[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
ANNUAL REPORT AND PERFORMANCE UPDATE
NEW ENGLAND
STAR ADVISERS FUND
[ARTWORK APPEARS HERE]
DECEMBER 31, 1995
<PAGE>
January 31, 1996
DEAR SHAREHOLDER,
ItOs a real pleasure to present to you the 1995 Annual Report for New
England Star Advisers Fund, containing your portfolio managerOs
commentary and complete financial information.
FAVORABLE ECONOMIC CONDITIONS IN 1995
In 1995 subdued economic growth with little or no inflation created a
very favorable backdrop for the bond and stock markets. Long term
interest rates dipped on the positive inflation news, with the yield
on the 30-year Treasury bond falling to a low of 5.95% at year end.
The stock market, fueled by lower interest rates and solid corporate
earnings growth, advanced 37.6%, as measured by the Standard & PoorOs
500 Index,* for its best showing since 1958. In July and in
December, the Federal Reserve Board lowered short term rates,
signaling its belief that the economy was indeed on a path towards
slow, non-inflationary growth.
NEW ENGLAND FUNDS - WHERE THE BEST MINDS MEET
Over this past year we launched our new corporate identity - Where the
Best Minds Meet -which we believe reflects the essence of New England
Funds. Our unique multiple adviser structure brings together some of
the best investment minds in the business. As recent examples,
consider New England Star Advisers Fund, managed by four prominent
equity advisers, and New England Star Worldwide Fund, a global fund
introduced this January which builds off the Star Advisers concept.
In addition, last May we launched New England Strategic Income Fund,
under the management of Dan Fuss of Loomis Sayles. One of the
industryOs most respected managers, Dan Fuss was named 1995Os OBond
Fund Manager of the YearO by Morningstar(tm) for his past record of
accomplishment in fund management at Loomis Sayles.**
* Standard & PoorOs 500 is an unmanaged index representing 500
major companies, the majority of which are listed on the New York
Stock Exchange.
** Morningstar is a third party, independent mutual fund rating
service.
<PAGE>
1995 DALBAR AWARD FOR SERVICE EXCELLENCE
Where the Best Minds Meet also refers to your financial adviser and
all the people at New England Funds who provide you with quality
service. We are proud to report that in recognition of our ongoing
quality initiatives, New England Funds has been named a 1995 Quality
Tested Service Seal Winner by DALBAR, an independent mutual fund
service rating company. The coveted DALBAR award was given to only
seven companies for Oproviding the highest tier of service excellence
in the mutual fund industry.O
OUTLOOK FOR 1996
Looking ahead, we believe interest rates are likely to remain flat as
the economy continues on its slow, steady, non-inflationary growth
path. While this scenario is extremely positive for the long term, it
is unlikely that 1996 will see a repeat of last yearOs stellar
performance. At this time itOs worth reiterating that long-term
investors should not focus on one yearOs performance. Instead, we
recommend that you review your asset allocation program with your
financial adviser, then remain committed to that program to carry out
its objectives.
We believe you will find your portfolio managerOs commentary
informative. If you have any questions or comments, please contact
your financial representative or New England Funds directly at 800-225-
5478. Also, please contact New England Funds for a prospectus on any
of the funds mentioned above. The prospectus details investment
objectives and risks, as well as management fees and expenses. You
should read it carefully before investing or sending money.
Sincerely,
/s/Peter S. Voss /s/Henry L.P. Schmelzer
Peter S. Voss Henry L.P. Schmelzer
Chairman President
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
INVESTMENT RESULTS THROUGH
DECEMBER 31, 1995
Putting Performance into Perspective
The graph comparing your FundOs performance to a benchmark index
provides you with a general sense of how your Fund performed. To put
this information in context, it may be helpful to understand the
special differences between the two. Your FundOs 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.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
TOTAL RETURNS FOR PERIOD ENDED 12/31/95
<TABLE><CAPTION>
<S> <C> <C>
CLASS A (INCEPTION 7/7/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 34.36%
27.29%
With Max. Sales Charge(2) 26.62 22.32
Lipper Growth Average(5) 30.79 22.08
CLASS B (INCEPTION 7/7/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 33.41%
26.38%
With CDSC(3) 29.41 24.56
Lipper Growth Average(5) 30.79 22.08
CLASS C (INCEPTION 7/7/94) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 33.39%
26.40%
Lipper Growth Average(5) 30.79 22.08
CLASS Y (INCEPTION 11/15/94)* 1 YEAR SINCE INCEPTION
Net Asset Value(1) 34.77%
27.73%
Lipper Growth Average(5) 30.79 n/a
<FN>
These returns represent past performance. Investment return and
principal value will fluctuate so that shares, upon redemption, may be
worth more or less than original cost.
*Class Y shares are available only to certain institutional investors.
NOTES TO CHARTS AND PERFORMANCE UPDATE
1 Net Asset Value (NAV) performance assumes reinvestment of all
distributions and does not reflect the payment of a sales charge
at the time of purchase.
2 With Maximum Sales Charge (MSC) performance assumes reinvestment
of all distributions and reflects the maximum sales charge of
5.75% at the time of purchase of Class A shares.
3 With Contingent Deferred Sales Charge (CDSC) performance assumes a
maximum 4% sales charge is applied to a redemption of Class B
shares. The sales charge will decrease over time, declining to
zero five years after the purchase of shares. Class Y shares are
not subject to a sales charge.
4 Standard & PoorOs 500 Index (S&P 500) is an unmanaged index
representing the performance of 500 major companies, most of which
are listed on the New York Stock Exchange. The S&P 500 performance
has not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund
investments.
5 Lipper Average is an average of the total return performance
(calculated on the basis of net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services,
an independent mutual fund ranking service.
</TABLE>
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
A $10,000 INVESTMENT COMPARED TO STANDARD & POOROS 500(4)
[A chart in the form of a line graph appers here, illustrating the
growth of a $10,000 investment in Class A Shares, since New England
Star Advisers FundOs inception on 7/7/94, compared to Standard &
PoorOs 500(4). The data points from the graph are as follows:]
New England Star Advisers - Net Asset Value/1/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,656
4Q94 $10,638
1Q95 $11,240
2Q95 $12,252
3Q95 $13,833
4Q95 $14,293
New England Star Advisers Fund - With Maximum Sales Charge/2/
Quarter Amount
- ------- -------
7-JUL-94 $9,425
3Q94 $10,043
4Q94 $10,026
1Q95 $11,594
2Q95 $11,547
3Q95 $13,038
4Q95 $13,471
S&P 500/4/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,489
4Q94 $10,487
1Q95 $11,505
2Q95 $12,599
3Q95 $13,597
4Q95 $14,413
[A chart in the form of a line graph appers here, illustrating the
growth of a $10,000 investment in Class B Shares, since New England
Star Advisers FundOs inception on 7/7/94, compared to Standard &
PoorOs 500(4). The data points from the graph are as follows:]
New England Star Advisers - Net Asset Value/1/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,640
4Q94 $10,600
1Q95 $11,176
2Q95 $12,170
3Q95 $13,717
4Q95 $14,145
New England Star Advisers Fund - With Maximum Sales Charge/2/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,640
4Q94 $10,600
1Q95 $12,170
2Q95 $13,717
3Q95 $13,742
4Q95
S&P 500/4/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,489
4Q94 $10,487
1Q95 $11,505
2Q95 $12,599
3Q95 $13,597
4Q95 $14,413
A $10,000 INVESTMENT COMPARED TO STANDARD & POOROS 5004
[A chart in the form of a line graph appers here, illustrating the
growth of a $10,000 investment in Class C Shares, since New England
Star Advisers FundOs inception on 7/7/94, compared to Standard &
PoorOs 500(4). The data points from the graph are as follows:]
New England Star Advisers - Net Asset Value/1/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,640
4Q94 $10,604
1Q95 $11,181
2Q95 $12,166
3Q95 $13,719
4Q95 $14,142
S&P 500/4/
Quarter Amount
- ------- -------
7-JUL-94 $10,000
3Q94 $10,489
4Q94 $10,487
1Q95 $11,505
2Q95 $12,599
3Q95 $13,597
4Q95 $14,413
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. Class Y share
performance will be greater than that shown based on differences in
inception date, fees and sales charges.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
NEW ENGLAND STAR ADVISERS FUND PERFORMANCE UPDATE
Assets of New England Star Advisers Fund continued to grow throughout
1995 - evidence of the FundOs growing popularity. Although the Fund
has been in operation for just over a year and a half, assets now
total in excess of $480 million, as of 12/31/95. At the heart of the
FundOs broad appeal is its unique investment concept - spreading
assets across four distinct investment styles can work to reduce the
risk associated with management by a single adviser and increase the
opportunity for gain. We think youOll be pleased with your FundOs
1995 performance, and agree that this one-of-a-kind investment
strategy has worked well for shareholders.
How Your Fund Performed
Benefiting from healthy corporate earnings and a favorable interest
rate environment, your Fund posted strong returns this year. Net
asset value returns through December 31, 1995 were 34.36%, 33.41% and
33.39% for Class A, B and C shares, respectively.
The following pages provide many important insights into each of the
Star AdvisersO investment activity over the past year. Although each
of the four investment managers is committed to a distinctly different
set of disciplines, all have the same goal: to seek long-term growth
and thereby provide you with the opportunity to reach your future
goals.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
STAR ADVISERS FUND
PERFORMANCE UPDATE
Rodney Linafelter, Berger Associates
[PHOTO]
[BERGER ASSOC. ARTWORK]
The year 1995 turned out to be an extraordinary one for growth stock
investors. Slow economic growth, low inflation and declining interest
rates provided an environment in which many stocks delivered double
digit returns.
Over the past twelve months, I continued to favor the traditional
growth stock sectors - technology, health care and consumer-related.
At mid-year, technology stocks comprised as much as 35% of the
portfolio. In anticipation of a correction, however, I reduced these
holdings to their current weighting of about 20% - a move which worked
to your FundOs advantage as technology stocks took quite a beating at
year-end. I remain cautious about technology stocks in the near term
- - the sector is currently in the midst of a correction which I believe
has further to go - but I remain bullish on technology stocks over the
long term.
Over the past year, I also maintained a rather heavy weighting in
health care stocks, focusing primarily on long-term care companies and
HMOs. However, as legislative questions surrounding Medicare and
Medicaid reimbursement rates remained unresolved, I later shifted my
focus to medical device and pharmaceutical companies - industries
which proved to be top performers in 1995.
Your FundOs assets were also invested in selected consumer stocks,
which contributed positively to performance. Although there is much
debate over the current attractiveness of the consumer sector, I
believe there are always companies and concepts in this sector that
are able to do quite well no matter what the economic environment. On
the whole, however, I expect the consumer spending cycle to remain
somewhat muted in the near future and therefore, to continue to offer
limited opportunities.
<PAGE>
NEW ENGLAND STAR ADIVSERS FUND
As always, there were one or two sectors outside of the mainstream
that offered outstanding upside potential. For example, I began to
move assets into the energy sector, specifically into oil field and
service companies, during the second half of the year. These stocks,
which now represent nearly 12% of the portfolio, helped boost
performance, especially at year-end.
Finally, with the wisdom of hindsight, there were a couple of things I
would have done differently in 1995. For example, for much of the
year, the Fund was underweighted in the financial sector - a sector
which on the whole benefited handsomely from falling interest rates.
Unfortunately, most stocks in this sector donOt possess the type of
earnings predictability that I typically look for. In addition,
intermittently throughout the year, I also maintained a rather heavy
position in cash - which tended to drag performance somewhat.
I look to 1996 to be a year of continued slow economic growth, low
inflation and relatively stable interest rates - an environment which
could significantly slow the rate of corporate earnings growth, yet
still offer outstanding opportunities for individual stock selection.
In fact, historically, our investment style has proven the most
effective in this type of environment. IOm confident that my efforts
to seek out those companies that can deliver steady, predictable, high
earnings growth over time hold potential for success in the months
ahead.
LARGEST HOLDINGS, % OF FUNDOS NET ASSETS
- ------------------------------------------------------
- - SOLECTRON CORP., 0.45% Software manufacturer
- - AMGEN, INC., 0.42% Drug and healthcare manufacturer
- - IDEXX LABS, INC., 0.38% Pharmaceutical manufacturer
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
STAR ADVISERS FUND
PERFORMANCE UPDATE
Edward Keely, Founders Asset Management
[PHOTO]
[FOUNDERS ARTWORK]
As I had predicted, 1995 turned out to be the year of the growth
stock. The combination of moderate growth, declining interest rates
and low inflation - which characterized the economy for much of the
year - provided a favorable backdrop for growth-oriented issues.
Technology, telecommunications and computer software - industries
which continue to benefit from heavy demand for information technology
- - comprised a major portion of the portfolio during the course of the
year. For example, I maintained a substantial weighting in semi-
conductor stocks, although I reduced this position dramatically - from
approximately 15% of Fund assets early on in the year to the current
5% - as the fundamental outlook for many semi-conductor companies
began to deteriorate. Assets were then shifted to computer networking
companies - a move which contributed significantly to Fund
performance.
As we entered the third quarter, the economy began to exhibit signs of
slowing that raised concerns about a possible recession. As a result,
market focus shifted slightly to more conservative, consistent growth
stocks. Accordingly, I began to favor the stocks of large, well-
established companies, particularly those in the health care industry
- - pharmaceutical, medical device and health care services companies,
for example - all of which had outstanding third and fourth quarters.
Toward the latter half of the year, I also took positions in selected
financial services issues, a move I regret not making earlier as
financial stocks in general were top-performers in 1995.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
Over the course of the year, I also continued to avoid heavy cyclicals
- - companies in industries whose performance moves from strong to weak
along with economic cycles - such as paper, chemicals and automobiles.
This strategy proved beneficial as cyclical stocks underperformed
growth stocks for much of 1995.
In summation, my investment strategy over the past twelve months was
primarily one of individual stock selection. I tried to determine
which companies would perform well in a slow-growth environment, and
which could meet or beat earnings expectations. To earn a place in
the portfolio, a company must meet my basic criteria of 15% or better
earnings growth, attractive stock price, and the potential for
earnings surprises. Some of my favorites over the past year include:
Maxim, an analog and mixed-signal semi-conductor company; Boston
Scientific, a medical device company; Merck & Co., a pharmaceuticals
company; as well as the office supply stores, Staples and Office Max.
Looking ahead, I expect a continuation of moderate
economic growth and low inflation - an environment which has proven
quite favorable for the types of stocks in which I invest. I will
continue to focus on high quality mid- to large-capitalization growth
stocks, and seek out the most attractive issues within that universe.
I do not anticipate making major changes to the portfolio in the near
term - I believe my portion of the Fund is well-positioned for the
months ahead.
Largest Holdings, % of FundOs Net Assets
- ---------------------------------------------------------------------
- - MAXIM INTEGRATED PRODUCTS, INC., 0.65% Electronic manufacturer
- - FORE SYSTEMS, 0.6% Computer and business equipment manufacturer
- - AT&T CORP., 0.56% Largest telecommunications company
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
STAR ADVISERS FUND
PERFORMANCE UPDATE
Warren Lammert, Janus Capital Corporation
[PHOTO]
[JANUS CAPITAL CORPORATION ARTWORK]
The investment environment over the past twelve months was defined
most significantly by continued low inflation and an incremental
slowing of the U.S. and European economies. And, while the economic
slowdown in this country has diminished corporate earnings growth in
some sectors, broadly speaking, it has been a powerful driver of
increased stock prices as investors have been willing to pay higher
prices for companies that can deliver earnings momentum despite slower
economic growth.
For example, technology continued to be an important secular story in
1995. Despite evidence of a slowing economy, particularly in the
third and fourth quarters, technology spending - both on a business
and consumer level - remained strong. I maintained a significant
commitment to technology issues over the past twelve months, although
I shifted my focus from semi-conductor stocks early on in the year to
software and computer networking stocks towards the latter half of the
year.
Lower interest rates helped the financial sector as a whole perform
especially well in 1995. I held positions in financial services
issues throughout the year, gradually increasing the weighting in this
sector as I found more and more stocks with attractive risk/reward
profiles. Stocks I owned included First Data and Unum, which proved
to be solid contributors, while I expect First Interstate and Chase
Manhattan Bank - names I added in the fourth quarter - to follow suit.
I also bought shares in Fannie Mae (Federal National Mortgage
Association) late in the fourth quarter. FNMA, which continues to
trade at a
<PAGE>
reasonable valuation, is currently witnessing a generous expansion of
its mortgage portfolio.
Another major theme I pursued over the course of the year was
geographic - I made a substantial commitment to European growth stocks
in 1995. When selecting stocks for the Fund, my goal was to seek out
issues with strong earnings growth potential, selling at reasonable
prices. I also look for companies with a solid business concept that
can be expanded or those undergoing a potentially profitable
transformation in the way they do business. I found many of these
types of stocks overseas. In fact, international holdings accounted
for nearly one-third of assets throughout the year.
The Fund was also heavily weighted in health care and related issues -
pharmaceutical and biotech stocks, for example - which proved to be
relatively strong performers in 1995. Finally, there were special
situations, outside of the FundOs major themes, which contributed
positively to performance. Crown, Cork and Seal in the packaging
industry, Hospitality Franchise Systems in the hotel franchising
industry, and Century 21 in the real estate industry all boosted
performance dramatically.
Near term, I donOt believe that the economy will change much - I
expect economic growth to continue at a
relatively modest pace and interest rates to remain low. Given this
scenario, I believe my current positioning is structured to serve
shareholders well.
LARGEST HOLDINGS, % OF FUNDOS NET ASSETS
- ------------------------------------------------------
- - AMGEN, INC., 1.04% Drug and healthcare manufacturer
- - SAP AG, 0.9% German software applications company
- - CISCO SYSTEMS, INC., 0.88% Computer and business equipment company
<PAGE>
NEW ENGLAND STAR ADVISERS
STAR ADVISERS FUND
PERFORMANCE UPDATE
Jeffrey Petherick and Mary Champagne, Loomis, Sayles & Company
[PHOTO]
[PHOTO]
[LOOMIS, SAYLES & CO. ARTWORK]
Equity investors were well rewarded in 1995. Slow economic growth,
low inflation and declining interest rates provided the perfect
backdrop for rising corporate profits and, in turn, healthy stock
market returns.
Market performance, although strong, was somewhat surprising. Smaller
companies, which tend to be more niche-oriented, and therefore less
sensitive to economic swings, typically fare better than larger
companies when the economy begins to slow. This was not the case in
1995, however. Small-cap stocks on the whole lagged large-cap stocks
for much of the year for several reasons. Many large-cap stocks
delivered double digit returns, making it unnecessary for investors to
flee the safety of well-established issues in search of higher
earnings growth. In addition, many marginal investors who were hurt
with small-cap stocks in 1994 have yet to return to the market.
Finally, a large number of initial public offerings in the small-cap
market, coupled with a shrinking supply of large-cap issues - the
result of stock buy-backs and corporate takeovers - led to an
increased demand for larger-cap stocks rather than their smaller
counterparts.
Despite the fact that the small-cap market lagged the larger-cap
market overall, the smaller companies we owned held their own.
Technology stocks, for example, proved to be solid contributors to
Fund performance. I was neither dramatically overweighted nor
underweighted in this sector, rather I maintained a balanced position
throughout the year. This somewhat neutral stance helped
<PAGE>
your Fund participate in the marketOs upside, yet cushioned your Fund
on the downside when technology stocks were badly hit in the latter
half of 1995. I also maintained substantial positions in the
financial services and health care sectors over the course of the
year, while in the second half, I broadened the portfolio to include
some energy stocks which helped boost performance dramatically.
I also tended to avoid consumer cyclicals - stocks whose performance
moves from strong to weak along with economic cycles - for much of
1995. This strategy worked to your FundOs advantage as industries in
this sector - retailing and restaurants, for example - have continued
to underperform.
As always, my investment approach is one of individual stock
selection: on a stock by stock basis, I seek out those issues that
are out of market favor, yet have strong earnings potential. Stocks
that were representative of my strategy over the past year include:
Seitel, a producer of seismic charts for the oil and gas industry; DVI
Health Services, a financier of large health and medical equipment
purchases; and Keystone International, a manufacturer of pumps and
valves for a growing international market.
Looking ahead, I expect 1996 to be an even better year overall for
small-cap stocks. I anticipate a further drop in interest rates early
in the new year which may lead to a pickup in economic activity and
improved market performance, especially in the small-cap market.
LARGEST HOLDINGS, % OF FUNDOS NET ASSETS
- ------------------------------------------------------
- - SOFAMOR/DANEK GROUP, INC., 0.37% Drug and healthcare manufacturer
- - VINTAGE PETROLEUM, 0.37% Gas exploration company
- - REINSURANCE GROUP AMERICA, INC., 0.37% Insurance company
<PAGE>
INDUSTRY CONCENTRATIONS REFLECT DIFFERENT MARKET EXPECTATIONS
Diverse strategies and analytical styles focused on the same objective
can lead to very different portfolio compositions. Far from canceling
each other out, these individual strategies complement one another and
lead to greater diversification for better performance potential over
time.
TOP INDUSTRY GROUPS BY INVESTMENT ADVISER*
DECEMBER 31, 1995
[A bar chart appears here, illustrating the allocation of each
investment adviserOs segment of New England Star Advisers FundOs
investment portfolio by top industry groups on December 31, 1995. The
percentage of New England Star Advisers FundOs total net assets in
each top industry group as of December 31, 1995 is also depicted. The
bar chart data is as follows:]
Berger Founders Janus Loomis Star Advisers
------ -------- ----- ------ -------------
TECHNOLOGY 4.2% 10.1% 6.1% 1.3% 21.7%
GENERAL BUSINESS 3.4% 4.4% 6.6% 6.0% 20.4%
CONSUMER BASICS 6.2% 3.1% 4.5% 2.5% 16.3%
FINANCE 1.1% 2.1% 3.6% 3.6% 10.4%
CASH AND EQUIVALENTS 1.6% 2.5% 1.6% 3.5% 9.2%
ENERGY 2.4% 0 0.5% 2.1% 5.0%
CONSUMER NON-DURABLES 1.3% 2.2% 0.7% 0.7% 4.9%
BASIC INDUSTRIES 0 0.6% 1.0% 2.3% 3.9%
CAPITAL GOODS 1.0% 0.3% 0.2% 1.5% 3.0%
* Portfolio composition is subject to change.
<PAGE>
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
NEW ENGLAND
STAR ADVISERS FUND
DECEMBER 31, 1995
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1995
<TABLE><CAPTION>
COMMON STOCKS-90.2% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
<C> <S> <C>
BASIC INDUSTRIES
-3.9%
CHEMICALS-1.0%
10,000 Agrium, Inc. $EE450,000
26,000 Cambrex Corp. 1,075,750
24,000 IMC Global, Inc. 981,000
33,000 Intertape Polymer
Group, Inc. 1,035,375
29,000 Learonal, Inc. 667,000
10,000 Potash Corp. of
Saskatchewan, Inc. 708,750
-----------
4,917,875
-----------
CONTAINERS & GLASS
-0.8%
91,575 Crown Cork &
Seal, Inc. (c) 3,823,258
-----------
ELECTRIC-0.1%
40,400 Gasonics International
Corp. 545,400
-----------
MINING-0.2%
25,900 Cleveland Cliffs, Inc. 1,061,900
-----------
MISCELLANEOUS
-0.5%
35,000 Case Corp. . 1,601,250
32,700 Greenfield Inds., Inc. 1,021,875
-----------
2,623,125
-----------
NON-FERROUS METALS
-0.2%
24,300 Wolverine Tube, Inc. 911,250
-----------
PAPER-0.5%
26,950 Alco Standard Corp. 1,229,594
61,800 Caraustar Inds., Inc. 1,236,000
1,725 James River Corp. 41,615
-----------
2,507,209
-----------
STEEL-0.6%
61,550 Citation Corp. 738,600
35,700 Quanex Corp. (c) 691,688
90,400 Republic Engineered
Steels Inc. 418,100
143,600 UNR Inds, Inc. 1,238,550
-----------
3,086,938
-----------
TOTAL BASIC
INDUSTRIES $19,476,955
-----------
CONSUMER BASICS
-16.3%
DRUGS & HEALTH CARE
-14.9%
146,675 Amgen, Inc. (c). 8,708,828
55,000 Apria Healthcare
Group, Inc. 1,553,750
15,000 Astra AB Series A 598,672
21,000 Astra AB Series B 831,815
8,000 Baxter International,
Inc. . 335,000
60,100 Biochem Pharm, Inc. 2,411,512
17,000 Biogen, Inc. 1,045,500
65,000 Columbia / HCA
Healthcare Corp. 3,298,750
60,350 Community Health
Systems, Inc. 2,149,969
44,550 Conmed Corp. 1,113,750
100,000 Curative Technologies,
Inc. 1,425,000
30,000 Elan PLC 1,458,750
15,000 Envoy Corp. New 259,688
12,000 Genzyme Corp. 748,500
85,512 Grancare, Inc. 1,239,924
4,800 Grupo Casa Autrey
S A De C V ADR (d) 65,538
76,300 Health Images, Inc. 553,175
65,000 Health Management
Associates 1,698,125
22,800 Healthplan Services Corp. 570,000
52,100 Healthsource, Inc. (c) 1,875,600
65,000 Healthsouth
Rehabilitation 1,893,125
65,000 Horizon Healthcare Corp. 1,641,250
23,100 Horizon Mental Health
Management, Inc. 384,037
40,000 Idexx Labs, Inc. (c) 1,880,000
14,500 Johnson & Johnson 1,241,562
34,100 Lilly Eli & Company 1,918,125
60,000 Lincare Hldgs. Inc. 1,500,000
9,625 Lunar Corp. (c) 264,687
28,000 Luxottica Group
SPA (ADR) (d) 1,638,000
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
DRUGS & HEALTH CARE
-continued
18,550 Manor Care, Inc. $649,250
39,000 Medisense, Inc. 1,233,375
26,800 Medpartners /
Mullikin, Inc. 884,400
17,000 Medtronic, Inc. 949,875
51,000 Merck & Co., Inc. 3,353,250
4,450 Nellcor Puritan
Bennett, Inc. 258,100
26,075 Oxford Health Plans, Inc. 1,926,291
32,975 Pacificare Health
Systems, Inc. 2,868,825
75,275 Pfizer, Inc. 4,742,325
110,300 Regency Health
Services 1,116,787
36,200 Sierra Health
Services, Inc. 1,149,350
33,616 Smithkline Beecham
(ADR) (d) 370,669
64,800 Sofamor/Danek
Group, Inc. 1,838,700
38,700 Total Renal Care
Hldgs., Inc. 1,141,650
25,000 United Healthcare
Corp. 1,637,500
138,050 Vidamed, Inc 1,311,475
28,675 Warner Lambert Co. 2,785,059
25,000 Watson Pharmaceuticals,
Inc. 1,225,000
-----------
73,744,513
-----------
FOOD & BEVERAGES
-0.5%
16,506 Cultor OY Series 2 683,101
25,296 Huhtamaki OY 610,678
23,000 Universal Foods
Corp. (c) 922,875
-----------
2,216,654
-----------
HOUSEHOLD PRODUCTS
-0.9%
45,000 Black & Decker Corp. 1,586,250
14,827 Cultor OY Series 1 613,616
22,000 Stanley Works 1,133,000
89,450 United States Can Corp. 1,207,575
-----------
4,540,441
-----------
Total Consumer
Basics $80,501,608
-----------
CONSUMER DURABLE
GOODS-2.1%
AUTO PARTS-0.5%
30,000 Lear Seating Corp. 870,000
80,000 Masland Corp. 1,120,000
33,600 Walbro Corp. 604,800
-----------
2,594,800
-----------
AUTOMOTIVE-0.6%
30,000 Chrysler Corp. 1,661,250
45,000 Elsag Bailey Process
Auto NV 1,209,375
2,000 Tower Automotive, Inc. 35,000
-----------
2,905,625
-----------
HOUSEHOLD
APPLIANCES & HOME
FURNISHINGS-1.0%
22,995 Harman International
Inds., Inc. New 922,674
8,075 Industrie Natuzzi Spa 366,403
47,925 Singer Co. N V 1,335,909
19,757 Thorn EMI 465,313
52,700 Toro Co. 1,732,513
-----------
4,822,812
-----------
Total Consumer
Durable Goods 10,323,237
-----------
CAPITAL GOODS
-3.0%
AGRICULTURAL
MACHINERY
-0.2%
22,600 Aptargroup, Inc. 844,675
-----------
BUILDING CONSTRUCTION
-0.4%
32,700 Brady W H Co. 882,900
50,900 Crossmann
Communities, Inc. 954,375
-----------
1,837,275
-----------
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
CONSTRUCTION-0.2%
41,400 CDI Corp. $745,200
-----------
Electric-1.1%
55,575 Boston Scientific
Corp. (c) 2,723,175
9,575 Coherent, Inc. 387,788
58,225 Gelman Sciences, Inc. 1,470,181
6,700 Novellus Systems, Inc. 361,800
46,000 Woodhead Industries 655,500
-----------
5,598,444
-----------
INDUSTRIAL MACHINERY
-0.8%
6,100 Cognex Corp. 211,975
34,500 Hardinge Brothers, Inc. 897,000
65,700 Keystone International,
Inc. 1,314,000
30,000 Thermo Electron Corp. 1,560,000
-----------
3,982,975
-----------
MISCELLANEOUS-0.1%
20,000 Roper Industries 735,000
-----------
POLLUTION CONTROL
-0.2%
30,200 United Waste Systems,
Inc. 1,124,950
-----------
Total Capital Goods
14,868,519
-----------
CONSUMER
NON-DURABLES
-4.9%
APPAREL & TEXTILES
-1.7%
5,000 Adidas AG 264,552
11,275 Baby Superstore, Inc. 642,675
70,000 Donnkenney , Inc. 1,268,750
30,000 Fila Hldgs. SPA
ADR (d) 1,365,000
34,650 Gucci Group N V 1,347,019
33,400 Jones Apparel Group,
Inc. 1,315,125
20,000 Talbots, Inc. 575,000
40,000 Tommy Hilfiger Corp. 1,695,000
-----------
8,473,121
-----------
PHOTOGRAPHY-0.4%
31,500 Eastman Kodak
Company $2,110,500
-----------
RETAIL-2.7%
89,400 Cato Corp. New 692,850
6,200 Claire S Stores, Inc. 109,275
89,200 Cole National Corp. 1,237,650
70,000 Federated Department
Stores, Inc. (c) 1,925,000
17,000 Gap, Inc. 714,000
59,600 Haverty Furniture Cos.,
Inc. 826,950
27,000 Home Depot, Inc. 1,292,625
15,000 Kohls Corp. 787,500
15,000 The Limited, Inc. 260,625
30,000 Nine West Group, Inc. 1,125,000
61,900 Peoplesoft, Inc. 2,661,700
39,000 Sears, Roebuck and
Co. 1,521,000
-----------
13,154,175
-----------
TOYS & AMUSEMENTS
-0.1%
12,400 Coleman Co., Inc. 435,550
-----------
Total Consumer Non-
Durables 24,173,346
-----------
CONSUMER SERVICES
-1.5%
Air Travel-0.3%
9,000 Delta Air Lines, Inc. 664,875
115,000 Singapore Airlines 1,073,171
-----------
1,738,046
-----------
HOTELS & RESTAURANTS
-1.1%
8,600 La Quinta Inns, Inc. 235,425
25,000 Marriot International,
Inc. 956,250
34,000 McDonalds Corp. 1,534,250
77,000 Mirage Resorts, Inc. 2,656,500
-----------
5,382,425
-----------
LEISURE TIME-0.1%
34,800 Supertel Hospitality 348,000
-----------
Total Consumer
Services 7,468,471
-----------
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
ENERGY-5.0%
DOMESTIC OIL-0.7%
60,600 Cross Timbers Oil Co. $1,068,075
15,929 Freeport McMoRan, Inc. 589,373
84,600 Lomak Petroleum, Inc. 824,850
9,000 Mobil Corp. 1,008,000
-----------
3,490,298
-----------
GAS EXPLORATION-1.8%
16,000 Apache Corp. 472,000
36,600 Barrett Resources Corp. 1,075,125
78,425 Belden and Blake Corp. 1,372,437
50,000 BJ Services Co. 1,450,000
13,200 Global Industries, Inc. 396,000
50,000 Sonat Offshore Drilling,
Inc. 2,237,500
81,000 Vintage Petroleum, Inc. 1,822,500
-----------
8,825,562
-----------
PETROLEUM SERVICES
-2.5%
81,000 Baker Hughes, Inc. 1,974,375
50,000 Dresser Inds., Inc. (c) 1,218,750
28,000 Halliburton Co. 1,417,500
30,000 Petroleum Geo Services
(ADR) (d) 750,000
86,600 Pride Petroleum
Services, Inc. 920,125
22,000 Schlumberger Ltd. 1,523,500
50,300 Seitel, Inc. 1,779,363
31,000 Western Atlas, Inc. 1,565,500
81,150 World Fuel Services
Corp. 1,288,256
-----------
12,437,369
-----------
Total Energy 24,753,229
-----------
FINANCE-10.4%
BANKS-2.5%
37,150 Bank of New York, Inc. 1,811,063
11,000 Bankers Trust New York
Corp. 731,500
49,450 Chase Manhattan
Corp. (c) 2,997,906
15,425 Citicorp 1,037,331
45,000 First Commonwealth, Inc. 1,170,000
BANKS-(CONTINUED)
26,225 First Interstate Bancorp $ 3,579,713
7,000 Morgan J P & Company,
Inc. 561,750
22,000 PNC Bank Corp. 709,500
-----------
12,598,763
-----------
FINANCIAL SERVICES
-2.9%
45,200 Charter One Financial, Inc. 1,384,250
26,500 Cityscape Financial
Corp. 549,875
27,850 Commercial Federal
Corp. 1,051,338
68,800 DVI, Inc. 963,200
17,000 Federal Home Loan
Mortgage Corp. 1,419,500
35,450 Federal National
Mortgage Assn. 4,400,231
18,000 First USA, Inc. 798,750
45,950 Imperial Credit
Inds., Inc. 999,413
1,605 Investors Financial
Services Corp. 33,304
11,375 Merrill Lynch &
Company, Inc. 580,125
8,225 North American
Mortgage Co. 174,781
85,000 Peregrine Investment 109,926
15,000 Salomon, Inc. 532,500
5,577 Securitas AB 264,583
66,500 WFS Financial, Inc. 1,296,750
-----------
14,558,526
-----------
INSURANCE-2.9%
50,500 Capital RE Corp. 1,552,875
7,500 Chubb Corp. 725,625
25,000 Conseco, Inc. 1,565,625
16,800 Meadowbrook
Insurance Group,
Inc. 562,800
41,100 Protective Life Corp. (c) 1,284,375
100,000 Prudential Reinsurance
Hlds, Inc. 2,337,500
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
INSURANCE-(CONTINUED)
50,500 Reinsurance Group
America, Inc. $1,849,562
30,700 Triad Guaranty, Inc. 813,550
37,475 Unum Corp. (c) 2,061,125
90,000 USF&G Corp. 1,518,750
-----------
14,271,787
-----------
INVESTMENT
COMPANIES-1.7%
43,600 Allied Group, Inc. 1,569,600
81,400 Capstone Capital Corp. 1,556,775
29,850 Eaton Vance Corp.
(non voting) 843,262
88,383 Kinnevik Investment
Series B 2,762,094
62,500 Waterhouse Investor
Services, Inc. 1,546,875
-----------
8,278,606
-----------
SAVINGS AND
LOAN-0.4%
38,950 First Financial Corp. 895,850
42,500 First Svgs Bank
Washington Bancorp
Inc. 557,812
23,425 Glendale Federal Bank
Federal Svgs Bank
California 409,938
-----------
1,863,600
-----------
Total Finance 51,571,282
-----------
GENERAL BUSINESS
-20.4%
BROADCASTING-1.1%
8,650 Central European
Media Ent. Ltd. 177,325
17,500 Gaylord
Entertainment Co. 485,625
46,500 Infinity Broadcasting
Corp. 1,732,125
31,225 Macromedia, Inc. 1,631,506
29,950 Telecomunicacoes
Brasileras (ADR)(d) 1,418,881
-----------
5,445,462
-----------
BUSINESS SERVICES-6.7%
30,000 America Online, Inc. $1,125,000
20,600 Analysts International
Corp. (c) 618,000
32,250 Banta Corp. 1,419,000
35,000 Block H & R, Inc. 1,417,500
30,675 Boca Research, Inc. 812,888
24,700 Cort Business Services
Corp. 407,550
80,825 CUC International, Inc. 2,758,153
58,414 First Data Corp. 3,906,436
10,950 General Motors Corp.,
Class E 569,400
24,100 Global Directmail Corp. 662,750
50,000 Gtech Hldgs. Corp. 1,300,000
31,500 MDL Information
Systems, Inc. 724,500
64,134 Nokia AB OY Series A 2,521,477
57,600 Nokia Corp. (ADR) (d) 2,239,200
23 NTT Data Comms
Systems 772,978
6,800 Olsten Corp. 268,600
39,515 SAP AG 5,977,522
30,000 SPS Transaction
Services, Inc. 888,750
15,400 SPSS, Inc. 300,300
44,275 Stratacom, Inc. 3,254,212
32,900 Strattec Security Corp. 583,975
22,700 Zilog, Inc. 831,388
-----------
33,359,579
-----------
COMMUNICATION
SERVICES-3.2%
3,933 Arch Communications
Group, Inc. 94,392
43,000 AT & T Corp. 2,784,250
9,950 Comnet Cellular, Inc. 287,306
39,600 Davel Communications
Group 534,600
32,900 Heartland Wireless
Communications,
Inc. 978,775
15,602 Korea Mobile
Telecomm Corp.
(GDR) 144A (f) (g) 694,289
19,550 Millicom International
Cellular S A 596,275
6,675 Mobilemedia Corp. 148,519
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
COMMUNICATION
SERVICES-(CONTINUED)
40,000 New World
Communications $700,000
238,825 Paging Network,
Inc. 5,821,359
53,050 Premisys
Communications,
Inc. 2,970,800
161,156 Telecom Italia 283,625
-----------
15,894,190
-----------
COMPUTERS &
BUSINESS EQUIPMENT
-0.1%
7,375 ITI Technologies, Inc. 219,406
-----------
Drugs & Health Care
-0.1%
15,950 ARV Assisted Living
Inc. 187,413
-----------
MISCELLANEOUS
-6.4%
20,325 American Standard
Cos., Inc. 569,100
22,400 Amerin Corp. 599,200
47,667 ARN Mondadori Edit 413,001
38,500 Borders Group, Inc. 712,250
27,800 Bush Boake Allen, Inc. 761,025
21,100 Business Objects S A
(ADR) (d) 1,020,713
31,200 Career Horizons, Inc. 1,053,000
917 Catena 7,182
13,950 Ciber, Inc. 326,081
97,700 Congoleum Corp. New 1,050,275
17,000 Corestaff, Inc. 620,500
70,275 Corvita Corp. 729,103
17,500 Cytec Industries, Inc. 1,091,563
9,450 Daig Corp. 217,350
8,424 Elkjop 208,801
81,700 Giant Cement Holding,
Inc. 939,550
149,500 Griffon Corp. 1,345,500
84,000 Guidant Corp. 3,549,000
81,075 HFS, Inc. 6,627,881
20,121 Hunter Douglas NV 932,886
79,800 Inbrand Corp. 1,316,700
MISCELLANEOUS
- (CONTINUED)
1,561 Metra AB A $64,243
25,006 Metra AB B 1,029,125
38,160 Nordictel Hldgs. AB 390,813
101,800 Numerex Corp. 661,700
336,615 Rottneros Bruk AB 354,881
30,000 Sync Research, Inc. 1,357,500
15,000 Valmet 375,914
94,921 Worldcom, Inc. 3,345,965
-----------
31,670,802
-----------
NEWSPAPERS-0.2%
50,000 News Corp. Ltd.
(ADR) (d) 1,068,750
-----------
OFFICE FURNISHINGS &
SUPPLIES-0.8%
78,400 Office Max, Inc. 1,754,200
40,000 Staples, Inc. 975,000
25,000 Viking Office Products,
Inc. 1,162,500
-----------
3,891,700
-----------
PUBLISHING-0.6%
50,000 Citic Pacific, Ltd. 171,031
29,500 Houghton Mifflin Co. 1,268,500
16,500 Insilco Corp. 525,938
30,000 Time Warner, Inc. 1,136,250
-----------
3,101,719
-----------
REAL ESTATE-1.2%
75,000 Chateau Properties,
Inc. 1,687,500
57,050 HGI Reality, Inc. 1,305,019
72,000 Liberty Property 1,494,000
53,900 Patriot American
Hospitality, Inc. 1,387,925
-----------
5,874,444
-----------
Total General
Business 100,713,465
-----------
TECHNOLOGY-21.7%
AEROSPACE-1.9%
45,000 Boeing Co. 3,526,875
19,000 Computer Sciences
Corp. 1,334,750
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
AEROSPACE
-(CONTINUED)
16,000 Lockheed Martin Corp. $1,264,000
22,000 McDonnell Douglas
Corp. 2,024,000
67,500 Whittaker Corp. 1,468,125
-----------
9,617,750
-----------
COMPUTERS & BUSINESS
EQUIPMENT-7.4%
57,575 Ascend Communications,
Inc. 4,670,772
97,500 Bay Networks, Inc. 4,009,688
20,500 Cabletron Systems,
Inc. (c) 1,660,500
104,500 Cisco Systems, Inc. 7,798,312
36,400 Control Data Systems,
Inc. 714,350
62,800 Digital Equipment
Corp. (c) 4,027,050
90,000 EMC Corp. 1,383,750
50,000 Fore Systems 2,975,000
5,575 Hewlett Packard Co. 466,906
11,000 International Business
Machines 1,009,250
18,275 Keane, Inc. 404,334
47,500 Madge N V 2,125,625
17,975 Seagate Technology 853,813
6,700 Secure Computing
Corp. 375,200
30,000 Stratus Computer, Inc. 1,038,750
25,150 Sun Microsystems,
Inc. 1,147,469
15,725 Xerox Corp. 2,154,325
-----------
36,815,094
-----------
ELECTRONICS--7.2%
36,050 Altera Corp. 1,793,487
27,100 Amphenol Corp. 657,175
110,975 Analog Devices, Inc. 3,925,741
15,000 Applied Magnetics
Corp. 279,375
17,450 BDM International, Inc. 506,050
16,500 Burr Brown 420,750
45,175 Comverse Technology,
Inc. 903,500
ELECTRONICS (CONTINUED)
2,700 Dallas Semiconductor
Corp. $56,025
81,800 Dynatech Corp. 1,390,600
75,000 ECI Telecom Ltd. 1,710,937
21,000 Electronics For Imaging,
Inc. 918,750
18,175 Fulcrum Technologies,
Inc. 590,688
10,000 General Instrument
Corp. 233,750
8,525 Glenayre Technologies,
Inc. 530,681
30,000 Input/Output, Inc. 1,732,500
25,000 Intel Corp. 1,418,750
30,000 Intelcom Group, Inc. 371,250
45,000 Lernout & Hauspie
Speech Prods. 1,260,000
27,500 LSI Logic Corp. (c) 900,625
84,000 Maxim Integrated
Products, Inc. 3,234,000
12,000 Motorola, Inc. 684,000
35,000 Newbridge Networks
Corp. 1,448,125
122,650 Picturetel Corp. 5,289,281
25,725 Pittway Corp. 1,742,869
30,000 SCI Systems, Inc. 930,000
17,000 Tektronix, Inc. 835,125
31,800 Unitrode Corp. 898,350
38,500 Xilinx, Inc. (c) 1,174,250
-----------
35,836,634
-----------
MISCELLANEOUS-0.7%
36,925 United States Robotics
Corp. 3,240,169
-----------
SOFTWARE-4.5%
36,825 ADAM Software,
Inc. 239,363
43,000 Cadence Design Systems
Inc. 1,806,000
59,975 Computer Associates
International, Inc. 3,411,078
35,000 Datalogix International,
Inc. 441,875
15,000 HBO and Co. 1,149,375
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
COMMON STOCKS-CONTINUED
SHARES DESCRIPTION VALUE(A)
- ----------------------------------------------------------------------
SOFTWARE-CONTINUED
40,550 Informix Corp. $1,216,500
12,650 Intuit 986,700
5,500 McAfee Assocs, Inc. 241,312
25,000 Micro Warehouse, Inc. 1,081,250
8,000 Microsoft Corp. (c) 702,000
130,000 Novell Inc. (c) 1,852,500
62,000 Oracle Systems Corp. (c) 2,627,250
35,000 Parametric Technology
Corp. 2,327,500
50,000 Solectron Corp. 2,206,250
10,100 Sterling Software, Inc. 629,987
42,000 Symantec Corp. 976,500
9,325 Vantive Corp. 209,813
-----------
22,105,253
-----------
Total Technology 107,614,900
-----------
TRANSPORTATION-1.0%
RAILROADS & EQUIPMENT
-0.2%
40,500 ABC Rail Products
Corp. 896,062
-----------
TRUCKING & FREIGHT
-0.8%
77,200 Harper Group, Inc. 1,370,300
45,000 Tidewater, Inc. 1,417,500
66,000 TNT Freightways
Corp. 1,328,250
-----------
4,116,050
-----------
Total Transportation 5,012,112
-----------
Total Common Stocks
(Identified Cost
$376,256,885) 446,477,124
-----------
SHORT TERM INVESTMENTS 9.2%
FACE AMOUNT DESCRIPTION VALUE(A)
- ----------- ----------- --------
$12,775,000 Repurchase agreement with State
Street Bank & Trust Company dated
12/29/95 at 5.000% to be
repurchased at $12,782,097 on
1/02/96 collateralized by
$11,165,000 U.S. Treasury Note
8.750% due 8/15/00 valued at
$13,055,593 $12,775,000
5,827,462 Associates Corp. North
America 5.950%
1/02/96 5,827,462
5,800,000 Chevron Oil Finance
Company 5.750%
1/02/96 5,800,000
5,600,000 Exxon Asset Management
5.550% 1/02/96 5,600,000
6,100,000 Ford Motor Credit Co.
5.750% 1/02/96 6,099,026
2,000,000 Federal Home
Loan Bank Consolidated
Discount Note 5.400%
2/27/96 1,982,900
6,700,000 United States Treasury
Bills 5.280%
1/11/96 6,690,247
800,000 United States Treasury
Bills 4.820%
2/08/96 795,930
-----------
TOTAL SHORT TERM
INVESTMENTS
(Identified Cost
$45,570,565) 45,570,565
-----------
Total Investments-99.4%
(Identified Cost
$421,827,450) 492,047,689
Cash, receivables and
other assets (e) 9,233,746
Liabilities (6,426,991)
-----------
Total Net Assets-
100% $494,854,444
-----------
-----------
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
FORWARD CURRENCY CONTRACTS OUTSTANDING
AT DECEMBER 31, 1995
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
LOCAL AGGREGATE UNREALIZED
DELIVERY CURRENCY FACE TOTAL APPRECIATION/
DATE AMOUNT VALUE VALUE(DEPRECIATION)
----------- ------- ------ ----- --------
British Pounds (bought)03/28/96 325,000 $514,377 $503,659 $(10,718)
British Pounds (sold) 03/28/96 497,000 780,290 770,211 10,079
British Pounds (sold) 03/28/96 272,000 415,344 421,524 (6,180)
Deutsch Mark (bought) 01/11/96 800,000 556,057 558,079 2,022
Deutsch Mark (sold) 01/11/96 2,874,000 2,075,240 2,004,898 70,342
Deutsch Mark (sold) 02/08/96 953,000 682,518 665,759 16,759
Deutsch Mark (sold) 02/12/96 201,000 143,967 140,442 3,525
Deutsch Mark (sold) 06/13/96 1,700,000 1,184,875 1,194,824 (9,949)
Finnish Marka (bought) 01/11/96 2,000,000 465,202 460,106 (5,096)
Finnish Marka (sold) 01/11/96 7,756,000 1,804,560 1,784,292 20,268
Finnish Marka (sold) 01/25/96 260,000 60,465 59,852 613
Finnish Marka (sold) 02/08/96 3,745,000 886,663 862,572 24,091
Finnish Marka (bought) 02/12/96 4,200,000 965,695 967,511 1,816
Finnish Marka (sold) 02/12/96 11,199,000 2,646,579 2,579,799 66,780
Finnish Marka (bought) 03/28/96 2,024,000 485,873 467,025 (18,848)
Finnish Marka (sold) 03/28/96 2,024,000 466,897 467,025 (128)
French Franc (bought) 03/28/96 200,000 39,956 40,900 944
French Franc (bought) 03/28/96 150,000 30,333 30,675 342
French Franc (bought) 03/28/96 1,000,000 203,214 204,502 1,288
French Franc (bought) 03/28/96 466,000 94,236 95,298 1,062
French Franc (sold) 03/28/96 1,816,000 369,444 371,376 (1,932)
Japanese Yen (sold) 02/08/96 15,000,000 149,120 146,129 2,991
Japanese Yen (bought) 03/14/96 50,000,000 509,450 489,464 (19,986)
Japanese Yen (bought) 03/14/96 18,000,000 184,733 176,207 (8,526)
Japanese Yen (bought) 03/14/96 53,000,000 532,717 518,832 (13,885)
Japanese Yen (bought) 03/14/96 50,000,000 490,148 489,464 (684)
Japanese Yen (sold) 03/14/96 145,000,000 1,493,844 1,419,447 74,397
Japanese Yen (sold) 03/14/96 50,000,000 509,191 489,464 19,727
Japanese Yen (sold) 03/14/96 15,000,000 150,090 146,839 3,251
Swedish Krona (bought) 01/11/96 3,800,000 571,085 571,671 586
Swedish Krona (bought) 01/11/96 4,000,000 601,612 601,758 146
Swedish Krona (bought) 01/11/96 3,400,000 511,416 511,494 78
Swedish Krona (bought) 01/11/96 5,571,000 836,085 838,099 2,014
Swedish Krona (sold) 01/11/96 9,571,000 1,295,154 1,439,858 (144,704)
Swedish Krona (sold) 01/11/96 11,500,000 1,559,737 1,730,056 (170,319)
Swedish Krona (sold) 01/25/96 10,800,000 1,458,277 1,622,780 (164,503)
Swedish Krona (sold) 03/28/96 156,000 21,766 23,331 (1,565)
---------
$(253,902)
=========
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION-CONTINUED
Investments as of December 31, 1995
[FN]
NOTES
(a)See Note 1a.
(b)Federal Tax Information: At December 31, 1995 the
net unrealized appreciation on investments based on
cost of $422,882,866 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 $78,360,288
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over value (9,195,465)
-----------
Net unrealized appreciation $69,164,823
===========
(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 $26,291 and a cost of $26,209.
(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
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value $492,047,689
Cash 189,354
Foreign cash at value (cost $26,209) 26,291
Receivable for
Fund shares sold 2,790,727
Securities sold 5,740,440
Accrued dividends and interest 349,493
Foreign withholding taxes 5,383
Prepaid registration expense 15,000
Unamortized organization expense 117,058
------------
501,281,435
LIABILITIES
Payable for:
Securities purchased $3,824,118
Open forward currency contracts-net 253,902
Fund shares redeemed 1,039,359
Foreign withholding taxes 3,053
Dividends declared 99,000
Payable to custodian bank 565,277
Accrued expenses:
Management fees 427,749
Deferred trusteesO fees 3,006
Accounting and administrative 4,651
Other expenses 206,876
------------
6,426,991
------------
NET ASSETS $494,854,444
============
Net Assets consist of
Capital paid in $417,072,348
Accumulated net investment loss (134,869)
Accumulated net realized gains 7,950,547
Unrealized appreciation on investments, forward currency
contracts and foreign currency transactions 69,966,418
------------
NET ASSETS $494,854,444
============
Computation of net asset value and offering price:
Net asset value and redemption price
of Class A shares ($223,595,832
divided by 13,322,654 shares of beneficial interest) $16.78
=======
Offering price per share (100/94.25 of $16.78) $17.80*
=======
Net asset value and offering price
of Class B shares ($220,017,335
divided by 13,227,545 shares of beneficial interest) $16.63**
========
Net asset value and offering price of Class C shares
($45,672,219 divided by 2,743,692 shares
of beneficial interest) $16.65
========
Net asset value and offering price of Class Y shares
($5,569,058 divided by 330,910 shares
of beneficial interest) $16.83
========
Identified cost of investments $421,827,450
============
<FN>
* Based upon single purchases of less than $50,000.
Reduced sales charges apply for purchases in excess of these
amounts.
**Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charges.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $2,170,359
Interest 2,931,148
-----------
5,101,507(a)
Expenses:
Management fees $3,599,730
Service fees-Class A 404,530
Service and distribution fees-Class B 1,458,476
Service and distribution fees-Class C 327,977
TrusteesO fees and expenses 23,606
Accounting and administrative 53,185
Custodian 471,807
Transfer agent 907,639
Audit and tax services 45,000
Legal 21,572
Printing 108,180
Registration 109,082
Amortization of organization expenses 31,846
Miscellaneous 10,854
----------
Total expenses 7,573,484
------------
Net investment loss (2,471,977)
REALIZED and UNREALIZED GAIN (LOSS) on
INVESTMENTS,
FORWARD CURRENCY CONTRACTS and
FOREIGN CURRENCY TRANSACTIONS
Realized (gain) loss on:
Investments-net 38,356,367
Foreign currency transactions-net (741,363)
------------
Total realized gain on investments,
forward currency contracts
and foreign currency transactions 37,615,004
------------
Unrealized appreciation (depreciation) on:
Investments-net 65,326,880
Forward currency contracts-net (164,506)
Foreign currency transactions-net (272,802)
------------
Total unrealized appreciation on
investments, forward currency contracts and
foreign currency transactions 64,889,572
------------
Net gain on investment transactions 102,504,576
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $100,032,599
============
<FN>
(a) Net of foreign taxes of $74,932
</TABLE>
<PAGE>
STAEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
JULY 7, 1994(A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $382,549 $ (2,471,977)
Net realized gain (loss) on
investments, forward currency
contracts and foreign currency
transactions (1,540,733) 37,615,004
Unrealized appreciation on investments,
forward currency contracts and
foreign currency transactions 5,076,847 64,889,572
------------ ------------
Increase in net assets from operations 3,918,663 100,032,599
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A (282,197) 0
Class B (90,894) 0
Class C (19,726) 0
Class Y (748) 0
Net realized gain on investments
Class A (34,557) (11,862,707)
Class B (11,131) (11,362,283)
Class C (2,415) (2,444,605)
Class Y (92) (228,886)
------------ ------------
(441,760) (25,898,481)
------------ ------------
Increase in net assets derived from
capital share transactions 180,921,938 236,321,485
----------- -----------
Total increase in net assets 184,398,841 310,455,603
NET ASSETS
Beginning of the year 0 184,398,841
------------ ------------
End of the year $184,398,841 $494,854,444
============ ============
UNDISTRIBUTED/(OVERDISTRIBUTED)
NET INVESTMENT INCOME
Beginning of the year $ 0 $ 0
------------ ------------
End of the year $000,000,000 $ (134,869)
------------ ------------
<FN>
(a) Commencement of operations
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
CLASS A CLASS B
---------- ----------
JULY 7, JULY 7,
1994 (A) YEAR 1994 (A) YEAR
THROUGH ENDED THROUGH, ENDED,
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1994 1995 1994 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.50 $13.25 $12.50 $13.23
--------- --------- --------- --------
Income From
Investment Operations
Net Investment Income 0.05 0.00 0.02 0.00
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.75 4.52 0.73 4.39
--------- --------- --------- --------
Total From Investment
Operations 0.80 4.52 0.75 4.39
--------- --------- --------- --------
Distributions From Net
Investment Income (0.05) 0.00 (0.02) 0.00
Distributions From
Net Realized Capital
Gains 0.00 (0.99) 0.00 (0.99)
--------- --------- --------- --------
Total Distributions (0.05) (0.99) (0.02) (0.99))
--------- --------- --------- --------
Net Asset Value,
End of Period $13.25 $16.78 $13.23 $16.63
====== ====== ====== ======
Total Return (%) (c) 6.4 34.4 6.0 33.4
Ratio of Operating
Expenses to Average
Net Assets (%) (d) 1.94(b) 1.82 2.69(b) 2.57
Ratio of Net Investment
income
(Loss) to Average
Net Assets (%) 1.06(b) (.33) 0.31(b) (1.08)
Portfolio Turnover
Rate (%) 100 142 100 142
Net Assets,
End of Period (000) $9,218 $223,596 $72,889 $220,017
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
</TABLE>
<TABLE><CAPTION>
CLASS C CLASS Y
----------- -----------
JULY 7, NOVEMBER 15,
1994 (A) YEAR 1994 (A) YEAR
THROUGH, ENDED THROUGH ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1994 1995 1994 1995
$12.50 $13.24 $13.59 $13.24
--------- --------- --------- --------
<S> <C> <C> <C> <C>
0.02 0.00 0.06 0.00
0.74 4.40 (0.35) 4.58
--------- --------- --------- --------
0.76 4.40 (0.29) 4.58
--------- --------- --------- --------
(0.02) 0.00 (0.06) 0.00
0.00 (0.99) 0.00 (0.99)
--------- --------- --------- --------
(0.02) (0.99) (0.06) (0.99)
--------- --------- --------- --------
$13.24 $16.65 $13.24 $16.83
======= ========= ========= ========
6.0 33.4 (2.1) 34.8
2.69(b) 2.57 1.79(b) 1.57
Net Assets (%) 0.31(b) (1.08) 2.26(b) (0.08)
100 142 100 142
$20,096 $45,672 $196 $5,569
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge of 5.75% maximum was not reflected in Class A
total return calculations. Periods less than one year are not
annualized.
(d) The Manager agreed to voluntarily reduce the management fee to an
annual rate of 1.00%, and the Advisers agreed to reduce their
advisory fee to the annual rate of 0.50%, until December 31,
1994. The ratio of operating expenses to average net assets for
Class A, B, C, and Y without giving effect to the voluntary
expense limitations would have been 1.98%, 2.75%, 2.75% and
1.90%, respectively, for the period ended December 31, 1994.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
The Fund is a series of New England Funds Trust I, a Massachusetts
business trust (the OTrustO), and is registered under the Investment
Company Act of 1940, as amended, (the O1940 ActO) 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 OFundO).
The Fund offers Class A, Class B, Class C and Class Y shares. The Fund
commenced its public offering of Class A, Class B and Class C shares
on July 7, 1994. Class Y shares commenced operations November 15,
1994. Class A shares are sold with a maximum front end sales charge of
5.75%. Class B shares do not pay a front end sales charge, but pay a
higher ongoing distribution fee than Class A shares for eight years
(at which point they automatically convert to Class A shares), and are
subject to a contingent deferred sales charge if those shares are
redeemed within five years of purchase. Class C shares do not pay
front end or contingent deferred sales charges and do not convert to
any other class of shares, but they do pay a higher ongoing
distribution fee than Class A shares. Class Y shares do not pay a
front end sales charge, a contingent deferred sales charge or
distribution fees. They are intended for institutional investors with
a minimum of $1,000,000 to invest. Expenses of the Fund are borne pro-
rata by the holders of each class of shares, except that each class
bears expenses unique to that class (including the Rule 12b-1 service
and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class
would receive their pro-rata share of the net assets 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
value.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
B.SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME.Security
transactions are accounted for on the trade date (the date the buy or
sell is executed). Dividend income is recorded on the ex-dividend date
and interest income is recorded on the accrual basis. Interest income
for the Fund is increased by the accretion of discount. In determining
net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
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.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from 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 FundOs 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 at fiscal year end, resulting from changes in
the exchange rate.
FORWARD FOREIGN CURRENCY CONTRACTS.The Fund may use foreign currency
contracts to facilitate transactions in foreign securities and to
manage the FundOs currency exposure. Contracts to buy generally are
used to acquire exposure to foreign currencies, while contracts to
sell are used to hedge the FundOs 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 FundOs 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 OForward Currency Contracts
Outstanding.O This amount represents 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 contractsO terms.
All contracts are Omarked-to-marketO daily at the applicable
translation rates and any gains or losses are recorded for financial
statement purposes as unrealized until settlement date. Risks
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
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.
D.FEDERAL INCOME TAXES.The Fund intends to meet the requirements of
the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its income and
any net realized capital gains, at least annually. Accordingly, no
provision for federal income tax has been made.
E.DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS.Dividends and
distributions are recorded on the ex-dividend date. The timing and
characterization of certain income and capital gains distributions are
determined in accordance with federal tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for organization costs and
foreign currency transactions for book and tax purposes. Permanent
book and tax basis differences will result in reclassification to
capital accounts.
F.REPURCHASE AGREEMENTS.The Fund, through its custodian, receives
delivery of the underlying securities collateralizing repurchase
agreements. It is the FundOs policy that the market value of the
collateral be at least equal to 100% of the repurchase price. Each
adviser is responsible for determining that the value of the
collateral is at all times at least equal to the repurchase price.
Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the portfolioOs ability to dispose of the underlying
securities.
G.ORGANIZATION EXPENSE.Costs incurred in fiscal 1994 in connection
with the FundOs organization and registration, amounting to
approximately $165,000 in the aggregate, were paid by the Fund and are
being amortized by the Fund over 60 months.
2.PURCHASES AND SALES OF SECURITIES (excluding short-term investments)
for the Fund for the year ended December 31, 1995 were $621,722,546
and $411,620,163, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
Transactions in forward currency contracts for the Star Advisers Fund
for the year ended December 31, 1995 are summarized as follows:
<TABLE><CAPTION>
<S> <C>
SALES OF
CONTRACTS
-----------
AGGREGATED FACE
VALUE OF CONTRACTS
Open at December 31, 1994 $5,222,139
Contracts opened 51,794,935
Contracts closed (46,455,242)
------------
Open at December 31, 1995 $10,561,832
=============
</TABLE>
3A.MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.The Fund
pays management fees to its adviser, New England Investment Companies,
L.P. (the OAdviserO) at the annual rate of 1.05% of the FundOs average
daily net assets. The Adviser pays the FundOs four investment
Subadvisers, Berger Associates, Inc., Founders Asset Management, Inc.,
Janus Capital Corporation and Loomis, Sayles & Company, L.P. (the
OSubadvisersO) at the rate of 0.55% of the first $50 million of the
average daily net assets of the segment of the Fund that Subadviser
manages and 0.50% of such assets in excess of $50 million. Certain
officers and directors of the Adviser and Loomis, Sayles are also
officers or trustees of the Fund. Loomis, Sayles is a wholly owned
subsidiary of the Adviser, which is a majority owned subsidiary of New
England Mutual Life Insurance Company. Fees retained by the Adviser
and paid to each Subadviser under the management agreement in effect
during the year ended December 31, 1995 are as follows:
<TABLE><CAPTION>
<C> <S>
FEES EARNED
----------
$1,785,925 New England Investment Companies, L.P.
438,676 Berger Associates, Inc.
474,560 Founders Asset Management, Inc.
466,726 Janus Capital Corporation
433,843 Loomis, Sayles & Company, L.P.
----------
$3,599,730
==========
</TABLE>
Effective January 1, 1996, New England Funds Management, L.P. became
the adviser for the Fund with the aforementioned subadvisers remaining
in that role.
B.ACCOUNTING AND ADMINISTRATIVE EXPENSE.New England Funds, L.P. (ONew
England FundsO), the FundOs distributor, is a wholly owned subsidiary
of the Manager and performs certain accounting and administrative
services for the Fund. The Fund reimburses New
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
England Funds for all or part of New England FundsO 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 year ended December 31, 1995, these expenses amounted to
$53,185 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 year ended December
31, 1995, the Fund paid New England Funds $661,230 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 FundOs Class
A shares (the OClass A PlanO) and Service and Distribution Plans
relating to the FundOs Class B and Class C shares (the OClass B and
Class C PlansO)
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 FundOs 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 year ended December
31, 1995, the Fund paid New England Funds $404,530 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 FundOs Class B and Class C
shares, as compensation for services provided and expenses (including
certain payments to securities dealers, who may be affiliated with New
England Funds) incurred by New England Funds in providing personal
services to investors in Class B shares and/or the maintenance of
shareholder accounts. For the year ended December 31, 1995 the Fund
paid New England Funds $364,619 and $81,994 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 FundOs 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
Class B and Class C shares. For the year ended December 31, 1995, the
Fund paid New England Funds $1,093,857 and $245,983 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 year ended December 31, 1995 amounted to $3,301,796.
E.TRUSTEES FEES AND EXPENSES.The Fund does not pay any compensation
directly to its officers or trustees who are directors, officers or
employees of Loomis, Sayles, New England Funds, New England Investment
Companies or their affiliates, other than registered investment
companies. Each other trustee is compensated by the Fund as follows:
Annual Retainer $2,400
Meeting Fee $125/meeting
Committee Meeting Fee $75/meeting
Committee Chairman Retainer $125/year
A deferred compensation plan is available to the trustees on a
voluntary basis. Each participating trustee will receive an amount
equal to the value that such deferred compensation would have had, had
it been invested in the Fund on the normal payment date.
5.CAPITAL SHARE TRANSACTIONS.At December 31, 1995 there was an
unlimited number of shares of beneficial interest authorized, divided
into four classes, Class A, Class B, Class C and Class Y capital
stock. Transactions in capital shares were as follows:
<TABLE><CAPTION>
FOR PERIOD ENDED
JULY 7, 1994 (A) THROUGH YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold 7,055,843 $91,678,940 7,642,009 $114,044,926
Shares issued in
connection with
the reinvestment of:
Distributions from
net investment
income 22,963 302,422 0 0
--------- --------- -------- ---------
Distributions
from net realized
gain 0 0 699,829 11,487,826
--------- --------- -------- ---------
7,078,806 91,981,362 8,341,838 125,532,752
Shares repurchased (194,900) (2,569,369) (1,903,090) (29,310,909)
--------- ----------- ----------- ------------
Net increase 6,883,906 $89,411,993 6,438,748 $96,221,843
========= =========== =========== ===========
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
FOR PERIOD ENDED
JULY 7, 1994 (A) THROUGH YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------- --------- --------- -------- ---------
Shares sold 5,594,561 $72,768,453 7,922,819 $119,214,783
Shares issued in
connection with
the reinvestment of:
Distributions from
net investment
income 7,373 97,026 0 0
Distributions from
net realized
gain 0 0 669,488 10,909,794
--------- --------- -------- ---------
5,601,934 72,865,479 8,592,307 130,124,577
Shares repurchased (93,876) (1,217,228) (872,820) (13,578,971)
--------- --------- -------- ---------
Net increase 5,508,058 $71,648,251 7,719,487 $116,545,606
========= =========== ========== ===========
FOR PERIOD ENDED
JULY 7, 1994 (A) THROUGH YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------- --------- --------- -------- ---------
Shares sold 1,579,105 $20,467,118 1,635,044 $24,683,156
Shares issued in
connection with
the reinvestment of:
Distributions from
net investment
income 1,572 20,688 0 0
Distributions from
net realized
gain 0 0 141,224 2,303,183
--------- --------- -------- ---------
1,580,677 20,487,806 1,776,268 26,986,339
Shares repurchased (62,704) (827,121) (550,549) (8,352,576)
--------- --------- -------- ---------
Net increase 1,517,973 $19,660,685 1,225,719 $18,633,763
========= =========== ========== ===========
<PAGE>
NOTES TO FINANCIAL STATEMENTS-CONTINUED
December 31, 1995
FOR PERIOD ENDED
JULY 7, 1994 (A) THROUGH YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------- ----------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
- --------- --------- --------- -------- ---------
Shares sold 14,720 $200,196 316,907 $4,921,298
Shares issued in
connection with
the reinvestment of:
Distributions from
net investment
income 64 839 0 0
Distributions from
net realized
gain 0 0 13,920 228,884
--------- --------- -------- ---------
14,784 201,035 330,827 5,150,182
Shares repurchased (2) (26) (14,699) (229,909)
--------- --------- -------- ---------
Net increase 14,782 $0201,009 316,128 $4,920,273
--------- --------- -------- ---------
Increase derived
from capital
shares transactions 13,924,719 $180,921,938 15,700,082 $236,321,485
========= =========== ========== ===========
</TABLE>
[FN]
(a)Commencement of Operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of NEW ENGLAND STAR ADVISERS
FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio composition, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
New England Star Advisers Fund (the OFundO) at December 31, 1995, the
results of its operations for the year then ended, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred
to as Ofinancial statementsO) are the responsibility of the FundOs
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at December 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were
not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 9, 1996
<PAGE>
SHAREHOLDER MEETING
(unaudited)
At a special shareholdersO meeting held on December 28, 1995,
shareholders of the Star Advisers Fund voted for the following
proposals:
<TABLE><CAPTION>
VOTED ABSTAINED
VOTED FOR AGAINST VOTES
---------- --------- --------
<S> <C> <C> <C>
1. To approve new
investment advisory
arrangement to be
effective upon the
merger of New
England Mutual
Life Insurance
Company into
Metropolitan Life
Insurance Company,
such arrangement to
be substantially
identical to the
investment advisory
arrangements in effect
for the Fund
immediately prior
to such merger. 13,781,194.749 212,826.865 398,053.947
============== =========== ===========
2. To approve a new
Advisory Agreement
between the Fund and
New England Funds
Management, L.P.
(ONEFMO); and 13,661,604.363 292,334.813 437,505.385
============== =========== ===========
3. To approve separate
Sub-Advisory
Agreements
between NEFM and
the FundOs four
current sub-advisers. 13,616,433.649 299.587.442 475,423.470
============== =========== ===========
<PAGE>
SHAREHOLDER MEETING (CONTINUED)
BROKER
NON-VOTES TOTAL VOTES
--------- -----------
<C> <C>
14,392,075.561
631.000 14,392,075.561
========
631.000 14,392,075.561
=======
</TABLE>
<PAGE>
REGULAR INVESTING PAYS
FIVE GOOD REASONS TO INVEST REGULARLY
1. ItOs an easy way to build assets
2. ItOs convenient and effortless
3. It requires a low minimum to get started
4. It can help you reach important long-term goals like retirement
or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England FundsO automatic investment
program, you can invest as little as $50 a month in your New
England Fund automatically - without even writing a check. And,
as you can see from the chart below, your monthly investments can
really add up over time.
THE POWER OF MONTHLY INVESTING
[A line graph appears here, illustrating the hypothetical accumulation
of monthly investments at an 8% annual rate of return. The data points
of the graph are as follow:]
Monthly investments of $50
Years Growth of Monthly Investments
0 $0
5 $3,661
10 $9,040
15 $16,943
20 $28,555
25 $45,618
Monthly investments of $100
Years Growth of Monthly Investments
0 $0
5 $7,322
10 $18,079
15 $33,886
20 $57,111
25 $91,236
Monthly investments of $200
Years Growth of Monthly Investments
0 $0
5 $14,643
10 $36,158
15 $67,772
20 $114,222
25 $182,472
Monthly investments of $500
Years Growth of Monthly Investments
0 $0
5 $36,608
10 $90,396
15 $169,429
20 $285,555
25 $456,181
For illustrative purposes only. These figures represent hypothetical
accumulation at an 8% annual rate of return, and are not indicative of
future performance of any New England Fund. The value of a New England
Fund will fluctuate with changing market conditions.
This program cannot assure a profit nor protect against a loss in a
declining market. It does, however, ensure that you buy more shares
when the price is low and fewer shares when the price is high.
You can start an Investment Builder program with your current New
England Fund account, or with any of our other funds. To open an
Investment Builder account today, call your financial representative
or New England Funds at 1-800-225-5478.
<PAGE>
INFORMATION ON CALL
YOU CAN CALL NEW ENGLAND FUNDS DAY OR NIGHT
Do you like to keep on top of your New England Funds but canOt always
call us during regular business hours? With Tele#Facts, New England
FundsO 24-hours a day automated telephone system, you can call us any
time thatOs convenient for you - day or night!
By calling 1-800-346-5984 from any Touch-Tone(R) telephone, you can:
- - Check the current value of your New England Fund account
- - Find out the current yield and total return on any New England Fund
- - Buy, sell or exchange fund shares
Just remember to have these four items with you before calling:
1.YOUR PERSONAL IDENTIFICATION NUMBER which is the last four digits of
your Social Security number
2.THE FUND NUMBER - two- or three-digit number listed on the
Tele#Facts
wallet card
3.FUNCTION NUMBER - listed on the Tele#Facts wallet card
4.ACCOUNT NUMBER - listed on all your statements
You can get the information you need to use Tele#Facts from the back
of your statement. If you need another Tele#Facts wallet card or have
questions about getting started, please call us at 1-800-225-5478.
So go ahead and give Tele#Facts a try. We think youOll enjoy this easy-
to-use and convenient service from New England Funds!
<PAGE>
SAVING FOR RETIREMENT
AN EARLY START CAN MAKE A BIG DIFFERENCE
With todayOs lengthening life spans, you may be retired for 20 years
or more after you complete your working career. Living these
retirement years the way youOve dreamed of will require considerable
financial resources. While itOs never too late to start a retirement
savings program, itOs certainly never too early: The sooner you begin,
the longer the time your money has to grow.
The chart below illustrates this point dramatically. One investor
starts at age 30, saves for just 10 years, then leaves the investment
to grow. The second investor starts 10 years later but saves much
longer - for 25 years, in fact. Can you guess which investor
accumulates the greater retirement nest egg?
For the answer, look at the chart.
AN EARLY START CAN MAKE A BIG DIFFERENCE
[A chart in the form of a line graph appears here, comparing the
growth of investments made for 10 years by an investor who begins
investing at age 30 to the growth of investments made for twenty-five
years by an investor who begins investing at age 40. A hypothetical
appreciation of 10% is assumed. The data points from the graph are as
follows:]
Investor A - Begins at age 30 for 10 years:
Age Growth of Investments
30 $2,000
35 $15,431
40 $35,062
45 $90,943
55 $146,464
60 $235,882
65 $379,890
Investor B - Begins investing at age 40 for 25 years:
Age Growth of Investments
40 $2,000
45 $15,431
50 $37,062
55 $71,899
60 $128,005
65 $216,364
Assumes 10% hypothetical appreciation. For illustrative purposes only
and not indicative of future performance of any New England Fund.
Investor A invested $20,000, less than half of investor BOs commitment
- - and for less than half the time. Yet investor A wound up with a much
greater retirement nest egg. The reason? ItOs all thanks to an early
start.
New England Funds has prepared a number of informative retirement
planning guides. Call your financial representative or New England
Funds today, and ask for the guide that best fits your personal needs.
<PAGE>
NEW ENGLAND FUNDS
STOCK FUNDS
Growth Fund of Israel
International Equity Fund
Star Worldwide Fund
GROWTH FUND
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
BOND FUNDS
High Income Fund
Strategic Income Fund
Government Securities Fund
Bond Income Fund
Limited Term U.S. Government Fund
Adjustable Rate U.S. Government Fund
TAX EXEMPT FUNDS
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.
New England Funds, L.P.
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors
when it is preceded or accompanied by the FundOs current prospectus,
which contains information about distribution charges, management and
other items of interest. Investors are advised to read the prospectus
carefully before investing.
<PAGE>
Bulk Rate
U.S. Postage
Paid
Brockton, MA
Permit No. 770
[LOGO]
NEW ENGLAND FUNDS
WHERE THE BEST MINDS MEET
399 Boylston Street
Boston, Massachusetts
02116
[LOGO]
QUALITY
TESTED SERVICE
1996
DALBAR
HONORS COMMITMENT TO:
INVESTORS
CA56
[RECYCLE LOGO] PRINTED ON RECYCLED PAPER
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OSee accompanying notes to the financial statementsO)
are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points, and similar graphic symbols are omitted.
(7) Page numbering is different.
