Black & Decker Corp. 1.01% Polaroid Corp. 1.00% Federal National Mortgage Association 0.89% OAKMARK/HARRIS ASSOCIATES - -------------------------------------------------------------------------------- [Photo of David Herro and Michael Welch] David Herro and Michael Welsh Oakmark/Harris Associates We expect to continue to find attractive investment opportunities throughout the world's economies. As always, our focus will be on individual stock selection, rather than macroeconomic trends. Our strategy will be to search for stocks that are inexpensive and that we believe have the potential for significant growth over three to five years. Rather than trying to predict the direction of individual markets or economies, we will continue to analyze companies on a case-by-case basis, using a process called fundamental analysis. That is, we will base our investment decisions on a number of factors, including a company's sales, potential earnings growth, management, market leadership and products and services. LARGEST HOLDINGS IN OAKMARK/HARRIS (INTERNATIONAL) SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Enix Corp. 0.93% Cordiant PLC 0.88% Guinness PLC, 144A 0.76% Tomkins PLC 0.75% Sanford, Ltd. 0.73% JANUS CAPITAL CORPORATION - -------------------------------------------------------------------------------- [Photo of Helen Young Hayes & Laurence Chang] Helen Young Hayes & Laurence Chang, Janus Capital Corporation We do not anticipate making any major changes in the portfolio. On June 30, l997, stocks of companies in the United States and continental Europe accounted for most of the segment's investments and have made solid contributions to performance. Even though stock prices in these markets have experienced strong appreciation in the past six months, we believe there are still attractive investment opportunities in these areas. While we expect investments in U.S. and european stocks to continue to make up the major portion of the segment's assets, we also plan to invest a smaller percentage of the portfolio in markets on the Pacific Rim and in the developing economies of Asia and Latin America. We will continue to seek investments in small, medium and large companies and to diversify the portfolio's assets among a wide range of industries and businesses. LARGEST HOLDINGS IN JANUS SEGMENT AS A PERCENTAGE OF FUND NET ASSETS - -------------------------------------------------------------------------------- Volkswagen AG 0.58% Rentokil Initial PLC 0.51% Philips Electronics NV 0.50% Philips Electronics NV (ADR) 0.42% Novartis AG 0.37% - -------------------------------------------------------------------------------- NEW ENGLAND STAR WORLDWIDE FUND - -------------------------------------------------------------------------------- TOP 15 COUNTRIES 6/30/97 PERCENTAGE OF COUNTRY NET ASSETS - -------------------------------------------------------------------------------- 1. United States 20.45% - -------------------------------------------------------------------------------- 2. United Kingdom 9.08% - -------------------------------------------------------------------------------- 3. Brazil 6.10% - -------------------------------------------------------------------------------- 4. Japan 5.49% - -------------------------------------------------------------------------------- 5. Netherlands 5.05% - -------------------------------------------------------------------------------- 6. Germany 4.14% - -------------------------------------------------------------------------------- 7. France 3.90% - -------------------------------------------------------------------------------- 8. Switzerland 3.31% - -------------------------------------------------------------------------------- 9. Hong Kong 3.11% - -------------------------------------------------------------------------------- 10. Sweden 2.87% - -------------------------------------------------------------------------------- 11. Argentina 2.61% - -------------------------------------------------------------------------------- 12. Mexico 2.39% - -------------------------------------------------------------------------------- 13. Italy 2.00% - -------------------------------------------------------------------------------- 14. Malaysia 1.87% - -------------------------------------------------------------------------------- 15. Taiwan 1.84% - -------------------------------------------------------------------------------- YOUR FUND'S FIVE LARGEST SECTORS 6/30/97 PERCENTAGE OF SECTOR NET ASSETS - -------------------------------------------------------------------------------- 1. Banks 10.3% - -------------------------------------------------------------------------------- 2. Food & Beverages 6.9% - -------------------------------------------------------------------------------- 3. Telecommunication 5.8% - -------------------------------------------------------------------------------- 4. Drugs & Health Care 3.8% - -------------------------------------------------------------------------------- 5. Apparel & Textiles 3.5% - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION - -------------------------------------------------------------------------------- Investments as of June 30, 1997 (unaudited) COMMON STOCK -- 91.9% OF TOTAL NET ASSETS
SHARES(A) DESCRIPTION VALUE(B) ------------------------------------------------------------------------------------- ARGENTINA--2.6% 9,616 Banco Frances del Rio la Plata S.A. (ADR) (d) .......... $ 312,520 61,500 Cresud (c) ............................................. 137,166 1,100 Irsa (GDR) (g) ......................................... 48,125 16,200 Irsa - B ............................................... 70,805 17,725 Nortel Inversora S.A. (ADR) (c) (d) .................... 480,791 54,900 Siderar S.A. (c) ....................................... 225,674 7,900 Supermercados Unimarc S.A. (ADR) (c) (d) ............... 148,125 2,225 Telecom de Argentina (ADR) (d) ......................... 116,812 40,050 Telefonica de Argentina (ADR) (d) ...................... 1,386,731 112,525 YPF Sociedad Anonima (ADR) (d) ......................... 3,460,144 ---------------- 6,386,893 ---------------- AUSTRALIA--1.4% 400,000 Colonial, Ltd. ......................................... 1,021,774 68,969 National Australia Bank, Ltd. .......................... 988,779 28,600 Village Roadshow (c) ................................... 104,182 253,038 Wattyl ................................................. 1,233,456 ---------------- 3,348,191 ---------------- BELGIUM--0.1% 1,661 Credit Communal Holdings/Dexia, 144A (c) (f) ........... 178,426 2,403 Telinfo S.A. ........................................... 146,598 ---------------- 325,024 ---------------- BRAZIL--6.1% 181,550,000 Banco Bradesco PN S.A. ................................. 1,829,750 13,000 Brahma ................................................. 9,902 580 CELESC (GDR) 144A (f) (g) .............................. 81,200 8,130,000 Cemig PN ............................................... 419,131 8,500 Cemig S.A. (ADR) (d) ................................... 427,940 11,000 Centrais Electric - PN B ............................... 16,349 500,000 Centrais Eletricas Brasileira S.A. - Electrobras (c) ... 279,597 4,260,000 Cesp CIA Energia ....................................... 284,910 473,000 Companhia de Saneamento Basico do Estado de Sao Paulo .. 144,112 300,000 Copene-Petroquimica Nordeste ........................... 111,189 1,025,000 Electrobras PN ......................................... 611,258 305,000 Itausa Investimentos Itau S.A. ......................... 280,479 16,000,000 Lojas Americanas PN, 144A (f) .......................... 216,989 12,026,000 Odebrecht S.A. ......................................... 100,538 20,783,000 Paranaense de Energia-Copel, Preferred B ............... 386,104 1,789,000 Petroleo Brasileiro, 144A (f) .......................... 496,892 34,526 Souza Cruz S.A. ........................................ 364,005 8,820,000 Telebras ............................................... 1,196,154 18,350 Telebras (ADR) (d) ..................................... 2,784,612 727,037 Telecom de Rio Janeiro S.A., Preferred (c) ............. 112,106 1,800,000 Telecomunicaoes do Rio de Janeiro S.A.-Telerj .......... 265,849 299,603 Telecomunicaoes do Rio de Janeiro S.A.-Telerj, Preferred ............................................ 46,198 6,850 TV Filme, Inc. ......................................... 71,069 19,900 Uniao de Bancos Brasileiros S.A. (GDR) (c) (g) ......... 738,787 42,900,000 Unibanco PN ............................................ 1,573,658 163,800 Usiminas ............................................... 1,824,311 12,900 Vale Rio Doce Cia PN ................................... 285,309 ---------------- 14,958,398 ---------------- CANADA--0.2% 3,825 Canwest Global Communications .......................... 56,658 7,275 Potash Corp., Saskatchewan ............................. 546,079 ---------------- 602,737 ---------------- CHILE--0.3% 10,250 Banco de A Edward (ADR) (d) ............................ 213,969 1,260 Compania de Telecom de Chile S.A. (ADR) (d) ............ 41,580 11,200 Empresa Nacional de Electricidad S.A. (ADR) (d) ........ 252,700 3,000 Sociedad Quimica Minera de Chile (ADR) (d) ............. 198,375 ---------------- 706,624 ---------------- CHINA--0.2% 610,000 Beijing Yanhua Petrochemical Company, Ltd. (c) ......... 132,278 45,000 Shanghai Industrial Holdings, Ltd. (c) ................. 279,968 154,000 Shenzhen Expressway, 144A (c) (f) ...................... 42,241 ---------------- 454,487 ---------------- CZECH REPUBLIC--0.3% 3,500 AGB Otevreny Podilovy Fund (c) ......................... 76,648 7,000 Alpha Efekt ............................................ 152,648 20,000 Czech Value Fund ....................................... 127,600 7,700 Komercni Banka A.S. (GDR) 144A (c) (f) (g) ............. 159,775 10,000 Komercni Banka I.F. (c) ................................ 148,669 28,000 Vynosovy I.F. .......................................... 141,636 ---------------- 806,976 ---------------- DENMARK--0.4% 1,615 Amtssparekassn Fyn A/S ................................. 104,101 2,100 Copenhagen Airport (c) ................................. 222,781 308 FIH A/S ................................................ 7,839 1,115 Jyske Bank A/S ......................................... 96,053 1,392 SAS Danmark A/S ........................................ 16,247 2,667 Sophus Berendsen, Class B .............................. 385,596 102 Spar Nord Holdings A/S ................................. 4,762 2,580 Sydbank A/S ............................................ 117,734 348 Unidanmark A/S ......................................... 19,549 ---------------- 974,662 ---------------- FINLAND--0.7% 8,534 Amer Group OY .......................................... 153,662 10,878 Metra OY, Series B ..................................... 327,843 1,012 Nokia AB OY ............................................ 75,597 4,025 Nokia Corp. (ADR) (d) .................................. 296,844 5,904 Pohjola Insurance Co., Series B ........................ 175,093 2,444 Raison Tehtaat ......................................... 168,024 2,027 Sampo Insurance Co. .................................... 197,128 3,924 Tietotehdas OY, B Shares ............................... 340,051 ---------------- 1,734,242 ---------------- FRANCE--3.9% 1,697 Alcatel Alsthom ........................................ 212,533 3,333 Axime (Ex Segin) ....................................... 394,173 8,204 Banque National de Paris ............................... 338,116 6,443 Capital Gemini S.A. .................................... 339,873 139 Carrefour .............................................. 100,950 25,045 Chargeurs International S.A. ........................... 1,443,027 3,600 Christian Dior (c) ..................................... 594,211 17,600 Compagnie Financiere de Paribas ........................ 1,215,920 1,398 CLF Dexia France ....................................... 136,072 954 Compagnie Bancaire ..................................... 121,752 200 Dassault Systems S.A. (ADR) (d) ........................ 14,250 6,832 Elf Aquitaine .......................................... 737,061 4,750 Groupe Legris Industries ............................... 223,893 2,125 Guilbert ............................................... 300,849 334 Le Carbone-Lorraine, 144A (f) .......................... 81,274 5,305 Michelin Compagne General B ............................ 318,569 1,800 Pathe (c) .............................................. 357,139 14,000 Pernod-Ricard .......................................... 721,834 16,836 Rhone Poulenc .......................................... 687,570 8,875 SGS Thomson Microelectronics (ADR) (c) (d) ............. 710,000 1,453 Societe Generale ....................................... 162,194 7,075 Total Petroleum (ADR) (d) .............................. 358,172 ---------------- 9,569,432 ---------------- GERMANY--4.1% 2,838 Adidas AG .............................................. 314,050 240 Altana AG .............................................. 255,949 13,492 BASF AG ................................................ 498,572 262 Bayer Motoren Werk ..................................... 216,769 10,361 Depfa Bank ............................................. 595,842 12,975 Deutsche Bank AG ....................................... 758,071 1,133 Fresenius AG, Preferred ................................ 257,249 17,150 Fresenius Medical Care (ADR) (d) ....................... 499,494 639 Fresenius Medical, Preferred ........................... 45,871 214 Gehe AG ................................................ 14,601 10,391 Lufthansa AG, 144A (f) ................................. 199,288 1,475 Mannesmann AG (c) ...................................... 657,115 4,625 Marschollek Lauten, Preferred .......................... 1,100,496 500 Pfeiffer Vacuum Technology AG ADR) (d) ................. 14,562 38 Porsche AG, Preferred .................................. 50,548 17,850 Rofin-Sinar Technologies, Inc. ........................ 341,381 3,500 SAP-Vorzug AG Preferred ................................ 726,449 7,525 Schwarz Pharma AG ...................................... 567,363 342 SGL Carbon AG, 144A (f) ................................ 46,826 3,386 Tarkett AG ............................................. 87,363 4,478 Veba ................................................... 251,616 1,844 Volkswagen AG .......................................... 1,413,582 2,200 Volkswagen, Preferred .................................. 1,236,168 ---------------- 10,149,225 ---------------- GREECE--0.0% 3,140 Hellenic Telecommunication Organization S.A. (GDR) 144A (f) (g) ......................................... 73,737 ---------------- HONG KONG--3.1% 24,000 Asia Satellite Telecom Holdings Corp. (ADR) (d) ........ 723,000 574,400 Beijing Datang Power Generation Co., Ltd., 144A (f) .... 265,058 18,000 Cheung Kong Holdings ................................... 177,739 58,000 China Light & Power .................................... 328,656 34,000 China Resources ........................................ 166,768 28,000 Citic Pacific, Ltd. .................................... 174,925 1,960,000 Giordano Holdings, Ltd. ................................ 1,340,854 303,600 Hong Kong Aircraft Engineering Co., Ltd. ............... 1,105,097 34,400 HSBC Holdings, Ltd. .................................... 1,034,580 50,000 Hutchison Whampoa, Ltd. ................................ 432,409 664,000 Jiangsu Expressway, 144A (f) ........................... 235,695 43,000 New World Development Co., Ltd., 144A (f) .............. 256,425 796,000 Pacific Port Co., 144A (f) ............................. 159,256 12,000 Sun Hung Kai Properties, Ltd., 144A (f) ................ 144,437 60,000 Union Bank of Hong Kong ................................ 173,480 432,000 Yue Yuen Industrial Holdings ........................... 894,970 ---------------- 7,613,349 ---------------- HUNGARY--0.0% 9,400 Zalakeramia Reszvenytarsasag (GDR) 144A (c) (f) (g) .... 68,150 ---------------- INDIA--1.1% 15,800 Bajaj Auto (GDR) (g) ................................... 542,730 8,500 Bajaj Auto (GDR) 144A (f) (g) .......................... 291,975 7,000 Indian Hotel (GDR) (g) ................................. 162,750 32,500 Indian Hotels Co., Ltd. (GDR) 144A (f) (g) ............. 771,875 2,192 Mahindra & Mahindra (GDR) 144A (f) (g) ................. 32,332 7,700 State Bank of India (GDR) (g) .......................... 204,050 8,850 Tata Engineering & Locomotive, Ltd. (GDR) (g) .......... 135,848 11,464 Tata Engineering & Locomotive, Ltd. (GDR) 144A (f) (g) 175,972 12,000 Videsh Sanchar Nigam, Ltd. (GDR) 144A (c) (f) (g) ...... 249,000 ---------------- 2,566,532 ---------------- INDONESIA--1.4% 51,500 Asia Pulp & Paper Co., Ltd. (ADR) (c) (d) .............. 778,937 107,000 Bimantara Citra PT (c) ................................. 186,986 157,000 Lippo Bank ............................................. 161,390 187,000 Lippo Securities ....................................... 132,638 37,000 Perusahaan Perkebu London Sumatra ...................... 91,283 50,500 PT Hanjaya Mandala Sampoerna ........................... 192,593 120,000 PT Matahari Putra Prima ................................ 241,776 230,000 PT Mulia Industrindo ................................... 120,580 1,550,000 PT Polysindo Eka Perkasa ............................... 860,403 2,600 PT Telekom (ADR) (d) ................................... 84,500 30,000 PT Telekom Indoneisa (c) ............................... 49,034 191,000 Semen Gresik PT (c) .................................... 428,022 ---------------- 3,328,142 ---------------- IRELAND--0.9% 470,000 Anglo Irish Bank Corp., 144A (f) ....................... 597,727 5,625 Elan PLC (ADR) (c) (d) ................................. 254,531 610,000 Fyffes ................................................. 877,363 16,300 Ryanair Holdings PLC (ADR) (c) (d) ..................... 442,138 ---------------- 2,171,759 ---------------- ISRAEL--0.4% 27,200 Koor Industries, Ltd. (ADR) (d) ........................ 479,400 8,100 Teva Pharmaceutical Industries, Ltd. (ADR) (d) ......... 524,475 ---------------- 1,003,875 ---------------- ITALY--2.0% 398,283 Credito Italiano ....................................... 728,808 338,500 Danieli & Company, 144A (f) ............................ 1,185,050 24,700 Fila Holdings SPA (ADR) (d) ............................ 825,906 21,163 Gewiss SPA ............................................. 364,220 8,100 Industrie Natuzzi SPA (ADR) (d) ........................ 207,562 144,558 Parmalat Finanziaria SPA ............................... 204,559 30,163 Pirelli SPA ............................................ 74,717 174,473 Stet Societa Finanziaria SPA ........................... 1,016,306 33,025 Telecom Italia Mobil ................................... 106,872 55,606 Telecom Italia SPA, 144A (f) ........................... 178,475 ---------------- 4,892,475 ---------------- JAPAN--5.5% 29,800 Amway Japan, Ltd. ...................................... 1,008,759 8,000 Canon, Inc. ............................................ 217,763 40 DDI Corp. (c) .......................................... 295,237 3,000 Doutor Coffee (c) ...................................... 121,707 10,250 Eisai Co. .............................................. 194,054 88,900 Enix Corp. ............................................. 2,280,283 19,000 Fujitsu ................................................ 263,567 3,000 Heiwa Corp. ............................................ 58,890 45,000 Hitachi ................................................ 502,530 18,000 Hoya Corp. (c) ......................................... 800,907 3,000 Isetan ................................................. 37,166 20,500 Konami Co., Ltd. ....................................... 765,486 11,000 Laox Co. ............................................... 154,511 34,000 Mitsubishi Estate Co., Ltd., 144A (f) .................. 492,410 7,000 Mitsubishi Trust & Banking ............................. 110,539 18,000 Mitsui Fudosan Co., 144A (f) ........................... 248,124 21,000 Mitsui Trust & Banking Co., Ltd. ....................... 158,480 88 Nippon Telegraph & Telephone ........................... 844,530 11,000 Nomura Securities ...................................... 151,632 36 NTT Data Communications Systems Corp. .................. 1,391,380 25,900 Sankyo Co .............................................. 777,316 16,000 Shiseido Co., Ltd. ..................................... 263,828 18,000 Sony Corp. ............................................. 1,568,836 25 Sony Corp. (ADR) (d) ................................... 2,200 3,000 Square Co., Ltd. (c) ................................... 147,880 17,000 Sumitomo Trust & Banking ............................... 182,429 14,000 Takeda Chemical ........................................ 393,300 1,000 Yamaha Motor Co., Ltd. ................................. 9,946 ---------------- 13,443,690 ---------------- KOREA--1.4% 20,000 Dongwon Securities ..................................... 263,514 30,000 Hyundai Enginering & Construction ...................... 770,270 15,000 Hyundai Merchant Marine (c) ............................ 282,095 16,700 Kepco (ADR) (c) (d) .................................... 312,081 625 Kook Min Bank (c) ...................................... 8,939 5,000 LG Semiconductor Co. (c) ............................... 194,820 13,100 Pohang Iron & Steel (ADR) (d) .......................... 419,200 3,640 Samsung Electronics .................................... 288,986 3,640 Samsung Electronics (Rights) ........................... 98,378 80,000 Seoul Bank ............................................. 330,631 29,964 SK Telecom Co., Ltd. (ADR) (d) ......................... 301,513 6,000 Yukong ................................................. 145,270 ---------------- 3,415,697 ---------------- LUXEMBOURG--0.6% 100 Millicom International Cellular ........................ 4,775 125,500 Quilmes Industrial (ADR) (d) ........................... 1,458,937 ---------------- 1,463,712 ---------------- MALAYSIA--1.9% 95,000 Arab Malaysian Corp. 353,803 81,000 Guinness Anchor ........................................ 179,715 46,000 Hong Leong Bank ........................................ 115,729 5,750 Hong Leong Bank (Rights) ............................... 797 142,000 IJM Corp. BHD, 144A (f) ................................ 298,177 438,000 IOI Corp. BHD, 144A (f) ................................ 499,778 28,000 Leader Univ Holdings ................................... 50,365 27,000 Magnum Corp. (c) ....................................... 40,650 23,000 Malakoff BHD ........................................... 100,238 43,000 New Straits Times, 144A (f) ............................ 252,139 24,000 Oriental Holdings BHD .................................. 180,666 169,000 Public BK BHD .......................................... 263,811 85,000 Renong BHD ............................................. 111,133 269,000 Tan Chong Motor Holdings ............................... 507,306 35,000 Tanjong ................................................ 120,642 615,000 Technology Resources Industries BHD, 144A (f) .......... 1,057,488 19,500 Telekom Malaysia BHD, 144A (f) ......................... 91,165 51,000 United Engineers BHD ................................... 367,750 ---------------- 4,591,352 ---------------- MEXICO--2.4% 320,000 Accel S.A. de C.V. B (c) ............................... 86,166 22,000 Acer Computec Latino America S.A. (c) .................. 76,955 113,000 Alfa S.A. de C.V. ...................................... 770,632 90,000 Cifra S.A. de C.V. (ADR) (d) ........................... 161,100 22,300 Fomento Economico Mexicano B (c) ....................... 132,720 485 Grupo Carso S.A. ....................................... 3,387 7,150 Grupo Casa Autrey S.A. (ADR) (d) ....................... 145,234 8,217 Grupo Financiero Inbursa B ............................. 34,946 2,007,000 Grupo Herdez, S.A. de C.V. ............................. 1,035,382 11,600 Grupo Radio Centro S.A. ................................ 136,300 11,900 Grupo Televisa S.A. (ADR) (d) .......................... 361,463 53,000 Hylsamex S.A. de C.V. B (c) ............................ 272,752 61,000 Industrias Penoles S.A. ................................ 290,897 11,300 Moderna ................................................ 60,072 16,000 Sanluis Corp. de S.A. C.V. ............................. 118,377 41,300 Telefonos de Mexico, S.A. de C.V. (ADR) 144A (d) (f) ... 1,972,075 17,500 Vitro Sociedad Anonima (ADR) (d) ...................... 196,875 ---------------- 5,855,333 ---------------- MOROCCO--0.1% 7,800 Banque Marocaine de Commerce (GDR) 144A (f) (g) ........ 150,150 ---------------- NETHERLANDS--5.0% 2,625 Akzo Nobel, 144A (f) ................................... 359,736 15,625 ASM Lithography Holding (ADR) (c) (d) .................. 914,062 10,400 Baan Co. NV (c) ........................................ 716,300 1,872 Bedrijven Nutricia NV .................................. 295,644 60,150 EVC International NV ................................... 1,522,979 10,375 Gucci Group NV (ADR) (d) ............................... 667,891 13,164 ING Groep NV ........................................... 606,930 2,473 Koninklijke Nedlloyd NV ................................ 71,435 6,516 Oce Van der Grinten NV (c) ............................. 840,517 17,178 Philips Electronics NV ................................. 1,230,438 14,351 Philips Electronics NV (ADR) (d) ....................... 1,031,478 577 Randstad Holdings ...................................... 60,848 302 Simac Techniek NV ...................................... 25,847 10,000 Unilever NV (ADR) (d) .................................. 2,180,000 21,954 Vedior NV, 144A (c) (f) ................................ 580,474 28,225 VNU .................................................... 624,059 5,221 Wolters Kluwer ......................................... 635,702 ---------------- 12,364,340 ---------------- NEW ZEALAND--1.3% 544,300 Lion Nathan, Ltd. ...................................... 1,379,040 5,575 Mas Technology, Ltd (ADR) (c) (d) ...................... 82,928 1,022,950 Sanford, Ltd. .......................................... 1,785,736 ---------------- 3,247,704 ---------------- NORWAY--0.2% 6,225 Kverneland ............................................. 169,019 2,393 Merkantildata .......................................... 47,343 4,482 Tandberg (c) ........................................... 47,699 11,414 Tandberg Television ASA (c) ............................ 84,874 6,754 Tomra Systems ASA ...................................... 138,228 ---------------- 487,163 ---------------- PANAMA--0.1% 4,725 Bladex (c) ............................................. 203,766 ---------------- PERU--0.2% 5,682 Credicorp, Ltd., 144A (f) .............................. 125,004 2,900 Ferryros S.A. (ADR) 144A (c) (d) (f) ................... 69,962 13,050 Telefonica de Peru S.A. (ADR) (d) ...................... 341,747 ---------------- 536,713 ---------------- PHILIPPINES--0.6% 300 Aboitiz Equity Ventures, Inc. (c) ...................... 23 864,000 Belle Corp. ............................................ 252,229 734,000 DMCI Holdings (c) ...................................... 242,107 11,140 Equitable Banking Corp. (c) ............................ 40,335 165,000 International Container ................................ 84,452 50,000 La Tondena Distillers, Inc. ............................ 120,375 77,000 Metro Pacific Corp., Class B ........................... 16,640 200,000 Music Semiconductors, Inc. (c) ......................... 104,261 189,000 PCI Leasing & Finance (c) .............................. 35,828 1,106,800 Petron Corp. ........................................... 281,148 1,800 Philippine Long Distance Telephone (ADR) (d) ........... 115,650 312,500 Republic Glass Holdings ................................ 28,435 469,000 Uniwide Holdings, Inc. (c) ............................. 92,463 ---------------- 1,413,946 ---------------- POLAND--0.3% 63,354 Bank Handlowy W Warszawie, 144A (c) (f) ................ 785,590 ---------------- PORTUGAL--1.3% 48,000 Banco Espirito Santo ................................... 1,087,847 1,250 Capital Portugal Fund, 144A (c) (f) .................... 189,478 8,500 Cimpor Cimentos de Portugal ............................ 198,097 9,131 Electricdade de Portugal ............................... 167,565 2,200 Portugal Telecom S.A. (ADR) (d) ........................ 88,275 18,700 Sonae Investimentos - Sociedade Gestora de Participacoes Sociais S.A. ......................................... 781,849 7,400 Telecel-Comunicacaoes Pessoais S.A., 144A (f) .......... 613,829 ---------------- 3,126,940 ---------------- RUSSIA--1.6% 8,100 Irkutskenergo (ADR) (d) ................................ 137,619 11 Irkutskenergo (Russian Depositary Trust) 144A (c) (f) .. 748,000 7,300 Lukoil Holdings (ADR) (d) .............................. 197,100 7,525 Lukoil Oil Company (ADR) (d) ........................... 586,950 950 Mosenergo (ADR) 144A (d) (f) ........................... 39,425 9,600 Surgutneftegaz (ADR) (d) ............................... 511,200 1,200 Tatneft (ADR) (d) ...................................... 126,000 14,325 Tatneft (ADR) 144A (d) (f) ............................. 1,532,775 ---------------- 3,879,069 ---------------- SINGAPORE--0.4% 219,000 Datacraft Asia ......................................... 696,420 24,000 Far East Levingston Shipbuilding, Ltd. 144A (f) ........ 81,248 100,000 Thakral Corp., Ltd. .................................... 102,000 ---------------- 879,668 ---------------- SOUTH AFRICA--0.7% 8,000 Anglovaal, Ltd. ........................................ 213,357 23,500 Barlow, Ltd. ........................................... 255,615 22,000 JCI, Ltd. .............................................. 169,231 159,147 Lonrho PLC, 144A (f) ................................... 340,954 54,423 Sasol, Ltd. ............................................ 713,724 1,750 South African Breweries, Ltd. .......................... 53,711 1,608 South African Breweries, Ltd., 144A (f) ................ 48,843 ---------------- 1,795,435 ---------------- SPAIN--0.7% 5,534 Adolfo Dominguez S.A. (c) .............................. 217,829 202 Azkoyen S.A. ........................................... 25,087 50 Azkoyen S.A., New ...................................... 6,210 4,044 Corp Financiera Reunida S.A. (c) ....................... 17,016 390 Cortefiel S.A. ......................................... 17,019 878 Grupo Acciona S.A. ..................................... 98,913 45,900 Grupo Uralita .......................................... 512,423 9,085 Prosegur Seguridad (c) ................................. 110,981 4,000 Repsol S.A. (ADR) (d) .................................. 169,750 3,122 Sol Melia S.A. (c) ..................................... 128,185 7,651 Tele Pizza S.A. (c) .................................... 446,546 ---------------- 1,749,959 ---------------- SWEDEN--2.9% 52,700 AB Volvo, Series B ..................................... 1,410,239 56,250 ABB AB ................................................. 788,976 25,494 Assa-Abloy AB, Series B ................................ 520,723 6,366 Astra AB ............................................... 118,506 2,508 Autoliv AB ............................................. 96,455 7,904 Autoliv, Inc. (c) ...................................... 309,244 71,800 Avesta Sheffield ....................................... 830,728 5,566 Bure Investment AB, 144A (f) ........................... 70,155 10,777 Electrolux AB, Series B ................................ 777,399 3,680 Enator AB (c) .......................................... 65,651 2,368 Ericsson LM Telephone AB, Series B ..................... 93,214 7,075 Ericsson LM Telephone Co. (ADR) (c) (d) ................ 278,578 1,110 Incentive AB, Series B ................................. 101,450 14,880 Medical Invest, Series B ............................... 607,857 2,767 Nordbanken AB .......................................... 93,360 8,770 Pricer AB, Series B .................................... 301,573 15,474 Securitas AB, Series B ................................. 436,085 819 Skandinaviska Enskilda Bank ............................ 8,841 3,211 Sparbanken Sverige AB, 144A (f) ........................ 71,397 3,310 WM Data AB, Series B ................................... 58,194 ---------------- 7,038,625 ---------------- SWITZERLAND--3.3% 67 Aero Serono Group ...................................... 97,058 93 Baloise Holdings ....................................... 221,671 299 Clariant ............................................... 193,531 8,695 Credit Suisse .......................................... 1,116,652 482 Hero AG, 144A (f) ...................................... 269,062 58 Kuoni Reisen Holdings, Series B ........................ 198,630 830 Nestle S.A., 144A (f) .................................. 1,094,918 1,092 Novartis AG ............................................ 1,745,704 195 Roche Holdings AG (c) .................................. 1,763,682 405 Schw Bankgesellsch ..................................... 463,253 74 Swissair ............................................... 82,921 161 Tag Heuer .............................................. 24,150 22,400 Tag Heuer International S.A. (ADR) (c) (d) ............. 337,400 1,280 Zurich Versicherun ..................................... 509,370 ---------------- 8,118,002 ---------------- TAIWAN--1.6% 5,400 Advanced Semiconductor Engineering (GDR) (g) ........... 97,200 4,968 Advanced Semiconductor Engineering (GDR) 144A (f) (g) .. 98,739 30,000 Bharat Petroleum Shareholder Equity Certificate (h) .... 377,095 240,000 China Development Corp. Shareholder Equity Certificate (h) ...................................... 1,238,849 5,740 China Steel Corp. (GDR) (c) (g) ........................ 122,549 1,333 China Steel Corp. (GDR) 144A (c) (f) (g) ............... 28,449 100,000 Compal Electronics Shareholder Equity Certificate (h) .. 395,684 75,000 Delta Electronic Industrial Shareholder Equity Cer- tificate (c) (h) ..................................... 464,029 140,000 Formosa Chemical and Fibre Shareholder Equity Certificate (h) ...................................... 203,453 68,000 Hung Sheng Shareholder Equity Certificate (h) .......... 116,187 85,000 Primax Electronics Shareholder Equity Certificate (h) .. 252,248 75,000 United World Shareholder Equity Certificate (h) ........ 179,406 10,000 Yageo Corp. (GDR) (c) (g) .............................. 175,000 12,000 Yageo Corp. (GDR) 144A (c) (f) (g) ..................... 210,000 ---------------- 3,958,888 ---------------- THAILAND--0.4% 41,000 Central Pattana, Ltd. .................................. 56,977 111,400 Electricity Generating Public Company, Ltd. ............ 273,071 46,000 Industrial Finance Corp. of Thailand (c) ............... 58,599 14,600 Pizza Public Co, Ltd. .................................. 56,923 20,000 PTT Exploration and Production ......................... 290,291 7,000 Siam Cement Co. ........................................ 121,058 6,700 Siam Cement Shareholder Equity Certificate (e) ........ 115,870 ---------------- 972,789 ---------------- TURKEY--0.4% 1,314,000 Akansa Cimento Sanayi & Ticaret ........................ 181,363 332,167 Koc Holdings ........................................... 78,275 132,125 Migros Turk Tas ........................................ 93,406 109,101 Trakya Cam ............................................. 4,775 6,046,000 Turk Sise Ve Cam Fabrikalani (c) ....................... 382,645 7,817,740 Yapi Ve Kredi Bankasi AS ............................... 178,962 5,878,000 Yapi Ve Kredi Bankasi, New ............................. 134,558 ---------------- 1,053,984 ---------------- UNITED KINGDOM--9.0% 20,857 Barclays ............................................... 414,020 2,742 Biocompatibles International PLC (c) ................... 59,727 3,625 British Airways (ADR) (d) .............................. 416,648 34,190 BTG .................................................... 359,270 109,146 Capita Group PLC ....................................... 428,047 83,625 Carlton Communications PLC (c) ......................... 706,749 22,467 CMG PLC ................................................ 499,038 22,530 Compass Group PLC, 144A (f) ............................ 252,880 1,046,000 Cordiant PLC (c) ....................................... 2,151,253 1,975 Danka Business Systems (ADR) (d) ....................... 80,728 71,575 Dixons Group ........................................... 556,636 38,516 Electrocomponents ...................................... 287,671 332,789 Freepages .............................................. 202,281 30,200 Gallaher Group PLC (ADR) (c) (d) ....................... 556,812 9,118 Glaxo Wellcome PLC ..................................... 188,284 189,000 Guinness PLC, 144A (f) ................................. 1,850,682 14,874 Harvey Nichols PLC, 144A (f) ........................... 69,851 80,980 Hays PLC ............................................... 770,028 7,800 Imperial Chemical Industies PLC (ADR) (d) .............. 443,625 17,653 J.D. Wetherspoon PLC ................................... 400,542 14,796 JBA Holdings PLC ....................................... 215,598 2,237 Johnson Matthey ........................................ 21,569 267,075 Ladbroke Group PLC ..................................... 1,045,187 52,809 Lloyds TSB Group PLC ................................... 541,728 34,954 Logica PLC ............................................. 398,731 25,714 London International Group PLC, 144A (f) ............... 74,081 58,550 Next PLC ............................................... 661,560 60,600 Norwich Union, 144A (f) ................................ 322,431 3,530 Pearson, 144A (f) ...................................... 40,885 37,381 Powerscreen International PLC (c) ...................... 407,430 354,887 Rentokil Initial PLC ................................... 1,246,997 250,000 Sedgwick Group ......................................... 512,080 2,587 Sema Group PLC ......................................... 53,098 42,814 Siebe .................................................. 725,816 6,246 SmithKline Beecham PLC ................................. 114,988 700 SmithKline Beecham PLC (ADR) (d) ....................... 64,138 127,000 Tate & Lyle PLC ........................................ 944,317 26,136 TI Group ............................................... 227,850 424,000 Tomkins PLC ............................................ 1,835,828 725,000 Vardon PLC ............................................. 1,291,857 17,849 Victrex ................................................ 50,828 121,000 WPP Group PLC .......................................... 496,701 ---------------- 21,988,470 ---------------- UNITED STATES--20.3% 100,366 AC Nielson Corp. ....................................... 1,969,683 20,500 AMBAC, Inc. ............................................ 1,565,687 20,400 Anheuser-Busch Companies, Inc. ......................... 855,525 16,325 Apache Corp. ........................................... 530,562 825 Associates 1st Capital Corp. (c) ....................... 45,788 37,775 Banc One Corp. ......................................... 1,829,734 1,500 BankAmerica Corp. ...................................... 96,844 66,300 Black & Decker Corp. ................................... 2,465,531 1,100 Boeing Co. (c) ......................................... 58,369 750 Boston Scientific Corp. (c) ........................... 46,078 62,000 Brunswick Corp. ........................................ 1,937,500 1,300 Budget Group, Inc. (c) ................................. 44,850 5,000 Cellular Communications International (c) .............. 167,500 1,800 Citicorp ............................................... 217,013 15,500 Columbia/HCA Healthcare Corp. (c) ...................... 609,344 1,800 Commercial Federal Corp. ............................... 66,825 500 Computer Sciences Corp. (c) ............................ 36,063 59,100 Dun & Bradstreet Corp. ................................. 1,551,375 3,125 Eletronics For Imaging, Inc. ........................... 147,656 8,050 Emerson Electric Co. ................................... 443,253 50,000 Federal National Mortgage Association .................. 2,181,250 3,000 First Pacific Co. ...................................... 3,834 30,200 Fortune Brands, Inc. ................................... 1,126,837 46,540 Foundation Health Systems, Inc. (c) .................... 1,410,744 2,600 Globalstar Telecommunication, Ltd. (c) ................. 79,625 27,300 H. J. Heinz Co. ........................................ 1,259,212 2,900 International Business Machines ........................ 261,544 5,400 Iridium World Communications ........................... 97,875 50,400 Knight-Ridder, Inc. .................................... 2,472,750 4,450 Lucent Technologies, Inc. (c) .......................... 320,678 19,100 Manpower, Inc. ......................................... 849,950 48,000 Mellon Bank Corp. (c) .................................. 2,166,000 11,825 Monsanto Co. ........................................... 509,214 8,225 Morton International, Inc. ............................. 248,292 1,625 Motorola, Inc. ......................................... 123,500 49,600 Nabisco Holdings Corp. ................................. 1,977,800 125 Nu Skin Asia Pacific, Inc. (c) ......................... 3,313 1,975 Nynex Corp. ............................................ 113,809 69,750 Old Republic International ............................. 2,114,297 13,975 Parametric Technology Corp. (c) ........................ 594,811 2,950 PepsiCo, Inc. (c) ...................................... 110,809 5,350 Perkin Elmer Corp. ..................................... 425,659 58,000 Philip Morris Companies, Inc. .......................... 2,573,750 11,000 Phycor, Inc. (c) ....................................... 378,813 44,000 Polaroid Corp. ......................................... 2,442,000 4,500 Polygram NV ............................................ 242,156 15,450 Quorum Health Group (c) ................................ 552,337 5,250 RadiSys Corp. (c) ...................................... 208,688 4,550 Rhone Poulenc Rorer, Inc. .............................. 413,481 1,575 Robert Half International, Inc. (c) .................... 74,123 12,825 Rural/Metro Corp. (c) .................................. 372,326 17,600 Sports Authority (c) ................................... 342,100 1,225 Student Loan Marketing Association ..................... 155,575 5,170 TCI Satellite Entertainment, Inc. (c) .................. 40,714 126,700 Tele-Communications, Inc. (c) .......................... 1,884,662 77,500 Tele-Communications, Inc., New ......................... 1,840,625 34,400 The Kroger Co. (c) ..................................... 997,600 83,000 U.S. West Media Group (c) .............................. 1,680,750 2,250 Ucar International, Inc. ............................... 102,938 10,650 Warnaco Group .......................................... 339,469 1,408 Wells Fargo & Co. ...................................... 379,456 10,250 Williams Companies, Inc. ............................... 448,438 21,718 Wolverine Worldwide .................................... 659,684 17,550 WorldCom, Inc. (c) ..................................... 561,600 ---------------- 49,828,268 ---------------- VENEZUELA--0.5% 21,425 CANTV (ADR) (c) (d) .................................... 923,953 165,080 Electricidad de Caracas ................................ 264,488 ---------------- 1,188,441 ---------------- Total Common Stocks (Identified Cost $190,336,944) ........................................ 225,272,604 ---------------- BONDS AND NOTES--0.4% FACE AMOUNT - --------------------------------------------------------------------------------------- TAIWAN--0.2% $ 150,000 United Microelectronics Corp., 144A, 1.250%, 6/08/04 (f) 551,250 ---------------- UNITED KINGDOM--0.1% 215,000 Barlow International Investments, Ltd. Convertible Bond, 144A, 7.000%, 9/20/04 (f) ............................ 266,600 ---------------- UNITED STATES--0.1% 200,000 Alfa S.A., Convertible Note, 144A, 8.000%, 9/15/00 (f) 285,500 ---------------- Total Bonds And Notes (Identified Cost $674,340) ....... 1,103,350 ---------------- SHORT TERM INVESTMENTS--7.3% - --------------------------------------------------------------------------------------- 2,000,000 American Express Credit Corp., 6.000%, 7/01/97 ........ 2,000,000 2,000,000 Ford Motor Credit Co., 6.110%, 7/01/97 ................ 2,000,000 3,000,000 General Electric Capital Corp., 6.250%, 7/01/97 ....... 3,000,000 10,782,000 Repurchase Agreement with State Street Bank & Trust Co. dated 6/30/97 at 5.000% to be repurchased at, $10,783,498 on 7/01/97, collateralized by $10,420,000 U.S. Treasury Bond, 7.25% due 5/15/16 with a value of $11,000,786 ...................................... 10,782,000 ---------------- Total Short Term Investments (Identified Cost $17,782,000) ....................... 17,782,000 ---------------- Total Investments--99.6% (Identified Cost $208,793,284) (i) .................. 244,157,954 Other assets less liabilities (e) ..................... 918,781 ---------------- Total Net Assets--100% ................................ $ 245,076,735 ================
FORWARD CURRENCY CONTRACTS OUTSTANDING at June 30, 1997
LOCAL AGGREGATE UNREALIZED DELIVERY CURRENCY FACE TOTAL APPRECIATION/ DATE AMOUNT VALUE VALUE (DEPRECIATION) ------------ -------------- ------------- ------------- ------------------ Deutsch Mark (sold) ........... 7/17/97 275,000 175,170 157,877 $ 17,293 Deutsch Mark (sold) ........... 7/18/97 300,000 191,339 172,243 19,096 Deutsch Mark (sold) ........... 7/24/97 450,000 277,521 258,481 19,040 Deutsch Mark (sold) ........... 8/11/97 350,000 213,337 201,298 12,039 Dutch Guilder (bought) ........ 7/21/97 1,600,000 847,916 816,375 (31,541) Dutch Guilder (sold) .......... 7/21/97 1,600,000 892,857 816,374 76,483 Dutch Guilder (sold) .......... 7/24/97 1,700,000 932,913 867,589 65,324 Dutch Guilder (sold) .......... 8/11/97 125,000 67,092 63,872 3,220 Finnish Marka (sold) .......... 7/18/97 675,000 144,788 130,175 14,613 French Franc (sold) ........... 7/18/97 400,000 75,547 68,150 7,397 French Franc (sold) ........... 8/4/97 2,800,000 511,294 477,595 33,699 French Franc (sold) ........... 8/11/97 2,000,000 358,025 341,286 16,739 French Franc (sold) ........... 11/28/97 1,000,000 176,204 171,880 4,324 British Pounds (bought) ....... 7/24/97 700,000 1,140,790 1,164,896 24,106 British Pounds (sold) ......... 7/24/97 1,000,000 1,638,400 1,664,137 (25,737) British Pounds (sold) ......... 7/28/97 750,000 1,212,944 1,247,958 (35,014) Japanese Yen (sold) ........... 7/18/97 63,000,000 555,727 551,150 4,577 Japanese Yen (sold) ........... 8/12/97 35,000,000 287,805 307,297 (19,492) Japanese Yen (sold) ........... 11/4/97 17,000,000 137,340 151,077 (13,737) Japanese Yen (sold) ........... 11/4/97 20,000,000 179,485 177,738 1,747 Japanese Yen (bought) ......... 11/4/97 20,000,000 177,124 177,738 614 Japanese Yen (bought) ......... 12/18/97 18,000,000 162,896 161,031 (1,865) Swedish Krona (sold) .......... 7/18/97 2,300,000 334,205 297,544 36,661 Swedish Krona (sold) .......... 7/23/97 750,000 106,686 97,045 9,641 Swiss Franc (sold) ............ 7/18/97 220,000 163,051 151,024 12,027 Swiss Franc (sold) ............ 7/21/97 100,000 72,945 68,673 4,272 Swiss Franc (sold) ............ 7/23/97 230,000 165,563 157,988 7,575 Swiss Franc (sold) ............ 7/24/97 400,000 284,799 274,795 10,004 Swiss Franc (sold) ............ 8/4/97 300,000 214,684 206,368 8,316 Swiss Franc (bought) .......... 8/11/97 400,000 277,681 275,370 (2,311) Swiss Franc (sold) ............ 8/11/97 650,000 458,683 447,477 11,206 Swiss Franc (sold) ............ 9/12/97 250,000 172,963 172,732 231 South African Rand (sold) ..... 11/3/97 338,000 64,726 72,127 (7,401) South African Rand (bought) ... 11/3/97 40,000 8,555 8,536 (19) -------- $283,127 ========
TEN LARGEST INDUSTRY HOLDINGS AT JUNE 30, 1997 (unaudited) Finance 23.10% Basic Industries 6.10% Consumer Basics 13.40% Technology 5.60% General Business 11.70% Energy 4.60% Consumer Non-Durables 8.50% Consumer Durable Goods 4.40% Utilities 8.00% Consumer Services 4.20% (a)Ordinary Shares unless otherwise noted. (b)See Note 1a. (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 $613,591 and a cost of $614,388. (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. (g)Global Depository Receipt. (h)These securities are certificates which entitle the holder to one local share of the common stock of the company indicated. The value of these securities is directly linked to the value of the underlying common stock. (i)Federal Tax Information: At June 30, 1997 the net unrealized appreciation on investments based on cost of $208,793,284 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. ............................................ $40,032,510 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value. .......................................... (4,667,840) ----------- Net unrealized appreciation ............................... $35,364,670 =========== See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES - -------------------------------------------------------------------------------- June 30, 1997 (unaudited)
ASSETS Investments at value ..................................... $244,157,954 Cash ..................................................... 1,966,996 Foreign cash at value (Cost $614,388) .................... 613,591 Receivable for: Fund shares sold ....................................... 1,335,813 Securities sold ........................................ 4,543,213 Open forward currency contracts--net ................... 283,127 Dividends and interest ................................. 505,857 Foreign withholding taxes .............................. 113,107 Prepaid registration expense ............................. 12,500 Unamortized organization expense ......................... 46,078 ------------ 253,578,236 LIABILITIES Payable for: Securities purchased ................................... $4,365,345 Fund shares redeemed ................................... 3,712,068 Foreign withholding taxes .............................. 23,668 Accrued expenses: Management fees ........................................ 203,987 Deferred trustees fees ................................. 4,235 Accounting and administrative .......................... 3,585 Other expenses ......................................... 188,613 ---------- 8,501,501 ------------ NET ASSETS ................................................. $245,076,735 ============ Net Assets consist of: Capital paid in ........................................ $204,908,005 Undistributed net investment loss ...................... (1,749) Accumulated net realized gains ......................... 4,527,111 Unrealized appreciation on investments, forward currency contracts and foreign currency transactions .......... 35,643,368 ------------ NET ASSETS ................................................. $245,076,735 ============ Computation of net asset value and offering price: Net asset value and redemption price of Class A shares ($110,463,077 divided by 6,565,987 shares of beneficial interest) ................................................ $16.82 ====== Offering price per share (100/94.25 of $16.82) ............. $17.85* ====== Net asset value and offering price of Class B shares ($109,954,412 divided by 6,606,466 shares of beneficial interest) ................................................ $16.64** ====== Net asset value and offering price of Class C shares ($24,659,246 divided by 1,480,844 shares of beneficial interest) ................................................ $16.65 ====== Identified cost of investments ............................. $208,793,284 ============
* Based upon single purchases of less than $50,000. Reduced sales charges apply for purchases in excess of this amount. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- Six Months ended June 30, 1997 (unaudited)
INVESTMENT INCOME Dividends .............................................. $ 2,101,504(a) Interest ............................................... 463,926 ----------- 2,565,430 Expenses Management fees ...................................... $ 1,027,240 Service fees--Class A ................................ 111,472 Service and distribution fees--Class B ............... 424,697 Service and distribution fees--Class C ............... 107,733 Trustees' fees and expenses .......................... 11,299 Accounting and administrative ........................ 21,183 Custodian ............................................ 368,678 Transfer agent ....................................... 291,261 Audit and tax services ............................... 25,000 Legal ................................................ 9,956 Printing ............................................. 35,576 Registration ......................................... 56,960 Amortization of organization expenses ................ 6,460 Miscellaneous ........................................ 4,281 ----------- Total expenses ......................................... 2,501,796 ----------- NET INVESTMENT INCOME .................................... 63,634 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments--net ..................................... 5,017,031 Futures contracts--net ............................... (28,139) Foreign currency transactions--net ................... 185,476 ----------- Total realized gain on investments, futures contracts and foreign currency transactions .................. 5,174,368 ----------- Unrealized appreciation on: Investments--net ..................................... 25,644,076 Foreign currency transactions--net ................... 204,412 ----------- Net unrealized appreciation on investments, forward currency contracts, and foreign currency transactions ....................................... 25,848,488 ----------- Net gain on investment transactions .................... 31,022,856 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS ............... $31,086,490 ===========
(a) Net of foreign taxes of: $183,023 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (unaudited)
FOR THE YEAR SIX MONTHS ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ---------------- ---------------- FROM OPERATIONS Net investment income (loss) ........................... $ (459,980) $ 63,634 Net realized gain on investments, futures contracts, and foreign currency transactions ........................ 1,546,235 5,174,368 Unrealized appreciation on investments, and foreign currency transactions ................................ 9,794,880 25,848,488 ------------ ------------ Increase in net assets from operations ................. 10,881,135 31,086,490 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized gain on investments Class A ................................................ (827,582) 0 Class B ................................................ (790,419) 0 Class C ................................................ (219,963) 0 ------------ ------------ (1,837,964) 0 ------------ ------------ Increase in net assets derived from capital share transactions ......................................... 142,813,680 62,133,394 ------------ ------------ Total increase in net assets ........................... 151,856,851 93,219,884 NET ASSETS Beginning of the period ................................ 0 151,856,851 ------------ ------------ End of the period ...................................... $151,856,851 $245,076,735 ============ ============ UNDISTRIBUTED NET INVESTMENT LOSS Beginning of the period ................................ $ 0 $ (65,383) ------------ ------------ End of the period ...................................... $ (65,383) $ (1,749) ============ ============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (unaudited)
CLASS A CLASS B --------------------------- --------------------------- SIX MONTHS SIX MONTHS YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, 1996 1997 1996 1997 ------------ ----------- ------------ ----------- Net Asset Value, Beginning of Period .... $ 12.50 $ 14.40 $ 12.50 $ 14.30 ----------- ----------- ----------- ----------- Income (Loss) From Investment Operations Net Investment Income (Loss) ............ (0.03)(a) 0.03 (0.12)(a) (0.02) Net Realized and Unrealized Gain on Investments ............................ 2.11 2.39 2.10 2.36 ----------- ----------- ----------- ----------- Total From Investment Operations ........ 2.08 2.42 1.98 2.34 ----------- ----------- ----------- ----------- Less Distributions Distributions From Net Realized Capital Gains ......................... (0.18) 0.00 (0.18) 0.00 ----------- ----------- ----------- ----------- Total Distributions ..................... (0.18) 0.00 (0.18) 0.00 ----------- ----------- ----------- ----------- Net Asset Value, End of Period .......... $ 14.40 $ 16.82 $ 14.30 $ 16.64 =========== =========== =========== =========== Total Return (%) (b) .................... 16.7 16.8 15.9 16.4 Ratio of Operating Expenses to Average Net Assets (%) ................ 2.58 2.15(d) 3.33 2.90(d) Ratio of Net Investment Income (Loss) to Average Net Assets (%) ............. (0.21) (0.38)(d) (0.96) (1.13)(d) Portfolio Turnover Rate (%) ............. 57 65(d) 57 65(d) Average Commission Rate (c) ............. $ 0.0004 $ 0.0025 $ 0.0004 $ 0.0025 Net Assets, End of Period (000) ......... $ 68,509 $ 110,463 $ 65,367 $ 109,954 (a) Per Share net investment income (loss) has been calculated using the average share 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 are not reflected in total return calculations. Periods less than one year are not annualized. (c) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades on which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. (d) Computed on an annualized basis.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- continued - ------------------------------------------------------------------------------- (unaudited)
CLASS C --------------------------------------------- SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ---------------------- -------------------- Net Asset Value, Beginning of Period ......................... $12.50 $14.31 ------ ------ Income (Loss) From Investment Operations Net Investment Income (Loss) ................................. (0.12)(a) (0.02) Net Realized and Unrealized Gain on Investments .............. 2.11 2.36 ------ ------ Total From Investment Operations ............................. 1.99 2.34 ------ ------ Less Distributions Distributions From Net Realized Capital Gains ................ (0.18) 0.00 ------ ------ Total Distributions .......................................... (0.18) 0.00 ------ ------ Net Asset Value, End of Period ............................... $14.31 $16.65 ====== ====== Total Return (%) (d) ......................................... 15.9 16.4 Ratio of Operating Expenses to Average Net Assets (%) ..................................... 3.33 2.90(c) Ratio of Net Investment Income (Loss) to Average Net Assets (%) .............................................. (0.96) (1.13)(c) Portfolio Turnover Rate (%) .................................. 57 65(c) Average Commission Rate (b) .................................. $0.0004 $0.0025 Net Assets, End of Period (000) .............................. $17,980 $24,659 (a) Per Share net investment income (loss) has been calculated using the average share outstanding during the year. (b) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades on which commissions are charged. This rate generally does not reflect mark-ups, mark-downs, or spreads on shares traded on a principal basis. (c) Computed on an annualized basis. (d) Periods less than one year are not annualized.
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 29, 1995. 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, 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. FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuation. 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 (if any) is shown in the portfolio composition under the caption "Forward Currency Contracts Outstanding." These amounts represent the aggregate exposure to each currency the Fund has acquired or hedged through currency contracts outstanding 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. All contracts are "marked-to-market" daily at the applicable translation rates and any gains or losses are recorded for financial statement purposes as unrealized until settlement date. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. E. 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. F. 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. G. 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 subadviser is responsible for determining that the value of the collateral is at all times at least equal to the repurchase price. Repurchase agreements could involve certain risks in the event of default or insolvency of the other party including possible delays or restrictions upon the portfolio's ability to dispose of the underlying securities. H. ORGANIZATION EXPENSE. Costs incurred in connection with the Fund's organization and initial registration, amounting to approximately $64,900 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, 1997 were $123,227,797 and $59,024,975 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 subadvisers, Harris Associates, L.P., Founders Asset Management, Inc., Janus Capital Corporation and Montgomery Asset Management, L.P. a subadvisory fee as follows: Harris Associates, L.P., Founders Asset Management, Inc. and Janus Capital Corporation 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 subadviser manages, 0.60% of the next $50 million of such assets and 0.55% of such assets in excess of $100 million. NEFM pays Montgomery Asset Management, L.P. at the annual rate of 0.90% of the first $25 million of the average daily net assets of the segment of the Fund that Montgomery Asset Management, L.P. manages, 0.70% of the next $25 million of such assets and 0.55% of such assets in excess of $50 million. Certain officers and directors of NEFM are also officers or trustees of the Fund. NEFM and Harris Associates, 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 subadvisers under the management agreement in effect during the six months ended June 30, 1997, are as follows: FEES EARNED ----------- $ 356,959 New England Funds Management, L.P. 256,032 Harris Associates, L.P. 132,042 Founders Asset Management, Inc. 123,070 Janus Capital Corporation 159,137 Montgomery Asset Management, L.P. ---------- $1,027,240 ========== 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 six months ended June 30, 1997, these expenses amounted to $21,183 and are shown separately in the financial statements as accounting and administrative. C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder servicing agent for the Fund. For the six months ended June 30, 1997, the Fund paid New England Funds $203,918 as compensation for its services in that capacity. D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to the Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, the Fund pays New England Funds a monthly service fee at the annual rate of up to 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses (including certain payments to securities dealers, who may be affiliated with New England Funds) incurred by the New England Funds in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. For the six months ended June 30, 1997, the Fund paid New England Funds $111,472 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 six months ended June 30, 1997 the Fund paid New England Funds $106,174 and $26,933 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, 1997, the Fund paid New England Funds $318,523 and $80,800 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 $617,388. 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 $2,125 Meeting Fee $114/meeting Committee Meeting Fee $68/meeting Committee Chairman Retainer $64/year A deferred compensation plan is available to the trustees on a voluntary basis. Each participating trustee will receive an amount equal to the value that such deferred compensation would have been, had it been invested in the Fund on the normal payment date. 4. CAPITAL 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:
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 -------------------------------- -------------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT - ------- --------- ------------- --------- ----------- Shares sold ......................... 5,263,135 $ 71,193,860 3,435,694 $53,622,535 Shares issued in connection with the reinvestment of: Distributions from net realized gains ........................... 55,816 789,245 0 0 --------- ------------ ---------- ----------- 5,318,951 71,983,105 3,435,694 53,622,535 Shares repurchased .................. (561,521) (7,815,507) (1,627,137) (26,014,278) --------- ------------ ---------- ----------- Net increase ........................ 4,757,430 $ 64,167,598 1,808,557 $27,608,257 --------- ------------ ---------- ----------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 ---------------------------- -------------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT - ------- --------- ------------- --------- ----------- Shares sold ......................... 4,646,365 $ 62,819,212 2,380,385 $36,431,494 Shares issued in connection with the reinvestment of: Distributions from net realized gains ........................... 52,648 739,708 0 0 --------- ------------- --------- ----------- 4,699,013 63,558,920 2,380,385 36,431,494 Shares repurchased .................. (128,197) (1,770,220) (344,735) (5,236,722) --------- ------------- --------- ----------- Net increase ........................ 4,570,816 $ 61,788,700 2,035,650 $31,194,772 --------- ------------- --------- ----------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1996 JUNE 30, 1997 ---------------------------- -------------------------------- CLASS C SHARES AMOUNT SHARES AMOUNT - ------- --------- ------------- --------- ----------- Shares sold ......................... 1,307,969 $ 17,561,696 548,250 $ 8,335,446 Shares issued in connection with the reinvestment of: Distributions from net realized gains ........................... 14,581 205,003 0 0 --------- ------------ --------- ----------- 1,322,550 17,766,699 548,250 8,335,446 Shares repurchased .................. (65,947) (909,317) (324,009) (5,005,081) --------- ------------ --------- ----------- Net increase ........................ 1,256,603 $ 16,857,382 224,241 $ 3,330,365 --------- ------------ --------- ----------- Increase derived from capital shares transactions ...................... 10,584,849 $142,813,680 4,068,448 $62,133,394 ========== ============ ========= ===========
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 fees and other items of interest. 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