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NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
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SEMIANNUAL REPORT AND PERFORMANCE UPDATE
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NEW ENGLAND
STAR ADVISERS FUND
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JUNE 30, 1996
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July 25, 1996
DEAR SHAREHOLDER,
New England Funds welcomes the opportunity to present you with the 1996
Semiannual Report for New England Star Advisers Fund, containing your portfolio
managers' commentaries and complete financial information.
ECONOMIC GROWTH IN THE FIRST HALF OF 1996
Moderate growth with low inflation was the economic story during the first
half of 1996. U.S. Gross Domestic Product (GDP), a bellwether of economic
growth, remained strong at 2.3% through June, just shy of what most economists
consider optimal growth. As a result, the Federal Reserve Board opted not to
tinker with interest rates through the first half of the year, save for a
quarter-point ease in short-term rates in late January. The relatively calm
economic waters had a stimulating effect on the domestic equity market, boosting
stocks 537 points to 5,654 at the end of June, as measured by the Dow Jones
Industrial Average. Bond yields did not fare as well, rising to 7.00% at the end
of June from 6.65% earlier in the year. Money market yields remained stable,
falling back only slightly during the past six months.
THE BENEFITS OF MAINTAINING A LONG-TERM FOCUS
But the market volatility of the first three weeks in July claimed 5.5% of
the Dow Jones Industrial Average's first-half gains. Again, we are reminded that
no bull market lasts forever. Long-term financial goals are key in times like
these and it's important to anticipate this type of market volatility and remain
committed to your financial plan.
It's also a good idea to ask your financial representative for help. A
financial representative can guide you through volatile markets and help you
meet your long-term financial goals. A recent study by Dalbar, Inc., a mutual
fund monitoring and analytical service, shows that, on average, mutual fund
investors who bought and held shares, with the assistance of a financial
representative, enjoyed the benefits of a long-term commitment. Consequently,
they benefitted from higher returns than direct investors and others who bought
and sold, although this does not occur in every case.
CELEBRATING THE BIRTHDAYS OF THREE NEW ENGLAND FUNDS
During the past two months, we've celebrated the birthdays of three of our
most popular funds: New England Growth Opportunities Fund; New England Strategic
Income Fund and New England Star Advisers Fund. Demonstrating the remarkable
scope and breadth of our funds, the Growth Opportunities Fund celebrated its
65th birthday in May while the fast-growing Strategic Income and Star Advisers
Funds marked their first and second birthdays, respectively. We're proud of all
of our funds, but take special pride in recognizing that, whether six months or
65-years-old, all New England Funds are designed to help investors achieve their
goals.
NEW ENGLAND FUNDS: THE PLACE "WHERE THE BEST MINDS MEET"(TM)
The longevity of our more seasoned funds and the potential for growth of our
newer ones illustrates the ongoing progress of New England Funds. Our unique
multiple-adviser approach brings together some of the best minds in the
investment business. The ability to attract top-notch investment advisers and
our multiple-adviser approach to fund management are the cornerstones of New
England Funds' investment philosophy and the essence of our corporate logo,
Where The Best Minds Meet(TM).
OUTLOOK FOR THE REST OF 1996
Going forward, we anticipate that the economy will continue to grow
moderately and that inflationary pressures will not be excessive. While we
estimate the GDP may rise somewhat from its current level of 2.3%, the Federal
Reserve should be reluctant to tighten the money supply by raising short-term
interest rates. We also believe that the equity markets will continue to be
volatile through the rest of the year.
We believe that you will find your portfolio manager commentary informative.
If you have any questions or comments, please contact your financial
representative or New England Funds directly at 800-225-5478.
Sincerely,
/s/ Henry L.P. Schmelzer
Henry L.P. Schmelzer, President
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NEW ENGLAND STAR ADVISERS FUND
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INVESTMENT RESULTS THROUGH
JUNE 30, 1996
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities
index measures the performance of a theoretical portfolio. Unlike a fund, the
index is unmanaged; there are no expenses that affect the results. In addition,
few investors could purchase all of the securities necessary to match the
index. And, if they could, they would incur transaction costs and other
expenses.
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NEW ENGLAND STAR ADVISERS FUND
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TOTAL RETURNS FOR PERIOD ENDED 6/30/96
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CLASS A (Inception 7/7/94) YEAR TO DATE 1 YEAR SINCE INCEPTION
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Net Asset Value(1) 12.64% 31.40% 27.18%
With Max. Sales Charge(2) 6.18 23.85 23.45
Lipper Growth Average(5) 10.08 22.20 23.19
CLASS B (Inception 7/7/94) YEAR TO DATE 1 YEAR SINCE INCEPTION
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Nt Asset Value(1) 12.27% 30.46% 26.29%
With CDSC(3) 8.27 26.46 25.08
Lipper Growth Average(5) 10.08 22.20 2.019
CLASS C (Inception 7/7/94) YEAR TO DATE 1 YEAR SINCE INCEPTION
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Net Asset Value(1) 12.19 30.52% 26.30%
Lipper Growth Average(5) 10.08 22.20 23.19
CLASS Y
(Inception 11/15/94)* YEAR TO DATE 1 YEAR SINCE INCEPTION
- ---------------------- ------------ ------ ---------------
Net Asset Value(1) 12.72 31.70% 27.57%
Lipper Growth Average(5) 10.08 22.20 n/a
These returns represent past performance. Investment return and principal value
will fluctuate so that shares, upon redemption, may be worth more or less than
original cost.
*Class Y shares are available only to certain institutional investors.
NOTES TO CHARTS AND PERFORMANCE UPDATE
(1)Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
(2)With Maximum Sales Charge (MSC) performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at the time of
purchase of Class A shares.
(3)With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum 4%
sales charge is applied to a redemption of Class B shares. The sales charge
will decrease over time, declining to zero five years after the purchase of
shares. Class Y shares are not subject to a sales charge.
(4)Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing the
performance of 500 major companies, most of which are listed on the New York
Stock Exchange. The S&P 500 performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments.
(5)Lipper Average is an average of the total return performance (calculated on
the basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund ranking
service.
(6)The Russell 2000 Small Cap Index is an unmanaged index commonly used to gauge
small-stock performance.
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NEW ENGLAND STAR ADVISERS FUND
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A $10,000 Investment Compared to Standard & Poor's 500(4)
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Class A NAV MSC S&P 500
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7-Jul-94 $10,000 $9,425 $10,000
3Q 94 $10,656 $10,043 $10,489
4Q 94 $10,638 $10,026 $10,487
1Q 95 $11,240 $10,594 $11,505
2Q 95 $12,252 $11,547 $12,599
3Q 95 $13,833 $13,038 $13,597
4Q 95 $14,293 $13,471 $14,413
1Q 96 $15,272 $14,393 $15,186
2Q 96 $16,098 $15,172 $15,866
Class B NAV CDSC S&P 500
- -------- ------- ------- -------
7-Jul-94 $10,000 $10,000 $10,000
3Q 94 $10,640 $10,640 $10,489
4Q 94 $10,600 $10,600 $10,487
1Q 95 $11,176 $11,176 $11,505
2Q 95 $12,170 $12,170 $12,599
3Q 95 $13,717 $13,717 $13,597
4Q 95 $14,142 $13,742 $14,413
1Q 96 $15,085 $14,658 $15,186
2Q 96 $15,875 $15,026 $15,866
Class C NAV S&P 500
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7-Jul-94 $10,000 $10,000
3Q 94 $10,640 $10,489
4Q 94 $10,604 $10,487
1Q 95 $11,181 $11,505
2Q 95 $12,166 $12,599
3Q 95 $13,719 $13,597
4Q 95 $14,145 $14,413
1Q 96 $15,079 $15,186
2Q 96 $15,870 $15,866
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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.
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NEW ENGLAND STAR ADVISERS FUND
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NEW ENGLAND STAR ADVISERS FUND
PERFORMANCE UPDATE
The popularity of the unique New England Star Advisers Fund continued in 1996,
as new investments brought total assets through June to over $66 million. The
rapid growth of this two-year-old fund is evidence of the strong appeal of its
distinctive, multiple-adviser approach to investment management. As of June 30,
shareholders numbered more than 53,000.
The Fund's concept -- having four prominent stock fund managers compete with one
another to seek attractive returns -- is unique in the mutual fund industry.
Each manager pursues the objective of long-term growth using a different
investment style. Spreading shareholder assets across four distinct investment
disciplines is a strategy intended to reduce the risk associated with management
by a single adviser and enhance the opportunity for gain.
On the following pages, you'll read how the advisers managed their portions of
the portfolio during the first two quarters of the year, and learn how their
investment decisions contributed to Fund performance.
How Your Fund Performed
Benefiting from strong corporate earnings and a favorable interest rate climate,
your Fund outperformed the S&P 500(4) benchmark and posted exceptional returns
for the first half of 1996. Net asset value returns through June 30, 1996 were
12.64%, 12.27% and 12.19% for Class A, B and C shares, respectively.
We hope the information provided in this report serves to confirm your choice of
New England Star Advisers as a vehicle for pursuing your long-term investment
goals.
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PHOTO OF
JEFFREY PETHERICK
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PHOTO OF
MARY CHAMPAGNE
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LOOMIS SAYLES
& COMPANY
STAR ADVISERS FUND PERFORMANCE UPDATE
Jeffrey Petherick, Mary Champagne
Loomis, Sayles & Company, L.P.
Through mid-year, the economic environment was good for small stocks, as
investors began to favor niche-oriented companies. This shift from 1995's
emphasis on large-cap issues served our portfolio well, given its small stock
focus.
We concentrated on finding undervalued, growing companies that were dominant, or
are becoming dominant, in a specific market sub-segment. Throughout the first
half of 1996, these included leaders in energy, oil and gas, and consumer
cyclicals.
Energy stocks were among the portfolio's best performers. Global Industries,
which lays pipe for offshore drilling activity, and Belden and Blake, an oil and
gas producer located in the Appalachian Basin, are good examples of leading
small companies that have benefited from recent foreign exploration and higher
oil and gas prices.
Another growth area has been business services, especially the temporary help
segment. CDI, which serves both the technology and automotive arenas, was up 88%
for the first six months of 1996. Career Horizons was up over 100% when we sold
it earlier this year.
Early in 1996, we increased our weighting in consumer cyclicals -- retail
stores, restaurants and other consumer services -- and reaped the rewards.
Healthy consumer spending in the first and second quarters enhanced the growth
of investments such as Ann Taylor, a retailer of upscale women's clothing and
Cole National, a specialty eyewear and giftware retailer.
We have deliberately limited investments in the technology sector for most of
1996. Our 7% level was significantly below the 12% average for the Russell 2000
Small Cap Index.(6) However, the sector's correction in June presented a buying
opportunity, and we plan to add to our technology exposure further in the coming
months.
We expect that the economy will grow slowly for the balance of the year, and
that interest rates will remain at their current levels. Given this scenario,
the earnings growth of small, niche-oriented companies should support a renewed
focus on small capitalization issues. Those companies which target affluent baby
boomers and older consumers should do particularly well.
We do not anticipate making major changes in portfolio structure or in sector
weightings. We plan to take profits aggressively, eliminate any non-performers
and continue to pursue added value through disciplined stock selection. Given
the market outlook, we believe the portfolio is well positioned for the months
ahead.
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LARGEST HOLDINGS, % OF FUND'S NET ASSETS
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o Allied Group, Inc., 0.40% Insurance company
o WMS Industries, Inc., 0.37% Casino hotels
o Patriot American Hospitality, Inc., 0.34% Real estate cmpany
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PHOTO OF
Warren Lammert
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(Logo)
Janus Capital Corporation
STAR ADVISERS FUND
PERFORMANCE UPDATE
Warren Lammert, Janus Capital Corporation
The U.S. economy was stronger than expected during the first half of 1996.
Employment, retail sales and business investment spending all rose, while
inflation and wage pressures remained subdued. This created a positive
environment for corporate earnings, and ultimately, for equity investors.
I maintained significant commitments during the period in four key industry
areas: technology, pharmaceuticals, banking, and business services. However, I
sold a number of individual names within these groups and initiated new
positions.
The strength in capital spending provided an especially positive economic
backdrop for the portfolio's technology holdings. Fund performance benefited
from our investments in the inter-networking industry, including Cisco, Xylan,
Ascend, US Robotics and Stratacom, all of which enjoyed strong earnings growth
for the period.
In the hospitality sector, Hospitality Franchise Systems -- a franchising
company operating in the hotel and real estate brokerage businesses -- made a
significant contribution to our performance during the first half of 1996.
The increase in long-term interest rates during the period created a difficult
environment for financial and pharmaceutical stocks. In addition, two companies
in the business services area, Danka Business Systems and Alco Standard, both of
which sell and service copy machines, had disappointing results and saw
significant declines in price.
My investment outlook for the next six months is positive based on the strong
fundamentals and reasonable valuations of the companies in the portfolio. Of
concern is a further rise in interest rates which would make me assess stock
valuations more conservatively.
I will watch for continued signs of weakness in capital spending, which appears
to be having a negative effect on the computer industry. Sustained weakness may
prompt us to rethink our commitment to the technology sector. An economic
slowdown, however, would be positive for interest rates and for our holdings in
less economically sensitive industries such as banks and pharmaceuticals.
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LARGEST HOLDINGS, % OF FUND'S NET ASSETS
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o Eli Lilly & Co., 1.55% Drug and healtcare manufacturer
o Wells Fargo & Co., 1.08% Bank
o Centocor, Inc., 0.94% Drug and healthcare manufacturer
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PHOTO OF
EDWARD KEELY
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(Logo)
FOUNDERS
STAR ADVISERS FUND
PERFORMANCE UPDATE
Edward Keely, Founders Asset Management
Late in 1995, I positioned the portfolio for the slower growth I expected in
1996, selling more aggressive holdings and increasing exposure to large-cap
stocks with stable earnings and high recurring revenues.
In March, when it became clear that consumer spending was strong and the economy
wasn't slowing, the portfolio's position was reduced in more conservative
issues -- pharmaceutical, medical device and financial service companies -- in
favor of a more aggressive posture, buying faster growing, mid-cap companies in
the technology sector. The June sell-off in technology issues provided
additional investment opportunities at extremely reasonable valuations.
During the second quarter, I added to our positions in Parametric Technology, a
mechanical design software company with sizeable sales in the automotive
industry both here and abroad, and PeopleSoft, a leader in client server
technology for human resource applications. Sun Microsystems, a manufacturer of
computer work stations, servers and super computers, is a recent favorite, given
its strong new product cycle.
Healthy consumer spending made retail stocks the biggest contributor to the
portfolio's year-to-date performance. The Gap stores -- up 52% through
June 30 -- produced gains for the Fund, as did the luxury goods retailer, Gucci
Group, up a sizeable 67%. Home Depot and Federated Department Stores also saw
good price appreciation and excellent earnings.
Our exposure to the gaming and leisure sector has also been profitable in 1996.
Especially notable are our positions in ITT, Mirage Resorts and Sun
International.
New opportunities emerged in the international arena. I participated in the
initial public offering of Korea Mobile, Korea's leading cellular
telecommunications company. Once wholly government-owned, this quickly growing
service company is selling at a low cash flow multiple. In western Europe, Oce
Van Der Grinten caught our eye with its streamlined, technologically advanced
full color copier. The product has a potentially big future and may boost the
company's sales and profits.
For the remainder of 1996, I expect to see moderate economic growth. Interest
rates -- both short and long -- shouldn't change unless we see an acceleration
in the inflation rate. All in all, I believe there's modest upside potential in
the market at current levels. Investors can expect a fairly smooth ride barring
any election surprises.
This should continue to be a "stock picker's" market, one where finding
outstanding issues will be increasingly difficult. I plan to enhance shareholder
value by aggressively selling stocks whose fundamentals start to deteriorate,
and buying companies that appear likely to meet or best earnings expectations.
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LARGEST HOLDINGS, % OF FUND'S NET ASSETS
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o Ascent Communications, Inc., 0.62% Computer & business
equipment manufacturer
o U.S. Robotics Corp., 0.55% Electronics company
o Newbridge Networks Corp., 0.50% Electronics company
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PHOTO OF
RODNEY LINAFELTER
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(Logo)
STAR ADVISERS FUND
PERFORMANCE UPDATE
Rodney Linafelter, Berger Associates
A tremendous inflow of capital into equity investments, especially into the
growth sector, fueled stock prices over the last six months. Meanwhile, the
impact of rising commodity prices, inflation fears and a 1.25% jump in interest
rates tempered the market's rise.
Throughout the first half of the year "momentum investing" was the norm as
buyers continued to favor those stocks that had performed well in 1995 and early
1996. This buying drove prices to extreme valuations. As a consequence,
identifying growth companies at attractive prices was unusually challenging.
I did find a significant number of buying opportunities in consumer cyclicals.
Expectations for the group were so low in early '96 that many of these stocks
were trading at reasonable valuations. Examples include Hospitality Franchise
Services (HFS), the largest hotel franchiser in the world, which has grown at
50% for several years and, at mid-year, continues to offer good future
prospects; Gucci Group, which benefited from increased first and second quarter
spending on luxury goods; and Tommy Hilfiger, a men's casual clothing designer
and manufacturer whose share price rose thanks to relaxed dress codes in the
workplace.
I also took advantage of weakness in technology stocks, increasing our holdings
from 15% early in the year back up to 22%. Among these purchases were Intel and
Microsoft, as well as HBO and Company, a manufacturer of information systems
used to automate the back-rooms of hospitals and medical offices.
Another area where I foresaw an evolving, long-term earnings story is the energy
service sector -- companies that provide crews and machinery for the drilling
and completion of oil and gas wells. This category of stocks currently comprises
about 15% of the portfolio.
One industry where I have reduced exposure thus far in 1996 is health care. Most
of my sales involved managed care companies which have been under significant
price pressure due to medical loss ratios.
Year to date, the portfolio's average cash position has been 12%. This level
enabled us to buy many securities at prices we think are highly attractive,
following the setback in stock prices in June.
My outlook remains cautious for the remainder of the year, given uncertainty
over the pace of economic growth, the direction of interest rates, and the
tremendous wild card presented by the election.
I do not anticipate making major changes in the portfolio's structure or
composition during the balance of 1996. Even in the face of economic
uncertainty, I will continue to focus my attention on reasonably priced issues
with strong fundamentals that aim to generate above-average earnings gains.
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LARGEST HOLDINGS, % OF FUND'S NET ASSETS
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o Baxter International, Inc., 0.64% Drug and healthcare manufacturer
o Falcon Drilling, 0.41% Gas and pipeline utilities
o Fila Holdings, SPA, 0.39% Apparel company
INDUSTRY CONCENTRATIONS REFLECT
DIFFERENT MARKET EXPECTATIONS
Diverse strategies and analytical styles focused on the same objective can lead
to very different portfolio compositions. Far from canceling each other out,
these individual strategies complement one another and lead to greater
diversification for better performance potential over time.
TOP INDUSTRY GROUPS BY INVESTMENT ADVISER*
June 30, 1996
[A chart in the form of a bar graph appears here illustrating the top industry
composition by individual investment sub-advisers. The industry group and
percentage invested by each sub-adviser as of 6/30/96 are as follows:]
Berger % Founders % Janus % Loomis % Star Advisers %
Drugs & Health Care 3.7 3.5 3.9 2.0 13.1
Electronics 3.0 3.3 6.3
Business Services 3.1 2.6 5.7
Computers & Business
Equipment 5.6 5.6
Software 3.4 2.2 5.6
Retail 1.8 2.6 4.4
Communication Services 1.2 1.8 3.0
Insurance 2.8 2.8
Chemicals 2.2 2.2
Petroleum Services 2.0 2.0
Real Estate 1.7 1.7
Financial Services 1.2 1.2
* Portfolio composition is subject to change.
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NEW ENGLAND FUNDS
Where The Best Minds Meet(TM)
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PORTFOLIO COMPOSITION, FINANCIAL STATEMENTS AND HIGHLIGHTS
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NEW ENGLAND
STAR ADVISERS FUND
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JUNE 30, 1996
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PORTFOLIO COMPOSITION
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Investments as of June 30, 1996
(unaudited)
COMMON STOCK -- 89.3% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE(a)
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AEROSPACE--0.9%
25,000 Boeing Co. .................................... $ 2,178,125
19,000 Computer Sciences Corp. (Rights) (c) .......... 1,420,250
18,000 Lockheed Martin Corp. ......................... 1,512,000
39,400 Whittaker Corp. ............................... 728,900
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5,839,275
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AIR TRAVEL--0.8%
80,000 America West Airlines, Inc., Class B (c) ...... 1,760,000
25,000 Atlas Air, Inc. (c) ........................... 1,437,500
180,000 Singapore Airlines ............................ 1,900,780
18,700 Trans World Airlines, Inc. .................... 266,474
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5,364,754
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APPAREL & TEXTILES--3.1%
16,000 Adidas ........................................ 1,345,873
47,500 Cole Kenneth Productions, Inc., Class A ....... 938,125
47,525 Fila Holdings. SPA (ADR) (d) .................. 4,099,031
108,475 Gucci (c) ..................................... 6,996,637
50,900 Jones Apparel Group, Inc. (c) ................. 2,500,463
18,800 Nike, Inc., Class B ........................... 1,931,700
17,000 Talbots, Inc. ................................. 550,375
47,125 Tommy Hilfiger Corp. (c) ...................... 2,527,078
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20,889,282
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AUTO PARTS--0.3%
60,000 Lear Corporation (c) .......................... 2,115,000
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AUTOMOTIVE & RELATED--0.6%
30,000 Chrysler Corp. ................................ 1,860,000
85,800 Tower Automotive, Inc. ........................ 2,102,100
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3,962,100
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BANKS--1.7%
8,975 Bank of New York, Inc. ........................ 459,969
12,559 BCA Pop Bergam CV ............................. 191,512
30,160 Chase Manhattan Corp. ......................... 2,130,050
45,000 First Commonwealth, Inc. ...................... 1,254,375
30,100 Wells Fargo & Co. ............................. 7,190,137
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11,226,043
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BANKS--MONEY CENTER--0.1%
37,225 Money Store, Inc. ............................. 823,603
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BROADCASTING--1.3%
22,342 Central European Media Entertainment, Ltd.,
Class A ...................................... 558,550
69,750 Infinity Broadcasting Corp. (c) ............... 2,092,500
70,000 Jacor Communications, Inc. (c) ................ 2,161,250
28,000 Telecomunicacoes Brasileiras S.A. (ADR) (d) ... 1,949,500
22,250 United States Satellite Broadcasting, Class A . 839,937
43,400 Vertex Communications Corp. ................... 808,325
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8,410,062
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BUILDING CONSTRUCTION--0.1%
40,500 Crossmann Communities, Inc. ................... 789,750
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BUSINESS SERVICES--5.7%
70,000 Accustaff, Inc. (c) ........................... 1,907,500
23,000 America Online, Inc. .......................... 1,006,250
26,000 Analysts International Corp. (Rights) (c) ..... 1,092,000
73,175 APAC Teleservices, Inc. (c) ................... 2,634,300
78,025 Banta Corp. ................................... 1,970,131
61,700 Cort Business Services Corp. .................. 1,203,150
50,000 CUC International, Inc. (c) ................... 1,775,000
76,275 Danka Business Systems (ADR) (d) .............. 2,231,044
70,939 First Data Corp. .............................. 5,648,518
50,000 Fiserv, Inc. (c) .............................. 1,500,000
36,000 Gartner Group, Inc., Class A .................. 1,318,500
24,100 Global DirectMail Corp. ....................... 951,950
24,000 MDL Information Systems, Inc. ................. 714,000
52,000 Medaphis Corp. (c) ............................ 2,067,000
40,297 SAP-Vorzug AG Preferred ....................... 5,981,606
48,000 SPSS, Inc. .................................... 1,200,000
67,275 Stratacom, Inc. ............................... 3,784,219
38,000 Strattec Security Corp. ....................... 674,500
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37,659,668
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CHEMICALS--2.2%
43,000 BF Goodrich Co. ............................... 1,607,125
30,200 Cambrex Corp. ................................. 1,543,975
15,900 Cytec Industries, Inc. ........................ 1,359,450
70,500 Dexter Corp. .................................. 2,097,375
82,000 Intertape Polymer Group, Inc. ................. 1,660,500
31,300 Learonal, Inc. ................................ 782,500
11,189 Potash Corp. Saskatchewan ..................... 741,271
81,950 Praxair, Inc. ................................. 3,462,387
5,400 Witco Corp. ................................... 185,625
15,475 WR Grace & Co. ................................ 1,096,791
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14,536,999
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COMMUNICATION SERVICES--3.0%
5,750 Adtran, Inc. .................................. 407,531
3,933 Arch Communications Group, Inc. ............... 73,252
43,000 AT & T Corp. .................................. 2,666,000
20,000 Cascade Communications Corp. (c) .............. 1,360,000
9,950 ComNet Cellular, Inc. ......................... 298,500
25,950 Heartland Wireless Communications, Inc. ....... 616,313
160,656 Korea Mobile (GDR) 144A (f)(g) ................ 2,751,234
17,800 MFS Communications Inc. ....................... 669,725
19,550 Millicom International Cellular ............... 931,069
170,775 Paging Network, Inc. (c) ...................... 4,098,600
11,050 Pair Gain Technologies, Inc. .................. 685,100
42,600 Palmer Wireless, Inc., Class A ................ 852,000
42,200 Premisys Communications, Inc. ................. 2,574,200
42,700 Westell Technologies, Class A ................. 1,675,975
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19,659,499
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COMPUTER SOFTWARE & SERVICES--1.3%
18,175 American Management Systems, Inc. ............. 531,619
16,975 Aspen Technology, Inc. ........................ 933,625
27,900 Ciber, Inc. ................................... 613,800
62,100 CompuServe, Inc. .............................. 1,311,862
56,800 Lernout & Hauspie Speech Products ............. 1,278,000
51,975 Peoplesoft, Inc. .............................. 3,703,219
5,350 Technology Solutions Co. 185,244
------------
8,557,369
------------
COMPUTERS & BUSINESS EQUIPMENT--5.6%
85,250 Ascend Communications, Inc. ................... 4,795,312
170,250 Cisco Systems, Inc. (c) ....................... 9,640,406
1,075 Citrix Systems, Inc. .......................... 40,850
42,575 Dell Computer Corp. ........................... 2,166,003
100,000 EMC Corp. (c) ................................. 1,862,500
3,800 Fore Systems .................................. 137,275
36,475 Gateway 2000, Inc. ............................ 1,240,150
21,125 Indus Group, Inc. ............................. 427,781
21,075 Keane, Inc. ................................... 777,141
60,500 National Computer Systems, Inc. ............... 1,293,188
90,286 Netcom Systems, B Shares ...................... 1,022,862
13,250 Netscape Communications Corp. ............... 824,813
23,000 Netstar, Inc. ................................. 454,250
19,000 Oce Van der Grinten N.V. ...................... 2,014,189
60,000 Panamsat Corp. (c) ............................ 1,740,000
33,000 Stratus Computer, Inc. ........................ 957,000
41,400 Sun Microsystems, Inc. ........................ 2,437,425
20,000 Transition Systems, Inc. ...................... 570,000
100,000 Unisys Corp. .................................. 712,500
7,125 Uunet Technologies, Inc. ...................... 472,031
8,350 Verifone, Inc. ................................ 352,788
24,850 Wonderware Corp. .............................. 469,044
38,050 Xeikon N V (ADR) (d) .......................... 432,819
59,375 Xylan Corp. ................................... 2,760,937
------------
37,601,264
------------
CONGLOMERATES--0.8%
43,300 ITT Corp. ..................................... 2,868,625
85,685 Kinnevik Investment, Series B ................. 2,601,575
------------
5,470,200
------------
CONSTRUCTION--0.6%
59,000 CDI Corp. ..................................... 1,991,250
38,000 Foster Wheeler Corp. (Rights) (c) ............. 1,705,250
------------
3,696,500
------------
CONTAINERS & GLASS--0.3%
39,450 Crown Cork and Seal Co., Inc. ................. 1,775,250
------------
COSMETICS & TOILETRIES--0.3%
38,800 Bush Boake Allen, Inc. ........................ 843,900
56,800 Paragon Trade Brands, Inc. .................... 1,221,200
------------
2,065,100
------------
DOMESTIC OIL--0.4%
68,400 Cross Timbers Oil Co. ......................... 1,692,900
84,600 Lomak Petroleum, Inc. ......................... 1,205,550
------------
2,898,450
------------
DRUGS & HEALTH CARE--13.1%
1,150 ABR Information Services, Inc. ................ 57,788
50,000 Amerisource Health Corp., Class A (c) ......... 1,662,500
14,725 Amgen, Inc. (c) ............................... 795,150
41,600 Applied Bioscience International, Inc. ........ 436,800
2,175 Arrow International, Inc. ..................... 58,725
15,950 ARV Assisted Living Onc ....................... 247,225
35,000 Astra AB (ADR) (d) ............................ 1,531,250
15,000 Astra AB, Series A ............................ 663,887
31,000 Astra AB, Series B ............................ 1,353,303
129,000 Baxter International, Inc. .................... 6,095,250
19,000 Bristol Myers Squibb Co. ...................... 1,710,000
55,191 Cardinal Health Inc. .......................... 3,980,651
267,450 Centocor, Inc. ................................ 7,990,069
60,000 Columbia/HCA Healthcare Corp. ................. 3,202,500
61,150 Conmed Corp. .................................. 1,628,119
40,000 Elan PLC (ADR) (c) (d) ........................ 2,285,000
188,725 Eli Lilly & Co. (c) ........................... 12,267,125
15,000 Envoy Corp. ................................... 438,750
13,500 Genzyme Corp. ................................. 678,375
14,602 Glaxo Wellcome PLC ............................ 196,613
15,075 Glaxo Wellcome PLC (ADR) (d) .................. 403,256
108,312 Grancare, Inc. ................................ 2,152,701
4,900 Grupo Casa Autrey S.A. (ADR) (d) .............. 105,350
91,000 Guidant Corp. ................................. 4,481,750
95,900 Health Images, Inc. ........................... 1,114,837
67,500 Health Management Associates, Class A (c) ..... 1,366,875
53,900 Healthplan Services Corp. ..................... 1,239,700
36,200 ICU Medical, Inc. ............................. 497,750
40,000 Idexx Laboratories (c) ........................ 1,570,000
33,000 Johnson & Johnson ............................. 1,633,500
5,175 Jones Medical Industries, Inc. ................ 172,069
28,000 Luxottica Group SPA (ADR) (d) ................. 2,054,500
15,000 Merck & Co., Inc. ............................. 969,375
39,600 Minntech Corp. ................................ 430,650
89,425 Nellcor, Inc. (c) ............................. 4,337,112
96,350 Omnicare, Inc. ................................ 2,553,275
6,900 Oxford Health Plans, Inc. ..................... 283,762
39,000 Phycor Inc. ................................... 1,482,000
129,200 Regency Health Services ....................... 1,469,650
14,425 Respironics, Inc. ............................. 266,863
34,411 Smithkline Beecham PLC ........................ 367,945
62,775 SmithKline Beecham PLC (ADR) (d) .............. 3,413,391
63,425 Sofamor/Danek Group, Inc. ..................... 1,760,044
15,918 St. Jude Medical, Inc. ........................ 533,253
19,000 Target Therapeutics, Inc. ..................... 779,000
45,000 Tenet Healthcare Corp. ........................ 961,875
46,525 Thrifty Payless Holdings, Inc., Class B ....... 802,556
38,700 Total Renal Care Holdings, Inc. (c) ........... 1,635,075
105,725 Vidamed, Inc .................................. 1,347,994
------------
87,465,188
------------
ELECTRIC--1.4%
40,000 Belden, Inc. .................................. 1,200,000
20,000 Boston Scientific Corp. (c) ................... 900,000
9,575 Coherent, Inc. ................................ 497,900
39,000 Gasonics International Corp. .................. 409,500
63,825 Gelman Sciences, Inc. ......................... 1,444,041
35,000 Memc Electronic Materials, Inc. (c) ........... 1,356,250
35,000 Roper Industries .............................. 1,706,250
20,800 Technitrol, Inc. .............................. 824,200
57,300 Woodhead Industries (Rights) (c) .............. 673,275
------------
9,011,416
------------
ELECTRONICS--6.3%
25,000 Adaptec, Inc. (c) ............................. 1,184,375
37,000 ADC Telecommunications, Inc. .................. 1,665,000
90,500 Amphenol Corp., Class A ....................... 2,081,500
154,087 Analog Devices, Inc. .......................... 3,929,218
11,000 Applied Magnetics Corp. (Rights) (c) .......... 115,500
45,400 Burr Brown (Rights) (c) ....................... 805,850
75,000 ECI Telecom, Ltd. ............................. 1,743,750
57,000 General Instrument Corp. ...................... 1,645,875
53,475 General Motors Corp. .......................... 3,215,184
60,000 Input/Output, Inc. (c) ........................ 1,942,500
57,000 Intel Corp. ................................... 4,185,937
80,000 Intelcom Group, Inc. (c) ...................... 2,000,000
54,400 Inter Tel, Inc. ............................... 1,424,600
12,625 Itron Inc. .................................... 358,234
60,025 Linear Technology Corp. ....................... 1,800,750
10,000 Maxim Integrated Products, Inc. ............... 273,125
40,600 Merix Corp. ................................... 812,000
51,225 Newbridge Networks Corp. ...................... 3,355,238
38,587 Pittway Corp. ................................. 1,794,296
96,300 S3, Inc. ...................................... 1,185,694
64,000 Silicon Graphics Inc. ......................... 1,536,000
43,000 U.S. Robotics Corp. (c) ...................... 3,676,500
50,400 Unitrode Corp. ................................ 976,500
11,050 Xilinx, Inc. (Rights) (c) ..................... 350,838
------------
42,058,464
------------
ENVIRONMENTAL--0.2%
207,577 Rentokil Group PLC ............................ 1,316,900
------------
FINANCIAL SERVICES--1.2%
71,200 Dignity Partners, Inc. ........................ 658,600
88,700 DVI, Inc. ..................................... 1,397,025
87,000 Financial Federal Corp. ....................... 1,359,375
49,545 Imperial Credit Industries., Inc. ............. 1,498,736
49,600 Southern Pacific Funding Corp. ................ 868,000
87,200 WFS Financial, Inc. ........................... 1,962,000
------------
7,743,736
------------
FOOD & BEVERAGES--0.6%
138,600 Flowers Industries, Inc. (Rights) (c) ......... 2,234,925
102,000 Unimark Group, Inc. ........................... 1,695,750
------------
3,930,675
------------
GAS EXPLORATION--0.6%
79,425 Belden and Blake Corp. ........................ 1,648,069
11,650 Triton Energy, Ltd., Class A .................. 566,481
81,800 Vintage Petroleum, Inc. ....................... 2,085,900
------------
4,300,450
------------
GAS & PIPELINE UTILITIES--0.4%
100,000 Falcon Drilling (c) ........................... 2,712,500
------------
GOVERNMENT AGENCY--0.5%
21,000 Federal Home Loan Mortgage Corp. .............. 1,795,500
48,000 Federal National Mortgage Association ......... 1,608,000
------------
3,403,500
------------
HOUSEHOLD APPLIANCES & HOME FURNISHINGS--0.7%
163,800 Griffon Corp. ................................. 1,330,875
22,495 Harman International Industries, Inc. ......... 1,107,879
63,200 Singer Co. N V ................................ 1,279,800
33,100 Toro Co. (Rights) (c) ......................... 1,096,437
------------
4,814,991
------------
HOTELS & RESTAURANTS--4.1%
6,075 Extended Stay America, Inc. ................... 191,363
21,000 Harrahs Entertainment, Inc. ................... 593,250
169,625 HFS, Inc. (c) ................................. 11,873,750
8,600 La Quinta Inns, Inc. .......................... 288,100
35,000 Marriot International, Inc. 1,881,250
66,000 Mirage Resorts, Inc. (c) ...................... 3,564,000
4,050 Papa Johns International, Inc. ................ 197,438
77,975 Planet Hollywood International, Inc. .......... 2,105,325
48,425 Sun International Hotels, Ltd. ................ 2,348,612
70,000 Trump Hotels & Casinos(c) ..................... 1,995,000
98,900 WMS Industries, Inc. .......................... 2,435,412
------------
27,473,500
------------
HOUSEHOLD PRODUCTS--0.8%
22,800 Aptargroup, Inc. .............................. 689,700
8,935 Cultor OY, Series 1 ........................... 437,915
20,121 Hunter Douglas NV ............................. 1,374,434
37,000 Stanley Works (Rights) (c) .................... 1,100,750
99,250 United States Can Corp. ....................... 1,612,812
------------
5,215,611
------------
INDUSTRIAL MACHINERY--0.8%
73,300 Dayton Superior Corp., Class A ................ 962,062
34,500 Hardinge Brothers, Inc. ....................... 1,095,375
52,000 Keystone International, Inc. .................. 1,079,000
45,000 Thermo Electron Corp. (c) ..................... 1,873,125
------------
5,009,562
------------
INSURANCE--2.8%
60,700 Allied Group, Inc. ............................ 2,640,450
20,100 CompDent Corp. ................................ 934,650
50,000 Conseco, Inc. ................................. 2,000,000
100,000 Everest Reinsurance Holdings, Inc. ............ 2,587,500
39,800 Meadowbrook Insurance Group, Inc. ............. 1,223,850
46,700 Protective Life Corp. (Rights) (c) ............ 1,640,337
47,200 Reinsurance Group America, Inc. ............... 1,781,800
12,750 Sun America, Inc. ............................. 720,375
60,000 Travelers Aetna Property Casualty Corp.,
Class A ...................................... 1,702,500
34,700 Triad Guaranty, Inc. .......................... 1,275,225
37,475 UNUM Corp. (Rights)(c) ........................ 2,332,819
------------
18,839,506
------------
INTERNATIONAL OIL--0.3%
326,000 Gulf Canada Resources, Ltd. ................... 1,670,750
------------
INVESTMENT COMPANIES--1.1%
96,600 Associates First Capital Corp., Class A ....... 3,634,575
85,000 Peregrine Investment .......................... 122,436
8,500 Peregrine Investment (warrants) ............... 1,054
90,650 Saks Holdings, Inc. (c) ....................... 3,093,431
16,731 Securitas AB, B Shares ........................ 351,295
------------
7,202,791
------------
LEISURE TIME--0.3%
16,275 Anchor Gaming ................................. 980,569
77,575 International Game Technology ................. 1,309,078
------------
2,289,647
------------
MANUFACTURING--0.7%
100,200 Congoleum Corp. ............................... 1,152,300
110,000 Giant Cement Holding, Inc. .................... 1,388,750
32,700 Greenfield Industries, Inc. ................... 1,079,100
29,700 Inbrand Corp. ................................. 831,600
------------
4,451,750
------------
MINING--0.2%
37,200 Cleveland Cliffs, Inc. (Rights) (c) ........... 1,455,450
------------
MISCELLANEOUS--0.9%
25,606 ARN Mondadori Edit ............................ 193,979
13,099 Axime Ex Segin ................................ 1,833,595
151,750 Macronix International Co., Ltd. (ADR) (d) .... 2,465,937
22,414 Metra AB ...................................... 1,006,588
30,000 Valmet OY ..................................... 508,464
------------
6,008,563
------------
OIL SERVICES--2.1%
70,000 BJ Services Co. (c) ........................... 2,458,750
59,300 Global Industries, Inc. ....................... 1,764,175
119,500 Pride Petroleum Services, Inc. ................ 1,702,875
67,500 Seitel, Inc. .................................. 1,847,813
45,000 Sonat Offshore Drilling, Inc. ................. 2,272,500
70,000 Viking Office Products, Inc. (c) .............. 2,196,250
99,650 World Fuel Services Corp. ..................... 1,806,156
------------
14,048,519
------------
PAPER--0.6%
44,500 Alco Standard Corp. ........................... 2,013,625
74,200 Caraustar Industries, Inc. .................... 1,966,300
------------
3,979,925
------------
PETROLEUM SERVICES--2.0%
65,000 Baker Hughes, Inc. ............................ 2,136,875
75,000 Dresser Industries, Inc. (Rights) (c) ......... 2,212,500
35,000 Halliburton Co. ............................... 1,942,500
60,000 Petroleum Geo Services (ADR) (c) (d) .......... 1,702,500
100,000 Reading & Bates Corp. (c) ..................... 2,212,500
18,000 Schlumberger, Ltd. ............................ 1,516,500
30,000 Western Atlas, Inc. (c) ....................... 1,747,500
------------
13,470,875
------------
PHOTOGRAPHY--0.3%
23,000 Eastman Kodak Co. ............................. 1,788,250
------------
POLLUTION CONTROL--0.2%
31,000 United Waste Systems, Inc. .................... 999,750
------------
PUBLISHING--0.7%
50,000 Citic Pacific, Ltd. ........................... 202,175
44,200 Houghton Mifflin Co. .......................... 2,198,950
31,600 Insilco Corp. ................................. 1,058,600
30,000 Time Warner, Inc. ............................. 1,177,500
------------
4,637,225
------------
RAILROADS & EQUIPMENT--0.2%
27,400 ABC Rail Products Corp. ....................... 592,525
31,500 Wisconsin Central Transportation Corp. ........ 1,023,750
------------
1,616,275
------------
REAL ESTATE--1.7%
43,000 Capital RE Corp. .............................. 1,580,250
99,700 Capstone Capital Corp. ........................ 2,043,850
97,100 Chateau Properties, Inc. ...................... 2,160,475
57,050 Horizon Group, Inc. ........................... 1,169,525
90,200 Liberty Property .............................. 1,792,725
76,700 Patriot American Hospitality, Inc. ............ 2,272,237
------------
11,019,062
------------
RETAIL--4.4%
59,100 99 Cents Only Stores .......................... 827,400
60,000 Autozone, Inc. (c) ............................ 2,085,000
69,300 Carson Pirie Scott & Co. ...................... 1,853,775
117,500 Cato Corp. .................................... 705,000
110,600 Cole National Corp., Class A .................. 2,212,000
38,125 Consolidated Stores Corp. ..................... 1,401,094
42,000 Dillard Department Stores, Inc., Class A ...... 1,533,000
97,000 Federated Department Stores, Inc. (c) ......... 3,310,125
106,000 Gap, Inc. ..................................... 3,405,250
59,600 Haverty Furniture Cos., Inc. .................. 610,900
101,125 Home Depot, Inc. .............................. 5,460,750
30,000 Nine West Group, Inc. (c) ..................... 1,533,750
35,000 Sears Roebuck and Co. ......................... 1,701,875
67,000 Sunglass Hut International, Inc. .............. 1,633,125
65,300 Zale Corp. .................................... 1,101,937
------------
29,374,981
------------
RETAIL--GROCERY--0.2%
41,600 Kroger Co. (c) ................................ 1,643,200
------------
SAVINGS & LOAN--0.6%
40,400 Charter One Financial, Inc.(Rights) (c) ....... 1,408,950
35,350 Commercial Federal Corp. ...................... 1,352,138
47,950 First Financial Corp. ......................... 1,078,875
23,425 Glendale Federal Savings Bank ................. 424,578
------------
4,264,541
------------
SOFTWARE--5.6%
10,250 Axent Technologies, Inc. ...................... 169,125
60,400 BMC Software, Inc. ............................ 3,608,900
51,800 Boole and Babbage, Inc. ....................... 1,243,200
10,250 Business Objects S.A. (ADR) (d) ............... 412,563
50,500 Cadence Design Systems Inc. ................... 1,704,375
46,375 Computer Associates International, Inc. ....... 3,304,219
30,000 HBO and Co. ................................... 2,032,500
49,575 Informix Corp. (c) ............................ 1,115,437
50,050 JDA Software Group, Inc. ...................... 1,032,281
36,725 Macromedia, Inc. .............................. 803,359
99,200 Mentor Graphics Corp. ......................... 1,612,000
32,000 Microsoft Corp. (c) ........................... 3,844,000
103,000 Orange PLC (ADR) (c) (d) ...................... 1,802,500
74,500 Parametric Technology Corp. (c) ............... 3,231,437
27,900 PC Docs Group International, Inc. ............. 554,513
64,400 Read Rite Corp. ............................... 909,650
25,750 Segue Software, Inc. .......................... 766,063
36,900 Shared Medical System ......................... 2,370,825
19,900 Shiva Corp. ................................... 1,592,000
35,000 Solectron Corp. (c) ........................... 1,325,625
87,750 Sterling Commerce, Inc. (c) ................... 3,257,719
7,150 Sterling Software, Inc. ....................... 550,550
------------
37,242,841
------------
STEEL--1.3%
109,650 Citation Corp. ................................ 1,315,800
25,300 J & L Specialty Steel, Inc. ................... 376,338
156,100 Oregon Steel Mills, Inc. ...................... 2,146,375
70,500 Quanex Corp. (Rights) (c) ..................... 1,665,562
104,500 Republic Engineered Steels Onc ................ 365,750
53,200 RMI Titanium Co. .............................. 1,250,200
152,600 UNR Industries, Inc. .......................... 1,468,775
------------
8,588,800
------------
TECHNOLOGY--0.8%
15,000 Sawtek, Inc. .................................. 517,500
89,921 Worldcom, Inc. (c) ............................ 4,979,375
------------
5,496,875
------------
TELECOMMUNICATION--1.5%
30,925 Cincinnati Bell, Inc. ......................... 1,611,966
200 DDI Corp. ..................................... 1,748,274
16,475 Glenayre Technologies, Inc. (c) ............... 823,750
139,075 PictureTel Corp. (c) .......................... 5,476,078
------------
9,660,068
------------
TOYS & AMUSEMENTS--0.0%
6,700 Coleman Co., Inc. ............................. 283,913
------------
TRANSPORTATION--0.0%
4,975 Amway Asia Pacific, Ltd. ...................... 150,494
------------
TRUCKING & FREIGHT FORWARDING--0.9%
95,000 Harper Group, Inc. ............................ 1,852,500
88,200 Pittston Burlington Co. ....................... 1,907,326
55,000 Tidewater, Inc. (Rights) (c) .................. 2,413,126
------------
6,172,952
------------
TRUSTS--0.1%
30,900 Redwood Trust, Inc. ........................... 865,200
------------
Total Common Stock (Identified Cost
$499,605,005) ................................ 595,018,864
------------
<PAGE>
SHORT TERM INVESTMENTS -- 12.7%
FACE
AMOUNT DESCRIPTION VALUE(a)
- ------------------------------------------------------------------------------
$16,010,000 Repurchase agreement with State Street Bank &
Trust Company dated 6/28/96 at 4.75% to be
repurchased at $16,016,337 on 7/1/96
collateralized by U.S. Treasury Bill due
12/19/96 valued at $16,337,949.68 ............ $ 16,010,000
8,000,000 United States Treasury Bills 4.94% 8/15/96 .... 7,950,600
5,000,000 Federal National Mortgage Association Discount
Notes 5.27% 7/29/96 .......................... 4,979,506
7,717,965 Associates Corp. North America 5.45% 7/01/96 .. 7,717,965
7,700,000 Chevron Oil Finance Company 5.25% 7/01/96 ..... 7,700,000
5,400,000 Exxon Asset Management 5.20% 7/01/96 .......... 5,400,000
7,400,000 Ford Motor Credit Co. 5.49% 7/01/96 ........... 7,400,000
5,000,000 General Electric Capital Corp. 5.35% 7/02/96 .. 4,999,257
5,300,000 United States Treasury Bills 4.93% 7/11/96 .... 5,292,742
8,000,000 United States Treasury Bills 4.94% 7/25/96 .... 7,973,653
9,000,000 United States Treasury Bills 4.90% 8/22/96 .... 8,936,300
------------
TOTAL SHORT TERM INVESTMENTS (Identified Cost
$84,360,023) ................................. 84,360,023
------------
Total Investments--102.0% (Identified Cost
$583,965,028) (b) ............................ 679,378,887
Other assets less liabilities (e) ............. (13,042,372)
------------
Total Net Assets--100% ........................ $666,336,515
============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
FORWARD CURENCY CONTRACTS OUTSTANDING
at June 30, 1996
<CAPTION>
LOCAL AGGREGATE UNREALIZED
DELIVERY CURRENCY FACE TOTAL APPRECIATION/
DATE AMOUNT VALUE VALUE (DEPRECIATION)
----------- ---------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Deutsche Mark (bought) ............................. 07/15/96 800,000 $ 545,238 $ 526,671 $ (18,567)
Deutsche Mark (sold) ............................... 07/15/96 2,374,000 1,669,597 1,562,896 106,701
Deutsche Mark (sold) ............................... 08/08/96 953,000 651,802 628,308 23,494
Deutsche Mark (sold) ............................... 08/12/96 401,000 273,776 264,443 9,333
Deutsche Mark (sold) ............................... 09/13/96 1,200,000 793,042 792,861 181
Deutsche Mark (sold) ............................... 10/22/96 500,000 333,111 331,153 1,958
Deutsche Mark (sold) ............................... 12/04/96 300,000 198,426 199,244 (818)
Finnish Markkaa (bought) ........................... 07/15/96 1,400,000 310,987 302,534 (8,453)
Finnish Markkaa (bought) ........................... 07/15/96 350,000 76,622 75,634 (988)
Finnish Markkaa (sold) ............................. 07/15/96 2,656,000 615,713 573,951 41,762
Finnish Markkaa (sold) ............................. 07/25/96 260,000 57,580 56,214 1,366
Finnish Markkaa (bought) ........................... 08/12/96 1,350,000 300,193 292,162 (8,031)
Finnish Markkaa (bought) ........................... 08/12/96 1,600,000 346,448 346,266 (182)
Finnish Markkaa (sold) ............................. 08/12/96 4,699,000 1,020,701 1,016,940 3,761
Finnish Markkaa (sold) ............................. 10/22/96 400,000 84,424 86,890 (2,466)
British Pounds (bought) ............................ 10/01/96 400,000 608,020 620,918 12,898
British Pounds (sold) .............................. 10/01/96 1,200,000 1,825,320 1,862,755 (37,435)
British Pounds (sold) .............................. 12/04/96 300,000 462,009 465,742 (3,733)
British Pounds (sold) .............................. 12/04/96 69,000 106,303 107,121 (818)
Italian Lire (bought) .............................. 08/09/96 980,000,000 621,335 637,452 16,117
Italian Lire (bought) .............................. 08/09/96 130,000,000 82,853 84,560 1,707
Italian Lire (bought) .............................. 08/09/96 200,000,000 128,432 130,092 1,660
Italian Lire (sold) ................................ 08/09/96 2,000,000,000 1,243,704 1,300,922 (57,218)
Italian Lire (bought) .............................. 11/15/96 1,200,000,000 765,624 775,437 9,813
Italian Lire (sold) ................................ 11/15/96 1,200,000,000 763,446 775,437 (11,991)
Japanese Yen (bought) .............................. 09/12/96 39,000,000 378,531 360,459 (18,072)
Japanese Yen (sold) ................................ 09/12/96 39,000,000 378,714 360,459 18,255
Japanese Yen (bought) .............................. 10/01/96 25,000,000 243,245 231,642 (11,603)
Japanese Yen (sold) ................................ 10/01/96 25,000,000 241,138 231,642 9,496
Japanese Yen (bought) .............................. 10/22/96 20,000,000 195,122 185,887 (9,235)
Japanese Yen (sold) ................................ 10/22/96 20,000,000 191,939 185,887 6,052
Swedish Krona (bought) ............................. 07/15/96 2,000,000 293,539 302,046 8,507
Swedish Krona (bought) ............................. 07/15/96 74,000 10,951 11,175 224
Swedish Krona (sold) ............................... 07/15/96 2,300,000 344,972 347,352 (2,380)
Swedish Krona (sold) ............................... 07/25/96 10,800,000 1,556,084 1,630,841 (74,757)
Swedish Krona (bought) ............................. 10/22/96 2,000,000 295,714 301,999 6,285
Swedish Krona (sold) ............................... 10/22/96 9,500,000 1,413,817 1,434,494 (20,677)
Swiss Franc (bought) ............................... 09/12/96 1,900,000 1,548,764 1,529,202 (19,562)
Swiss Franc (sold) ................................. 09/12/96 1,900,000 1,615,852 1,529,202 86,650
Swiss Franc (bought) ............................... 10/01/96 450,000 367,539 362,728 (4,811)
Swiss Franc (sold) ................................. 09/12/96 450,000 385,109 362,728 22,381
Finnish Markkaa (sold) ............................. 07/02/96 34,010 7,363 7,343 20
Swedish Krona (sold) ............................... 07/02/96 149,521 22,588 22,586 2
------------
$ 76,826
============
<FN>
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1996 the net unrealized appreciation on investments based on cost of
$583,965,028 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. ....................................................................................................... $108,369,743
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over
value. ...................................................................................................... (12,955,884)
------------
Net unrealized appreciation ................................................................................. $ 95,413,859
============
(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 $62,894 and a cost of $62,573.
(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.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1996
(unaudited)
ASSETS
Investments at value ........................ $679,378,887
Foreign cash at value (cost $62,573) ........ 62,894
Receivable for:
Fund shares sold .......................... 3,396,785
Securities sold ........................... 11,664,785
Open forward currency contracts--net ...... 76,826
Accrued dividends and interest ............ 376,490
Foreign taxes ............................. 17,890
Prepaid registration expense ................ 15,000
Unamortized organization expense ............ 100,518
------------
695,090,075
LIABILITIES
Payable for:
Securities purchased ...................... $27,086,101
Fund shares redeemed ...................... 463,724
Withholding taxes ......................... 4,750
Dividends declared ........................ 5,024
Payable to custodian bank ................. 436,055
Accrued expenses:
Management fees ........................... 571,113
Deferred trustees' fees ................... 4,566
Accounting and administrative ............. 3,376
Other expenses ............................ 178,851
-----------
28,753,560
------------
NET ASSETS .................................... $666,336,515
============
Net Assets consist of:
Capital paid in ........................... $523,117,127
Undistributed net investment loss ......... (2,493,389)
Accumulated net realized gains ............ 50,221,941
Unrealized appreciation on investments,
forward currency contracts and foreign
currency transactions ................... 95,490,836
------------
NET ASSETS .................................... $666,336,515
============
Computation of net asset value and offering
price:
Net value and redemption price of Class A shares
($290,430,712 divided by 15,358,283 shares of
beneficial interest) ......................... $18.91
======
Offering price per share (100/94.25 of $18.91) $20.06*
======
Net asset value and offering price of Class B
shares ($298,639,745 divided by 15,993,516
shares of beneficial interest) ............... $18.67**
======
Net asset value and offering price of Class C
shares ($66,909,767 divided by 3,581,198
shares of beneficial interest) ............... $18.68
======
Net asset value and offering price of Class Y
shares ($10,356,291 divided by 545,688 shares
of beneficial interest) ...................... $18.98
======
Identified cost of investments ................. $583,965,028
============
*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.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1996
(unaudited)
INVESTMENT INCOME
Dividends ................................... $ 2,041,093(a)
Interest .................................... 1,633,761
-----------
3,674,854
Expenses
Management fees ........................... $ 3,016,193
Service fees--Class A ..................... 319,147
Service and distribution fees--Class B .... 1,286,434
Service and distribution fees--Class C .... 270,430
Trustees' fees and expenses ............... 12,461
Accounting and administrative ............. 24,484
Custodian ................................. 223,746
Transfer agent ............................ 640,352
Audit and tax services .................... 24,000
Legal ..................................... 9,394
Printing .................................. 52,541
Registration .............................. 136,435
Amortization of organization expenses ..... 16,540
Miscellaneous ............................. 1,217
------------
Total expenses .............................. 6,033,374
-----------
Net investment loss ......................... (2,358,520)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments--net .......................... 42,223,423
Foreign currency transactions--net ........ 47,973
------------
Total realized gain on investments and
foreign currency transactions ........... 42,271,396
------------
Unrealized appreciation (depreciation) on:
Investments--net .......................... 25,631,360
Foreign currency transactions--net ........ (106,942)
------------
Total unrealized appreciation on
investments, forward currency
contracts and foreign currency
transactions ............................ 25,524,418
------------
Net gain on investment transactions ......... 67,795,814
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS .... $65,437,294
===========
(a) Net of foreign taxes of: $51,144
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(unaudited)
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ -------------
FROM OPERATIONS
Net investment loss .......................... $ (2,471,977) $ (2,358,520)
Net realized gain on investments and foreign
currency transactions ...................... 37,615,004 42,271,396
Unrealized appreciation on investments and
foreign currency transactions 64,889,572 25,524,418
------------ ------------
Increase in net assets from operations ....... 100,032,599 65,437,294
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain on investments
Class A .................................... (11,862,707) 0
Class B .................................... (11,362,283) 0
Class C .................................... (2,444,605) 0
Class Y .................................... (228,886) 0
------------ ------------
(25,898,481) 0
------------ ------------
Increase in net assets derived from capital
share transactions ......................... 236,321,485 106,044,777
------------ ------------
Total increase in net assets ................. 310,455,603 171,482,071
NET ASSETS
Beginning of the period ...................... 184,398,841 494,854,444
------------ ------------
End of the period ............................ $494,854,444 $666,336,515
============ ============
UNDISTRIBUTED NET INVESTMENT (LOSS)
Beginning of the period ...................... $ 0 $ (134,869)
============ ============
End of the period ............................ $ (134,869) $ (2,493,389)
============ ============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
CLASS A CLASS B
-------------------------------------- ---------------------------------
JULY 7, JULY 7,
1994(a) YEAR SIX MONTHS 1994(a) YEAR SIX MONTHS
THROUGH ENDED ENDED THROUGH ENDED ENDED
DECEMBER DECEMBER JUNE 30, DECEMBER DECEMBER JUNE 30,
31, 1994 31, 1995 1996 31, 1994 31, 1995 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........... $12.50 $13.25 $16.78 $12.50 $13.23 $16.63
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income (loss) ................... 0.05 0.00 (0.03) 0.02 0.00 (0.09)
Net Realized and Unrealized Gain (Loss) on
Investments .................................. 0.75 4.52 2.16 0.73 4.39 2.13
------ ------ ------ ------ ------ ------
Total From Investment Operations ............... 0.80 4.52 2.13 0.75 4.39 2.04
------ ------ ------ ------ ------ ------
Less Distributions
Distributions From Net Investment Income ....... (0.05) 0.00 0.00 (0.02) 0.00 0.00
Distributions From Net Realized Capital Gains 0.00 (0.99) 0.00 0.00 (0.99) 0.00
------ ------ ------ ------ ------ ------
Total Distributions ............................ (0.05) (0.99) 0.00 (0.02) (0.99) 0.00
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................. $13.25 $16.78 $18.91 $13.23 $16.63 $18.67
====== ====== ====== ====== ====== ======
Total Return (%) (c) ........................... 6.4 34.4 12.7 6.0 33.4 12.3
Ratio of Operating Expenses to
Average Net Assets (%) ....................... 1.94 (b) 1.82 1.70 (b) 2.69 (b) 2.57 2.45 (b)
Ratio of Net Investment Income to
Average Net Assets (%) ....................... 1.06 (b) (0.33) (0.41)(b) 0.31 (b) (1.08) (1.16)(b)
Portfolio Turnover Rate (%) .................... 100 142 136 (b) 100 142 136 (b)
Average Commission Rate (d) .................... -- -- $0.0099 -- -- $0.0099
Net Assets, End of Period (000) ................ $91,218 $223,596 $290,431 $72,889 $220,017 $298,640
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) 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.
(d) 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.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS Y
----------------------------------- -----------------------------------
JULY 7, NOVEMBER
1994 (a) YEAR SIX MONTHS 15, (a) YEAR SIX MONTHS
THROUGH ENDED ENDED THROUGH ENDED ENDED
DECEMBER DECEMBER JUNE 30, DECEMBER DECEMBER JUNE 30,
31, 1994 31, 1995 1996 31, 1994 31, 1995 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........... $12.50 $13.24 $16.65 $13.59 $13.24 $16.83
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income (Loss) ................... 0.02 0.00 (0.09) 0.06 0.00 (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments .................................. 0.74 4.40 2.12 (0.35) 4.58 2.16
------ ------ ------ ------ ------ ------
Total From Investment Operations ............... 0.76 4.40 2.03 (0.29) 4.58 2.15
------ ------ ------ ------ ------ ------
Less Distributions
Distributions From Net Investment Income ....... (0.02) 0.00 0.00 (0.06) 0.00 0.00
Distributions From Net Realized Capital Gains .. 0.00 (0.99) 0.00 0.00 (0.99) 0.00
------ ------ ------ ------ ------ ------
Total Distributions ............................ (0.02) (0.99) 0.00 (0.06) (0.99) 0.00
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................. $13.24 $16.65 $18.68 $13.24 $16.83 $18.98
====== ====== ====== ====== ====== ======
Total Return (%) (c) ........................... 6.0 33.4 12.2 (2.1) 34.8 12.7
Ratio of Operating Expenses to
Average Net Assets (%) ....................... 2.69 (b) 2.57 2.45 (b) 1.79 (b) 1.57 1.45 (b)
Ratio of Net Investment Income to
Average Net Assets (%) ....................... 0.31 (b) (1.08) (1.16)(b) 2.26 (b) (0.08) (0.16)(b)
Portfolio Turnover Rate (%) .................... 100 142 136 (b) 100 142 136 (b)
Average Commission Rate (d) .................... -- -- $0.0099 -- -- $0.0099
Net Assets, End of Period (000) ................ $20,096 $45,672 $66,910 $196 $5,569 $10,356
<FN>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Periods less than one year are not computed on an annualized basis.
(d) 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.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1996
(unaudited)
1. The Fund is a series of New England Funds Trust I, a Massachusetts
business trust (the "Trust"), and is registered under the Investment Company
Act of 1940, as amended, (the "1940 Act") as an open-end management investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (each such series of shares a
"Fund").
The Fund offers Class A, Class B, 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.
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
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 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
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." 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 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.
D. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The timing and characterization of
certain income and capital gains distributions are determined in accordance
with federal tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for organization costs and foreign currency transactions for book
and tax purposes. Permanent book and tax basis differences will result in
reclassification to capital accounts.
F. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to
100% of the repurchase price. Each 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.
G. ORGANIZATION EXPENSE. Costs incurred in fiscal 1994 in connection with the
Fund's organization and registration, amounting to approximately $165,000 in
the aggregate, were paid by the Fund and are being amortized by the Fund over
60 months.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for
the Fund for the six months ended June 30, 1996 were $434,397,110 and
$353,258,354, respectively.
Transactions in forward currency contracts for the Star Advisers Fund for the
six months ended June 30, 1996 are summarized as follows:
<PAGE>
SALES OF
CONTRACTS
------------------
AGGREGATED FACE
VALUE OF CONTRACTS
Open at December 31, 1995 ................................ $ 10,561,832
Contracts opened ......................................... 16,665,692
Contracts closed ......................................... (18,120,098)
------------
Open at June 30, 1996 .................................... $ 9,107,426
============
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays
management fees to its adviser, New England Funds Management, L.P. (the
"Adviser"), at the annual rate of 1.05% of the Fund's average daily net
assets. The Adviser pays the Fund's four investment Subadvisers, Berger
Associates, Inc., Founders Asset Management, Inc., Janus Capital Corporation
and Loomis, Sayles & Company, L.P. (the "Subadvisers") at the rate of 0.55% of
the first $50 million of the average daily net assets of the segment of the
Fund that the 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. The Adviser and Loomis, Sayles &
Company, L.P. are wholly owned subsidiaries of New England Investment
Companies, L.P., 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 six months ended June 30, 1996 are as follows:
FEES EARNED
- -----------
$1,530,184 New England Funds Management, L.P.
353,709 Berger Associates, Inc.
396,827 Founders Asset Management, Inc.
373,609 Janus Capital Corporation
361,864 Loomis, Sayles & Company, L.P.
- ----------
$3,016,193
==========
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, 1996, these expenses amounted to $24,484 and are
shown separately in the financial statements as accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent for the Fund. For the six months ended June 30, 1996, the Fund
paid New England Funds $504,390 as compensation for its services in that
capacity.
D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act,
the Trust has adopted a Service Plan relating to the Fund's Class A shares
(the "Class A Plan") and Service and Distribution Plans relating to the Fund's
Class B and Class C shares (the "Class B and Class C Plans")
Under the Class A Plan, the Fund pays New England Funds a monthly service fee
at the annual rate of up to 0.25% of the average daily net assets attributable
to the Fund's Class A shares, as reimbursement for expenses (including certain
payments to securities dealers, who may be affiliated with New England Funds)
incurred by New England Funds in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts. For the six
months ended June 30, 1996, the Fund paid New England Funds $319,147 in fees
under the Class A Plan.
Under the Class B and Class C Plans, the Fund pays New England Funds monthly
service fees at the annual rate of up to 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses (including certain payments to securities
dealers, who may be affiliated with New England Funds) incurred by New England
Funds in providing personal services to investors in Class B shares and/or the
maintenance of shareholder accounts. For the six months ended June 30, 1996
the Fund paid New England Funds $321,609 and $67,608 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, 1996, the Fund paid New
England Funds $964,825 and $202,822 in distribution fees under the Class B and
Class C plans, respectively.
Commissions (including contingent deferred sales charges) on Fund shares paid
to New England Funds by investors in shares of the Fund during the six months
ended June 30, 1996 amounted to $1,739,091.
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, the
Adviser or their affiliates, other than registered investment companies. Each
other trustee is compensated by the Fund as follows:
Annual Retainer $2,343
Meeting Fee $114/meeting
Committee Meeting Fee $68/meeting
Committee Chairman Retainer $233/year
A deferred compensation plan is available to the trustees on a voluntary
basis. Each participating trustee will receive an amount equal to the value
that such deferred compensation would have had, had it been invested in the
Fund on the normal payment date.
4. CAPITAL SHARE TRANSACTIONS. At June 30, 1996 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>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- --------- ---------------- -------- --------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 7,642,009 $114,044,926 3,619,803 $ 66,204,441
Shares issued in connection with the
reinvestment of:
Distributions from net realized gain ............. 699,829 11,487,826 0 0
---------- ------------ --------- ------------
8,341,838 125,532,752 3,619,803 66,204,441
Shares repurchased ................................. (1,903,090) (29,310,909) (1,584,174) (28,379,717)
---------- ------------ --------- ------------
Net increase ....................................... 6,438,748 96,221,843 2,035,629 37,824,724
---------- ------------ --------- ------------
<PAGE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- --------- ---------------- -------- --------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 7,922,819 119,214,783 3,570,391 63,389,133
Shares issued in connection with the
reinvestment of:
Distributions from net realized gain ............. 669,488 10,909,794 0 0
---------- ------------ --------- ------------
8,592,307 130,124,577 3,570,391 63,389,133
Shares repurchased ................................. (872,820) (13,578,971) (804,420) (14,265,378)
---------- ------------ --------- ------------
Net increase ....................................... 7,719,487 116,545,606 2,765,971 49,123,755
---------- ------------ --------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------------------- ----------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- --------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 1,635,044 $ 24,683,156 1,105,362 $ 19,944,326
Shares issued in connection with the
reinvestment of:
Distributions from net realized gain ............. 141,224 2,303,183 0 0
---------- ------------ --------- ------------
1,776,268 26,986,339 1,105,362 19,944,326
Shares repurchased ................................. (550,549) (8,352,576) (267,856) (4,766,422)
---------- ------------ --------- ------------
Net increase ....................................... 1,225,719 18,633,763 837,506 15,177,904
---------- ------------ --------- ------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------------------- ----------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
- ------- --------- ---------------- -------- --------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 316,907 4,921,298 231,347 4,215,050
Shares issued in connection with the
reinvestment of:
Distributions from net realized gain ............. 13,920 228,884 0 0
---------- ------------ --------- ------------
330,827 5,150,182 231,347 4,215,050
Shares repurchased ................................. (14,699) (229,909) (16,569) (296,656)
---------- ------------ --------- ------------
Net increase ....................................... 316,128 4,920,273 214,778 3,918,394
---------- ------------ --------- ------------
Increase derived from capital share
transactions ..................................... 15,700,082 $236,321,485 5,853,884 $106,044,777
========== ============ ========= ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REGULAR INVESTING PAYS
- --------------------------------------------------------------------------------
FIVE GOOD REASONS TO INVEST REGULARLY
1. It's an easy way to build assets
2. It's convenient and effortless
3. It requires a low minimum to get started
4. It can help you reach important long-term goals like
retirememt or college funding
5. It can help you benefit from the ups and downs of the market
With Investment Builder, New England Funds' 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 follows:]
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>
- -----------------------------------------------------------------------------
NEW ENGLAND FUNDS
- -----------------------------------------------------------------------------
STOCK FUNDS
Growth Fund
Star Advisers Fund
Capital Growth Fund
Value Fund
Growth Opportunities Fund
Balanced Fund
INTERNATIONAL STOCK FUNDS
Growth Fund of Israel
International Equity Fund
Star Worldwide 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.
VISIT OUR WORLD WIDE WEB SITE AT HTTP://WWW.MUTUALFUNDS.COM
New England Funds, L.P.
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors when it is
preceded or accompanied by the Fund's current prospectus, which contains
information about distribution charges, management and other items of interest.
Investors are advised to read the prospectus carefully before investing.
<PAGE>
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NEW ENGLAND FUNDS BULK RATE
Where The Best Minds Meet(TM) U.S. POSTAGE
PAID
BROCKTON, MA
PERMIT NO. 770
--------------
- ---------------------
399 Boylston Street
Boston, Massachusetts
02116
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[LOGO: DALBAR SEAL]
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