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ANNUAL REPORT
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[logo]
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
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New England Star Advisers Fund
[Graphic Omitted]
December 31, 1997
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FEBRUARY 1998
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[Photo of Henry L.P. Schmelzer]
"EVEN IN 1997 . . . INVESTORS SAW SOME SHARP, SHORT-TERM DROPS, WHETHER THEY
WERE INVESTED IN THE UNITED STATES OR OVERSEAS, IN BONDS OR STOCKS."
Dear Shareholder:
In 1997, many investors once again had reason to be pleased with the performance
of their mutual fund holdings. However, in times such as these, expectations
tend to grow along with prices. It pays to remind ourselves that no trend is
permanent, and we should keep our goals realistic and long-term needs in focus.
In the third straight year of outstanding returns, the Dow Jones Industrial
Average and the Standard & Poor's 500 Stock Index -- two widely followed
indicators of the performance of large-company stocks -- gained 24.9% and 33.3%
respectively. At the same time, smaller-company stocks, as measured by the
Russell 2000 Index, were up 22.4%. Meanwhile, bond investors also were rewarded
as declining interest rates and rising prices meant solid gains. The Lehman Long
Treasury Index, for example, posted a 15.1% return for the year. Results were
less favorable for international investors, especially those exposed to emerging
markets or the financial turmoil in Asia.
Gratifying though it has been, the markets' surge of the past few years obscures
the historic norm: Downturns and volatility also are regular features of
investing. Even in 1997, notwithstanding the impressive overall results,
investors saw some sharp, short-term drops, whether they were invested in the
United States or overseas, in bonds or stocks. Market fluctuations remind us of
some valuable lessons.
First, volatility is inevitable, and should not disrupt long-term programs
without sufficient evaluation. Those who sold in response to downturns --
October 1987 is an obvious example -- may have missed out on the subsequent
uptrend. Second, sound diversification can reduce risk. A useful exercise is to
review your asset allocation regularly with your financial representative.
Starting in 1998, you have one more reason to consult with your representative:
Newly expanded retirement options, including the new Roth IRA, could play an
important role in your retirement and tax planning for years to come. With this
in mind, New England Funds has introduced programs specially designed to help
you make the most of the newest retirement vehicles.
[Dalbar logo] In addition to offering quality mutual fund choices and
tax-advantaged plans, we focus on providing the highest quality customer
service. This is why I am pleased to report that we have received DALBAR's
Mutual Fund Service Award for "providing the highest tier of service excellence
in the mutual fund industry." New England Funds is one of just three mutual fund
companies to receive this award for the third consecutive year from DALBAR, an
independent evaluator of mutual fund services. We are continuing to work to
provide even more effective services. Two examples are: the Personal Access
Line(TM) -- our enhanced automated telephone account service (800-346-5984) --
and the account information section of the New England Funds website
(www.mutualfunds.com). Each provides convenient, 24-hour access to current
information about your New England Funds accounts.
All of us at New England Funds thank you for your continued support and look
forward to serving you in the years ahead.
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 DECEMBER 31, 1997
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Putting Performance in Perspective
The charts comparing your Fund's performance to a benchmark index provide you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differeces 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.
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
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AVERAGE ANNUAL TOTAL RETURNS -- 12/31/97
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CLASS A (Inception 7/7/94) 1 YEAR 3 YEARS SINCE INCEPTION
Net Asset Value(1) 20.17% 24.31% 22.73%
With Max. Sales Charge(2) 13.26 21.88 20.67
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CLASS B (Inception 7/7/94) 1 YEAR 3 YEARS SINCE INCEPTION
Net Asset Value(1) 19.26% 23.40% 21.83%
With CDSC(3) 14.32 22.74 21.30
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CLASS C (Inception 7/7/94) 1 YEAR 3 YEARS SINCE INCEPTION
Net Asset Value(1) 19.25% 23.39% 21.83%
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CLASS Y (Inception 11/15/94)* 1 YEAR 3 YEARS SINCE INCEPTION
Net Asset Value(1) 20.50% 24.77% 22.78%
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COMPARATIVE PERFORMANCE 1 YEAR 3 YEARS SINCE 7/7/94 SINCE 11/15/94
Lipper Growth Fund Average(4) 25.18% 24.99% 22.36% 24.51%**
S&P 500 Index(5) 33.31 31.08 27.58 29.39
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 and
are not subject to a sales charge.
** Lipper Average calculated from 11/30/94.
NOTES TO CHARTS
(1) Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at the time of purchase.
(2) With Maximum Sales Charge (MSC) performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at the time of
purchase of Class A shares.
(3) With Contingent Deferred Sales Charge (CDSC) performance assumes a maximum
5% sales charge is applied to a redemption of Class B shares. The sales
charge will decrease over time, declining to zero six years after the
purchase of shares.
(4) Lipper Growth Fund 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.
(5) Standard & Poor's 500 Stock Index(R) (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. Investors cannot
purchase an index directly.
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NEW ENGLAND STAR ADVISERS FUND
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GROWTH OF $10,000 INVESTMENT COMPARED TO STANDARD & POOR'S 500
[A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares, since New England Star Advisers Fund's
inception on 7/7/94 compared to Standard & Poor's 500(5). The data points from
the graph are as follows:]
NAV MSC S&P500
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7-Jul-94 $10,000 $ 9,425 $10,000
12/94 $10,638 $10,026 $10,391
6/95 $12,252 $11,547 $12,484
12/95 $14,293 $13,471 $14,281
6/96 $16,098 $15,172 $15,721
12/96 $17,006 $16,028 $17,552
6/97 $18,775 $17,695 $21,167
12/97 $20,436 $19,261 $23,400
[A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class B Shares, since New England Star Advisers Fund's
inception on 7/7/94 compared to Standard & Poor's 500(5). The data points from
the graph are as follows:]
NAV CDSC S&P500
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7-Jul-94 $10,000 $10,000 $10,000
12/94 $10,599 $10,599 $10,391
6/95 $12,169 $12,169 $12,484
12/95 $14,140 $14,140 $14,281
6/96 $15,875 $15,875 $15,721
12/96 $16,702 $16,702 $17,552
6/97 $18,376 $18,376 $21,167
12/97 $19,917 $19,617 $23,400
[A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class C Shares, since New England Star Advisers Fund's
inception on 7/7/94 compared to Standard & Poor's 500(5). The data points from
the graph are as follows:]
NAV S&P500
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7-Jul-94 $10,000 $10,000
12/94 $10,604 $10,391
6/95 $12,166 $12,484
12/95 $14,153 $14,281
6/96 $15,878 $15,721
12/96 $16,705 $17,552
6/97 $18,379 $21,167
12/97 $19,921 $23,400
These illustrations represent past performance and cannot predict future
results. Investment return and principal value may vary, resulting in a gain or
loss on the sale of shares. All Index and Fund performance assumes reinvested
distributions. Class Y share performance will be greater than that shown based
on differences in inception date, fees and sales charges.
<PAGE>
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NEW ENGLAND STAR ADVISERS FUND
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OVERVIEW: HOW YOUR FUND PERFORMED
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New England Star Advisers Fund's Class A shares generated a total return of
20.17% for the one-year period ending December 31, 1997, reflecting a one cent
drop in net asset value to $18.17 per share and the reinvestment of $3.614 per
share in capital gains distributions. During the same period, your Fund's Class
B shares returned 19.26% and Class C shares returned 19.25%, all based on net
asset value. The Lipper Growth Fund Average rose 25.18% for the 12 months ending
December 31, 1997, while Standard & Poor's 500 Index returned 33.31% during that
time.
Your Fund's multiple-adviser approach -- the essence of the Star concept --
provides a means to diversify among not just individual securities, but among
investment styles and strategies as well. The Fund gives you access to some of
the nation's most prominent investment managers and their extensive experience
in selecting stocks. In the following pages, each of your Fund's subadvisers
discuss their distinct strategies during 1997 and outlooks for 1998.
The four portfolio segments of Star Advisers Fund are managed autonomously.
However, the following chart shows the areas of emphasis for the Fund as a
whole.
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YOUR FUND'S FIVE LARGEST SECTORS -- 12/31/97
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% OF
SECTOR NET ASSETS
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1. DRUGS & HEALTH CARE 8.3
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2. BANKS 4.7
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3. ELECTRONICS 4.4
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4. FOOD & BEVERAGES 4.3
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5. BROADCASTING 3.9
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Portfolio holdings and asset allocations will vary.
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NEW ENGLAND STAR ADVISERS FUND
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LOOMIS, SAYLES & COMPANY, L.P.
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Q. Please describe some of the strategies you emphasized during 1997 in your
segment of the Fund.
- --------------------------
[Photo of Marcy Champagne]
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[Photo of Jeff Petherick]
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Mary Champagne and Jeff Petherick
Loomis, Sayles & Company, L.P.
Careful stock selection was the key to keeping performance positive in the face
of uneasy conditions for smaller companies -- the chief investment focus of our
segment. For instance, we found select opportunities in both health care and
technology, two otherwise stormy sectors in 1997. Meanwhile, we emphasized
financial services stocks, which have risen significantly, driven by a growing
economy and falling interest rates. The portfolio benefited from financial
holdings such as Commercial Federal Corp. and First Financial. We also have
added several utilities for their attractive yields and that may benefit from
continuing deregulation.
Recently, we've been finding some good values in technology, which has suffered
from the Asian financial difficulties. We've increased these holdings from about
7% to 10% of the portfolio, being careful to select firms that we believe have
minimal exposure to Asia. A good example is National Computer Systems, a company
that depends mostly on the school-testing market rather than overseas customers
for its business.
Q. What factors had the greatest influence on the segment's performance?
Increased investor interest in smaller companies bolstered performance in
mid-year, enabling the segment to stay ahead of its benchmark, the Russell 2000
Index, for 1997. But the interest was short-lived due to the financial problems
in Asia and the resulting market downturn, which drove investors back to the
comfort of better-known, large-company names. As a result, the portfolio lagged
the larger-company market indexes for 1997.
Q. What is your current outlook for 1998?
We remain cautiously optimistic that the market has absorbed most of the Asian
worries. If so, market performance in general should be solid throughout 1998,
and the smaller-company investments that the portfolio favors could do better
because their earnings depend less on the international economy than those of
some larger firms.
LARGEST HOLDINGS IN LOOMIS SAYLES SEGMENT
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% OF SEGMENT'S ASSETS % OF FUND'S NET ASSETS
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Protective Life Corp. 1.56 0.43
Mack-Cali Realty Corp. 1.21 0.33
Viad Corp. 1.20 0.33
Reinsurance Group America, Inc. 1.18 0.32
Capital Re 1.17 0.32
<PAGE>
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NEW ENGLAND STAR ADVISERS FUND
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FOUNDERS ASSET MANAGEMENT, INC.
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Q. Please describe some of the strategies you emphasized during 1997 in your
segment of the Fund.
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[Photo of Edeard Keely]
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Edward Keely Founders Asset Management, Inc.
Since mid-1997, I've been shifting to larger-company names in more defensive
industries such as pharmaceuticals, food and beverage, and consumer products.
Through the first half of 1998, the segment is expected to stay invested about
70% in larger companies and 30% in mid-size stocks. This defensiveness is partly
due to the uneasy market environment created by the Asian financial crisis. A
good example of a defensive stock I currently favor is appliance-maker Maytag.
This slower-growth company has started a potentially lucrative relationship with
Sears.
Q. What factors had the greatest influence on performance?
Until the fall, the portfolio's returns were about even with Standard & Poor's
500 Index, but finished 1997 trailing that index by about 5%. In early 1997, I
emphasized larger-company stocks when investors were favoring them so strongly,
and toward mid-year I shifted toward mid-cap stocks, which did well at that
point. However, mid-sized companies were hurt in the market when the Asian
crisis occurred in October and November. At that point, I had roughly 23% in
technology, which is relatively low but still too high to be unaffected by the
Asian situation. In October, I started to reduce my technology exposure to about
10% by year-end.
Q. What is your current outlook for 1998?
Though I anticipate opportunities, I'm cautious. The main reason: I expect S&P
500 earnings growth in 1998 to be about 6% to 7% -- lower than the widely
expected estimates of 12% to 13%. Given my lower earnings expectations and
because stock prices are at historically high levels, I believe there is little
room for market appreciation in general. The Asian financial troubles also
should temper 1998 earnings, especially among technology companies, which do
substantial business in Asia.
LARGEST HOLDINGS IN FOUNDERS SEGMENT
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% OF SEGMENT'S ASSETS % OF FUND'S NET ASSETS
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Eli Lilly 3.13 0.83
General Electric Co. 3.12 0.83
Microsoft Corp. 3.04 0.81
Pfizer, Inc. 2.20 0.59
Sunbeam Corp. 2.06 0.55
<PAGE>
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NEW ENGLAND STAR ADVISERS FUND
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JANUS CAPITAL CORP.
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Q. Please describe some of the strategies you emphasized during 1997 in your
segment of the Fund.
- -------------------------
[Photo of Warren Lammert]
- -------------------------
Warren Lammert Janus Capital Corp.
During 1997, I found promising situations in growth-oriented, reasonably priced
firms, both in the United States and abroad. With the growing global demand for
oil and gas services, I added several positions in this area, including
Transocean Offshore, Noble Drilling, and Schlumberger. In Europe, I took
advantage of a trend toward corporate restructuring to improve efficiencies and
thereby boost profits. Philips Electronics is a good example. This company, now
one of the biggest holdings, is selling underperforming divisions and
streamlining operations, which have helped the firm exceed earnings estimates
for the past three quarters.
Other investments had mixed performance results through 1997 despite promising
outlooks. For example, pharmaceutical firm Warner-Lambert performed well through
most of 1997, but suffered a setback in December due to unexpected side effects
from one of its two new drugs. But these drugs appear to hold tremendous
long-term potential to help Warner-Lambert's business grow. Another example is
computer-aided design manufacturer Parametric Technology, which has been a
disappointment this year. The company has already addressed its sluggish
Japanese sales problems with the implementation of a new management team.
Parametric's U.S. and European divisions continue to gain clientele.
Q. What factors had the greatest influence on performance?
While the broader stock market, as measured by the S&P 500, soared in 1997, the
environment for the segment's holdings was more uneven. In the first half of the
year small- and mid-sized stocks significantly lagged the S&P 500, but began to
catch up by mid-year. As 1997 ended, the Asian financial turmoil hit some of our
higher-growth stocks especially hard.
Q. What is your current outlook for 1998?
As 1997 came to a close, the impact of the Asian financial crisis continued to
influence stocks around the world. Though this situation is still unfolding, it
reminds us that stocks don't always go up in price. The volatility may be
unsettling, but it has lowered prices on some fundamentally sound stocks,
creating excellent buying opportunities.
LARGEST HOLDINGS IN JANUS SEGMENT
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% OF SEGMENT'S ASSETS % OF FUND'S NET ASSETS
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Warner-Lambert Co. 5.19 1.17
Monsanto Co. 4.78 1.08
Parametric Technology Corp. 4.15 0.94
UNUM Corp. 3.52 0.80
Philips Electronics NV (ADR) 3.40 0.77
<PAGE>
NEW ENGLAND STAR ADVISERS FUND
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Editor's Note: In July 1997, Oakmark/Harris Associates replaced Berger
Associates as a subadviser of Star Advisers Fund, naming Robert Sanborn as
portfolio manager. The move, approved by a shareholder vote in October, is a
positive change that helps the Fund create a better balance of investment styles
for greater return potential with less risk. Oakmark/Harris Associates and
Robert Sanborn bring a strong reputation, broad visibility and an impressive
track record to the Fund.
OAKMARK/HARRIS ASSOCIATES
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Q. Please describe some of the strategies you emphasized during 1997 in your
segment of the Fund.
- -------------------------
[Photo of Robert Sanborn]
- -------------------------
Robert Sanborn Oakmark/Harris Associates
After assuming management of the portfolio on July 25, 1997, I've repositioned
much of the segment with a preference toward larger, more stable businesses.
Cable companies were my best performers, with financial services firms also
performing very well. As these industries' stocks had risen substantially in
value by year-end, I trimmed the positions and took some profits. Two very
strong cable stocks for the portfolio were TCI Communications and U.S. West
Media Group, which rose about 66% and 42% respectively. Among the stronger
financial holdings have been Fannie Mae (formerly the Federal National Mortgage
Association) and Mellon. Nike and Boeing, two well-known companies with
long-term growth potential, have lagged the market.
I try to buy a stock when it is worth only about 60% of its potential value in
the market and sell if and when the stock nears its full value. The examples
I've just discussed met these criteria.
Q. What factors had the greatest influence on performance?
As I mentioned, both cable and financial stocks have been spectacular
performers. Another contributing factor to the portfolio's solid performance was
the absence of technology stocks, which sustained losses in the aftermath of the
Asian financial crisis. On balance, the segment's returns have been about even
with the major market indexes, slightly trailing Standard & Poor's 500 Index and
outperforming the Dow Jones Industrial Average.
Q. What is your current outlook for 1998?
I believe the market is in good shape. Overall, staying invested in bargain-type
stocks is a better alternative to being out of the market.
LARGEST HOLDINGS IN OAKMARK/HARRIS SEGMENT
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% OF SEGMENT'S ASSETS % OF FUND'S NET ASSETS
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Philip Morris Companies 9.05 2.12
Boeing Co. 8.26 1.93
U.S. West Media Group 6.72 1.57
Banc One Corp. 6.44 1.51
Federal National Mortgage
Association 5.70 1.33
<PAGE>
PORTFOLIO COMPOSITION
Investments as of December 31, 1997
COMMON STOCK -- 93.2% OF TOTAL NET ASSETS
AEROSPACE--3.2%
399,000 Boeing Co............................................$ 19,526,062
77,900 Gencorp, Inc......................................... 1,947,500
40,150 Gulfstream Aerospace Corp. (c)....................... 1,174,389
100,000 Lockheed Martin Corp................................. 9,850,000
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32,497,951
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AIR TRAVEL--0.5%
151,000 Deutsche Lufthansa AG................................ 2,895,856
69,350 Southwest Airlines................................... 1,707,744
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4,603,600
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APPAREL & TEXTILES--0.3%
187,900 Shaw Industries, Inc................................. 2,184,337
11,800 Timberland Co........................................ 685,138
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2,869,475
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AUTO PARTS--0.2%
105,500 Aftermarket Technology Corp.......................... 1,912,187
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AUTOMOTIVE--1.1%
131,900 Apogee Enterprises, Inc.............................. 1,566,312
30,200 Borg Warner Automotive, Inc.......................... 1,570,400
70,000 Echlin, Inc.......................................... 2,533,125
57,400 Federal Signal Corp.................................. 1,241,275
86,350 Ford Motor Co........................................ 4,204,166
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11,115,278
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BANKS--4.7%
8,375 Ambanc Holding Company, Inc.......................... 157,031
280,000 Banc One Corp........................................ 15,207,500
507,406 Banca Commerciale Italiana........................... 1,764,017
38,700 Bank of New York..................................... 2,237,344
77,200 BankAmerica Corp..................................... 5,635,600
15,625 Chase Manhattan...................................... 1,710,937
8,850 Citicorp............................................. 1,118,972
45,100 City National Corp................................... 1,665,881
14,100 CNB Bancshares, Inc.................................. 679,444
11,725 Dime Bancorp, Inc.................................... 354,681
11,650 Klamath First Bancorp................................ 250,475
202,750 Mellon Bank Corp..................................... 12,291,719
7,975 Provident Financial Holdings, Inc.................... 174,453
7,275 Queens County Bancorp, Inc........................... 294,638
33,500 Roslyn Bancorp....................................... 778,875
23,300 Star Banc Corp....................................... 1,336,838
8,150 U.S. Bancorp......................................... 912,291
11,700 Westamerica Bancorporation........................... 1,196,325
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47,767,021
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BROADCASTING--3.9%
171,575 Comcast Corp......................................... 5,415,336
15,800 Jacor Communications, Inc. (c)....................... 839,375
618,099 Tele-Communications, Inc. (c)........................ 17,268,141
550,000 U.S. West Media Group (c)............................ 15,881,250
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39,404,102
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BUSINESS SERVICES--3.1%
49,400 Alternative
Resources (c)...................................... 1,139,288
6,825 America Online, Inc.................................. 608,705
148,300 APAC Teleservices, Inc. (c).......................... 2,002,050
85,525 Banta Corp........................................... 2,309,175
82,700 Cadmus Communications Corp........................... 1,695,350
32,000 CDI Corp............................................. 1,464,000
49,400 Cognizant Corp....................................... 2,201,387
47,900 Cort Business Services Corp.......................... 1,907,019
103,075 Fiserv, Inc. (c)..................................... 5,063,559
36,291 Lamar Advertising Co. (c)............................ 1,442,567
66,220 Metra OY, Series B................................... 1,554,988
95,850 Nokia Corp. (ADR) (d)................................ 6,709,500
19,900 Team America Corp.................................... 208,950
171,000 Viad Corp............................................ 3,302,437
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31,608,975
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CHEMICALS--2.2%
102,700 Cuno, Inc............................................ 1,566,175
25,600 Dexter Corp.......................................... 1,105,600
44,700 General Chemical Group Inc........................... 1,195,725
58,700 Hanna M.A. Co........................................ 1,482,175
36,000 HB Fuller Co......................................... 1,782,000
11,525 Imperial Chemical Industies PLC (ADR) (c) (d)........ 748,405
33,300 Mississippi Chemical Corp............................ 607,725
259,675 Monsanto Co.......................................... 10,906,350
113,995 Solutia, Inc. (c).................................... 3,042,241
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22,436,396
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COMMUNICATION SERVICES--0.3%
14,600 Lucent Technologies, Inc............................. 1,166,175
180,800 Rohn Inds, Inc....................................... 932,250
91,200 Vanguard Cellular Systems, Inc....................... 1,162,800
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3,261,225
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COMPUTER SOFTWARE & SERVICES--1.3%
51,800 American Management Systems, Inc..................... 1,010,100
40,400 National Computer Systems, Inc....................... 1,424,100
59,000 Nichols Research Corp................................ 1,475,000
81,125 Peoplesoft, Inc. (c)................................. 3,163,875
102,300 PLATINUM Technology, Inc............................. 2,889,975
47,300 Sterling Software, Inc. 1,939,300
23,587 Technology Solutions (c)............................. 622,107
42,800 Wonderware Corp...................................... 604,550
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13,129,007
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COMPUTERS & BUSINESS EQUIPMENT--1.5%
11,275 Bay Networks, Inc. (c) 288,217
30,375 Ceridian Corp. (c)................................... 1,391,555
64,900 Compaq Computer Corp................................. 3,662,794
96,300 Digi International, Inc.............................. 1,637,100
86,325 EMC Corp. (c)........................................ 2,368,542
29,675 Hewlett-Packard Co................................... 1,854,687
68,100 Komag, Inc........................................... 1,012,988
9,500 Oce Van der Grinten NV (c)........................... 1,035,435
66,000 Telxon Corp.......................................... 1,575,750
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14,827,068
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CONGLOMERATES--0.3%
129,243 Siebe................................................ 2,536,765
-------------
CONSTRUCTION EQUIPMENT--0.3%
91,300 Regal Beloit Corp.................................... 2,699,056
-------------
CONSUMER GOODS & SERVICES--1.3%
31,200 Linens'n Things...................................... 1,361,100
230,000 NIKE, Inc., Class B.................................. 9,027,500
31,293 Outdoor Systems, Inc. (c)............................ 1,200,869
114,200 Stride Rite Corp., (Rights).......................... 1,370,400
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12,959,869
-------------
DRUGS & HEALTH CARE--8.3%
70,400 Alza Corp. (c)....................................... 2,239,600
15,100 American Home Products Corp.......................... 1,155,150
50,600 Bristol-Myers Squibb Co.............................. 4,788,025
18,525 Cardinal Health, Inc................................. 1,391,691
32,925 Centocor, Inc........................................ 1,094,756
380,000 Columbia/HCA Healthcare Corp......................... 11,257,500
66,400 CompDent Corp........................................ 1,346,675
48,750 Dura Pharmaceuticals, Inc. (c)....................... 2,236,406
187,100 Eli Lilly............................................ 13,026,837
36,625 ESC Medical Systems, Ltd. (c)........................ 1,419,219
55,200 Genesis Health Ventures, Inc......................... 1,455,900
95,475 HEALTHSOUTH Corp. (c)................................ 2,649,431
27,900 Merck & Co........................................... 2,964,375
2,250 Novartis AG.......................................... 3,649,398
101,700 Omnicare, Inc........................................ 3,152,700
109,775 Pfizer, Inc.......................................... 8,185,098
56,200 PharMerica, Inc. (c)................................. 583,075
151,063 SmithKline Beecham PLC............................... 1,556,959
58,600 SmithKline Beecham PLC (ADR) (d)..................... 3,014,238
33,200 Sola International, Inc. (c)......................... 1,079,000
55,925 Stryker Corp. (c).................................... 2,083,206
64,100 Trigon Healthcare, Inc............................... 1,674,613
95,525 Warner-Lambert Co.................................... 11,845,100
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83,848,952
-------------
ELECTRIC--1.1%
98,200 ANTEC Corp........................................... 1,534,375
47,213,000 Ericsson Telecomunicacoes S.A. (c)................... 1,514,471
114,500 General Electric Co.................................. 8,401,438
-------------
11,450,284
-------------
ELECTRIC UTILITIES--0.3%
70,400 Calpine Corp......................................... 1,047,200
12,400 Commonwealth Energy Systems.......................... 412,300
45,800 Rochester Gas and Electric Corp...................... 1,557,200
-------------
3,016,700
-------------
ELECTRONIC COMPONENTS--0.1%
93,000 International Rectifier Corp. (c).................... 1,098,563
69,500 Xicor, Inc........................................... 208,500
-------------
1,307,063
-------------
ELECTRONICS--4.4%
43,900 Alliant Techsystems, Inc............................. 2,447,425
48,800 Alpha Industries, Inc................................ 786,900
85,350 Altera Corp. (c)..................................... 2,827,219
42,600 ASM Lithography Holding
(ADR) (c) (d)...................................... 2,875,500
83,900 BMC Industries....................................... 1,352,887
48,300 California Microwave................................. 935,813
69,550 Ciena Corp. ......................................... 4,251,244
58,000 Cypress Semi-
conductor Corp. ................................... 493,000
45,750 Electronic Data Systems Corp......................... 2,010,141
45,900 Exar Corp............................................ 757,350
145,000 Integrated Device Technology
(Rights) (c)....................................... 1,368,437
7,400 Lam Research
Corp. (c).......................................... 216,450
136,500 Maxim Integrated Products, Inc. (c).................. 4,709,250
5,382 Philips Electronics NV............................... 322,763
147,036 Philips Electronics NV (ADR) (d)..................... 8,895,678
153,600 Sensormatic Electronics Corp......................... 2,524,800
54,650 Tellabs, Inc. (c).................................... 2,889,619
48,000 Texas Instruments, Inc............................... 2,160,000
79,350 Xilinx, Inc. (c)..................................... 2,782,209
-------------
44,606,685
-------------
ENTERTAINMENT--0.7%
234,825 CBS Corp............................................. 6,912,661
-------------
FINANCE--1.6%
51,436 Associated Banc Corp................................. 2,835,410
14,850 Beneficial Corp...................................... 1,234,406
6,375 Catskill Financial Corp.............................. 120,328
50,900 CIT Group, Inc....................................... 1,641,525
36,800 Hartford Financial Services Group.................... 3,443,100
6,350 Peekskill Financial Corp............................. 106,363
40,300 SLM Holding Corp..................................... 5,606,737
7,725 TF Financial Corp.................................... 231,750
43,700 UST Corp............................................. 1,212,675
-------------
16,432,294
-------------
FINANCIAL SERVICES--2.1%
103,450 Associates 1st Capital Corp. (c)..................... 7,357,881
47,075 Capital One Financial Corp........................... 2,550,877
56,112 Charles Schwab Corp.................................. 2,353,197
108,400 DVI, Inc............................................. 2,005,400
109,800 Financial Federal Corp............................... 2,594,025
4,950 FirstSpartan Financial Corp.......................... 199,238
127,600 Franchise Mortgage Acceptance Co..................... 2,344,650
3,375 GSB Financial Corp................................... 60,961
27,362 SunAmerica, Inc...................................... 1,169,725
81,400 WFS Financial, Inc................................... 915,750
-------------
21,551,704
-------------
FOOD & BEVERAGES--4.4%
101,825 Coca-Cola Enterprises, Inc........................... 3,621,152
225,000 H.J. Heinz Co........................................ 11,432,812
18,100 International Home Foods, Inc........................ 506,800
52,200 International Multifoods Corp........................ 1,477,913
69,800 Lance, Inc........................................... 1,836,612
32,900 Michael Foods, Inc................................... 801,938
220,000 Nabisco Holdings Corp................................ 10,656,250
82,500 PepsiCo, Inc......................................... 3,006,094
27,575 Raison Tehtaat....................................... 3,273,012
17,125 Ralston Purina Co.................................... 1,591,555
88,350 Sara Lee Corp........................................ 4,975,209
98,700 Weider Nutrition International, Inc.................. 1,227,581
-------------
44,406,928
-------------
FREIGHT TRANSPORTATION--0.6%
62,500 Circle International Group, Inc...................... 1,433,594
93,200 Pittston Burlington Co............................... 2,446,500
65,300 US Freightways Corp.................................. 2,122,250
-------------
6,002,344
-------------
GAS & PIPELINE UTILITIES--0.5%
70,700 Eastern Enterprises.................................. 3,181,500
50,500 Public Service North Carolina, Inc................... 1,155,187
23,200 WPS Resources Corp................................... 784,450
-------------
5,121,137
-------------
GOVERNMENT AGENCIES--1.7%
292,800 Federal National Mortgage Association................ 16,707,900
-------------
HEALTH CARE -- MEDICAL TECHNOLOGY--1.1%
85,800 C.R. Bard, Inc....................................... 2,686,613
115,950 Conmed Corp.......................................... 3,043,687
91,300 Hologic, Inc......................................... 1,888,769
57,900 Invacare Corp........................................ 1,259,325
27,825 Sofamor/Danek Group, Inc............................. 1,810,364
-------------
10,688,758
-------------
HEALTH CARE -- SERVICES--1.2%
32,800 Gulf South Medical Supply, Inc....................... 1,221,800
114,200 Healthplan Services Corp............................. 2,398,200
101,373 Integrated Health Services, Inc...................... 3,161,570
56,100 Phymatrix Corp....................................... 883,575
75,900 Sierra Health Services, Inc. (c)..................... 2,552,138
80,773 Vitalink Pharmacy Services, Inc...................... 1,948,649
-------------
12,165,932
-------------
HOUSEHOLD APPLIANCES & HOME FURNISHINGS--1.6%
22,808 Electrolux AB, Series B.............................. 1,582,792
141,600 Furniture Brands International, Inc.................. 2,902,800
131,400 Maytag Corp.......................................... 4,902,862
131,800 Sunbeam Corp. (c).................................... 5,552,075
29,400 Westpoint Stevens, Inc............................... 1,389,150
-------------
16,329,679
-------------
HOME BUILDERS--0.1%
70,300 Champion Enterprises, Inc............................ 1,445,544
-------------
HOTELS & RESTAURANTS--1.0%
134,800 Buffets, Inc......................................... 1,263,750
47,800 Cooker Restaurant.................................... 457,087
23,800 Cracker Barrel Old Country Store..................... 794,325
125,800 Darden Restaurants, Inc.............................. 1,572,500
120,700 Mirage Resorts, Inc. (c)............................. 2,745,925
134,100 Sunstone Hotel Investors............................. 2,313,225
28,200 WMS Industries, Inc.................................. 595,725
-------------
9,742,537
-------------
HOUSEHOLD PRODUCTS--2.9%
250,000 Black & Decker Corp.................................. 9,765,625
261,950 Dial Corp. (c)....................................... 5,451,834
42,600 Gillette Co.......................................... 4,278,638
32,817 Hunter Douglas....................................... 1,149,117
94,400 Premark International, Inc........................... 2,737,600
56,700 Procter & Gamble Co.................................. 4,525,369
107,550 United States Can Corp............................... 1,814,906
-------------
29,723,089
-------------
HOUSING & BUILDING MATERIALS--0.6%
61,950 Crossmann Communities, Inc........................... 1,711,369
74,400 Giant Cement Holding, Inc............................ 1,720,500
144,400 Griffon Corp......................................... 2,111,850
-------------
5,543,719
-------------
INDUSTRIAL MACHINERY--0.7%
72,600 Chart Industries..................................... 1,656,188
43,500 Crane Co............................................. 1,886,812
32,070 Tomra Systems ASA.................................... 716,449
76,200 Trimas Corp.......................................... 2,619,375
-------------
6,878,824
-------------
INSURANCE--3.5%
89,475 Allied Group, Inc.................................... 2,561,222
39,750 Allstate Corp........................................ 3,612,281
51,900 Capital Re........................................... 3,221,044
32,400 Capmac Holdings, Inc................................. 1,125,900
127,000 Everest Reinsurance Holdings, Inc.................... 5,238,750
22,950 Marsh & McLennan Companies, Inc...................... 1,711,209
13,950 Progressive Corp..................................... 1,672,256
72,000 Protective Life Corp. (c)............................ 4,302,000
76,300 Reinsurance Group America, Inc....................... 3,247,519
17,250 Reliance Group Holdings, Inc......................... 243,656
147,945 UNUM Corp............................................ 8,044,510
-------------
34,980,347
-------------
LEISURE TIME--0.4%
37,100 Walt Disney Co....................................... 3,675,219
-------------
LIQUOR--1.0%
239,500 Anheuser-Busch Companies, Inc........................ 10,538,000
-------------
METAL--0.3%
118,100 Agnico Eagle Mines, Ltd.............................. 642,169
131,800 Oregon Steel Mills, Inc.............................. 2,808,987
-------------
3,451,156
-------------
MINING--0.9%
418,000 De Beers Centenary Mines AG (ADR) (d)................ 8,542,875
-------------
MORTGAGE--0.3%
219,500 Imperial Credit Com-
mercial Mortgage Investment Corp................... 3,210,187
-------------
NEWSPAPERS--1.0%
200,000 Knight-Ridder, Inc................................... 10,400,000
-------------
NON-FERROUS METALS--0.2%
63,600 Amcol International Corp............................. 1,009,650
76,500 Imco Recycling, Inc.................................. 1,228,781
-------------
2,238,431
-------------
OIL & GAS--1.3%
18,126 Elf Aquitaine........................................ 2,108,200
86,400 Forcenergy, Inc...................................... 2,262,600
86,900 Pride International, Inc. (c)........................ 2,194,225
83,825 Transocean Offshore, Inc............................. 4,039,317
117,675 World Fuel Services Corp............................. 2,471,175
-------------
13,075,517
-------------
OIL -- INDEPENDANT PRODUCERS--0.4%
104,800 Lomak Petroleum, Inc................................. 1,703,000
115,200 Vintage Petroleum, Inc............................... 2,188,800
-------------
3,891,800
-------------
OIL SERVICES--1.1%
15,200 BJ Services Co. (c).................................. 1,093,450
108,000 Kimball International, Inc., Class B................. 1,991,250
1,265,341 Ocean Rig Asa........................................ 1,336,302
41,625 Santa Fe International Corp. (c)..................... 1,693,617
57,400 Seitel, Inc., New.................................... 982,975
54,837 Smedvig.............................................. 1,150,821
60,500 Weatherford Enterra, Inc. (c)........................ 2,646,875
-------------
10,895,290
-------------
PAPER--0.9%
71,300 Boise Cascade Corp., (Rights)........................ 2,156,825
59,800 Fort James Corp...................................... 2,287,350
43,950 International Paper Co............................... 1,895,344
78,000 Mead Corp............................................ 2,184,000
10,500 Wausau Mosinee Paper Corp............................ 211,312
-------------
8,734,831
-------------
PETROLEUM SERVICES--2.1%
27,700 Atwood Oceanics,
Inc. (c)........................................... 1,312,287
76,550 Baker Hughes, Inc.................................... 3,339,494
58,350 Diamond Offshore Drilling, Inc....................... 2,808,094
89,250 Noble Drilling (c)................................... 2,733,281
38,400 Plains Resources, Inc................................ 660,000
57,825 Reading & Bates (c).................................. 2,421,422
102,900 Schlumberger, Ltd.................................... 8,283,450
-------------
21,558,028
-------------
PHOTOGRAPHY--1.0%
210,000 Polaroid Corp........................................ 10,224,375
-------------
PLASTICS--0.4%
67,225 Sealed Air Corp...................................... 4,151,144
-------------
POLLUTION CONTROL--0.1%
48,350 Allied Waste Industries, Inc......................... 1,127,159
-------------
PUBLISHING--1.8%
400,000 Dun & Bradstreet Corp................................ 12,375,000
34,500 Gibson Greetings, Inc................................ 754,688
38,100 Houghton Mifflin Co.................................. 1,462,087
54,050 Time Warner, Inc..................................... 3,351,100
-------------
17,942,875
-------------
REAL ESTATE INVESTMENT TRUSTS--2.2%
110,500 American General Hospitality Corp.................... 2,955,875
99,900 Brandywine Realty Trust.............................. 2,509,987
88,800 Capstone Capital Corp................................ 2,269,950
35,000 Equity Office Properties Trust....................... 1,104,687
79,200 Health Care Property Investments, Inc................ 2,994,750
122,900 Koger Equity, Inc.................................... 2,696,119
89,500 Liberty Property..................................... 2,556,344
81,800 Mack-Cali Realty Corp................................ 3,353,800
59,200 Sun Communities, Inc................................. 2,127,500
-------------
22,569,012
-------------
RETAIL--2.1%
45,525 CompUSA, Inc. (c).................................... 1,411,275
53,500 Costco Companies, Inc. (c)........................... 2,387,437
31,925 Dayton Hudson Corp................................... 2,154,937
46,450 Family Dollar Stores, Inc............................ 1,361,566
131,800 Heilig Meyers Co..................................... 1,581,600
83,500 Lowe's Companies..................................... 3,981,906
28,300 Office Max, Inc. (c)................................. 403,275
57,600 Saks Holdings, Inc. (c).............................. 1,191,600
101,900 Tandycrafts, Inc..................................... 464,919
77,850 Toys R Us, Inc. (c).................................. 2,447,409
104,300 United Auto Group, Inc............................... 1,890,438
36,900 Wet Seal, Inc. (c)................................... 1,088,550
55,500 Zale Corp............................................ 1,276,500
-------------
21,641,412
-------------
RETAIL -- GROCERY--0.2%
51,700 Hannaford Brothers Co................................ 2,245,719
-------------
SAVINGS & LOAN--1.4%
4,675 Astoria Financial Corp............................... 260,631
46,100 Bank United Corp..................................... 2,256,019
77,137 Commercial Federal Corp.............................. 2,743,167
81,000 Downey Financial Corp................................ 2,303,438
9,450 First Defiance Financial Corp........................ 151,200
2,175 First Savings Bancorp, Inc........................... 55,463
1,375 FSF Financial Corp................................... 28,359
51,450 H F Ahmanson & Co.................................... 3,443,934
6,350 North Central Bancshares, Inc........................ 126,206
44,592 Washington Mutual, Inc............................... 2,845,527
-------------
14,213,944
-------------
SERVICES--0.3%
117,925 Galileo International, Inc........................... 3,257,678
-------------
SOFTWARE--2.5%
90,325 Cadence Design Systems, Inc. (c)..................... 2,212,963
62,400 FileNet Corp......................................... 1,879,800
49,550 HBO & Co., Rights.................................... 2,378,400
109,425 Microsoft Corp. (c).................................. 14,143,181
66,400 Structural Dynamics (c).............................. 1,494,000
20,250 Veritas Software Co. (c)............................. 1,032,750
43,162 Wind River Systems (c)............................... 1,712,992
-------------
24,854,086
-------------
STEEL--0.2%
84,800 Intermet Corp........................................ 1,484,000
-------------
TECHNOLOGY--3.5%
122,515 Analog Devices, Inc.................................. 3,392,134
91,700 Aspen Technology..................................... 3,140,725
84,112 Cisco Systems, Inc. (c).............................. 4,689,244
38,350 Dell Computer Corp. (c).............................. 3,221,400
60,550 Intel Corp........................................... 4,253,638
199,950 Parametric Technology Corp. (c)...................... 9,472,631
77,012 Pittway Corp......................................... 5,361,961
24,725 Sapient Corp......................................... 1,514,406
-------------
35,046,139
-------------
TELECOMMUNICATION--0.8%
31,800 AT&T Corp............................................ 1,947,750
121,850 MCI Communications Corp.............................. 5,216,703
190,424 Telecom Italia S.p.A................................. 1,216,389
-------------
8,380,842
-------------
TOBACCO--2.8%
556,800 Philip Morris Companies.............................. 25,230,000
80,150 RJR Nabisco Holdings Corp. (c)....................... 3,005,625
-------------
28,235,625
-------------
TOYS & AMUSEMENTS--1.0%
270,000 Mattel, Inc.......................................... 10,057,500
-------------
TRANSPORTATION--0.2%
61,400 CNF Transportation, Inc.............................. 2,356,225
-------------
TRUCKING & FREIGHT FORWARDING--0.1%
49,100 Offshore Logistics, Inc.............................. 1,049,513
-------------
Total Common Stocks (Identified Cost $844,278,817)... 941,539,638
-------------
SHORT TERM INVESTMENTS--7.7%
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE(a)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
$ 1,300,000 Federal Home Loan Mortgage Discount Notes, Zero Coupon,
1/02/98............................................... $ 1,299,783
13,500,000 General Electric Capital Corp., 5.650%, 1/02/98......... 13,500,000
7,700,000 Chevron Corp., 6.600%, 1/02/98.......................... 7,700,000
11,000,000 General Electric Capital Corp., 6.700%, 1/02/98......... 10,997,953
44,075,000 Repurchase Agreement with State Street Bank & Trust Co.
dated 12/31/97 at 5.00% to be repurchased at
$44,087,243 on 1/2/98, collateralized by $43,815,000
U.S. Treasury Bond, 5.875% due 1/31/99, valued at
$44,960,543........................................... 44,075,000
--------------
Total Short Term Investments (Identified Cost
$77,572,736).......................................... 77,572,736
--------------
Total Investments--100.9% (Identified Cost
$921,851,553)(b)...................................... 1,019,112,374
Other assets less liabilities (e)....................... (8,722,886)
--------------
Total Net Assets--100%.................................. $1,010,389,488
==============
</TABLE>
<TABLE>
<CAPTION>
FORWARD CURRENCY CONTRACTS OUTSTANDING
as December 31, 1997
LOCAL AGGREGATE UNREALIZED
DELIVERY CURRENCY FACE TOTAL APPRECIATION/
DATE AMOUNT VALUE VALUE (DEPRECIATION)
-------- -------- ---------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Deutsch Mark (bought)................. 02/18/98 1,800,000 $ 1,021,636 $ 1,003,456 $(18,180)
Deutsch Mark (bought)................. 02/18/98 400,000 228,024 222,990 (5,034)
Deutsch Mark (bought)................. 02/18/98 1,450,000 846,221 808,340 (37,881)
Deutsch Mark (bought)................. 02/18/98 560,000 327,336 312,186 (15,150)
Deutsch Mark (bought)................. 02/18/98 365,000 214,375 203,478 (10,897)
Deutsch Mark (bought)................. 02/18/98 625,000 366,097 348,422 (17,675)
Deutsch Mark (sold)................... 02/18/98 1,200,000 647,459 668,971 (21,512)
Deutsch Mark (sold)................... 02/18/98 4,000,000 2,158,545 2,229,903 (71,358)
Finnish Markka (bought)............... 01/09/98 2,040,000 382,452 374,463 (7,989)
Finnish Markka (sold)................. 01/09/98 3,000,000 556,318 550,681 5,637
Finnish Markka (sold)................. 01/15/98 1,700,000 328,249 312,173 16,076
Finnish Markka (sold)................. 01/15/98 906,000 167,026 166,370 656
Finnish Markka (bought)............... 02/11/98 660,000 124,023 121,404 (2,619)
Finnish Markka (sold)................. 02/11/98 660,000 123,658 121,404 2,254
Finnish Markka (sold)................. 02/26/98 1,749,000 316,275 322,018 (5,743)
Finnish Markka (bought)............... 03/26/98 6,000,000 1,167,088 1,106,436 (60,652)
Finnish Markka (sold)................. 03/26/98 8,400,000 1,617,251 1,549,011 68,240
Finnish Markka (sold)................. 03/31/98 3,000,000 569,822 553,373 16,449
Finnish Markka (sold)................. 03/31/98 12,000,000 2,318,419 2,213,491 104,928
Finnish Markka (sold)................. 03/31/98 3,000,000 563,592 553,373 10,219
Finnish Markka (sold)................. 05/28/98 5,000,000 956,023 925,045 30,978
British Pounds (bought)............... 01/20/98 130,000 208,295 213,318 5,023
British Pounds (bought)............... 01/20/98 130,000 216,858 213,318 (3,540)
British Pounds (bought)............... 01/20/98 40,000 65,800 65,636 (164)
British Pounds (sold)................. 01/20/98 300,000 504,600 492,271 12,329
British Pounds (bought)............... 02/18/98 350,000 567,772 583,258 (15,486)
British Pounds (bought)............... 02/19/98 39,000 64,081 63,902 (179)
British Pounds (bought)............... 02/19/98 120,000 198,216 196,621 (1,595)
British Pounds (sold)................. 02/19/98 250,000 418,750 409,627 9,123
British Pounds (bought)............... 03/04/98 59,000 97,533 96,610 (923)
British Pounds (sold)................. 03/04/98 769,000 1,287,152 1,259,198 27,954
British Pounds (sold)................. 03/11/98 65,000 107,185 106,396 789
Italian Lira (sold)................... 01/09/98 800,000,000 464,212 452,196 12,016
Italian Lira (sold)................... 01/09/98 800,000,000 457,378 452,196 5,182
Italian Lira (sold)................... 01/09/98 500,000,000 284,843 282,622 2,221
Italian Lira (sold)................... 01/09/98 700,000,000 389,903 395,671 (5,768)
Italian Lira (sold)................... 01/09/98 300,000,000 166,176 169,573 (3,397)
Italian Lira (bought)................. 03/11/98 700,000,000 409,989 395,566 (14,423)
Italian Lira (bought)................. 03/11/98 200,000,000 115,520 113,019 (2,501)
Italian Lira (sold)................... 03/11/98 1,400,000,000 788,599 791,133 (2,534)
Netherland Guilder (bought)........... 01/09/98 1,400,000 718,815 690,845 (27,970)
Netherland Guilder (sold)............. 01/09/98 4,000,000 1,953,220 1,973,844 (20,624)
Netherland Guilder (bought)........... 02/25/98 2,900,000 1,489,394 1,435,204 (54,190)
Netherland Guilder (bought)........... 02/25/98 1,500,000 767,185 742,347 (24,838)
Netherland Guilder (bought)........... 02/25/98 1,600,000 804,586 791,837 (12,749)
Netherland Guilder (sold)............. 02/25/98 3,000,000 1,440,576 1,484,694 (44,118)
Netherland Guilder (sold)............. 02/25/98 10,700,000 5,409,505 5,295,407 114,098
Netherland Guilder (sold)............. 03/31/98 1,000,000 505,485 495,915 9,570
Netherland Guilder (sold)............. 03/31/98 1,500,000 755,390 743,872 11,518
Swedish Krona (sold).................. 01/15/98 1,500,000 192,879 188,999 3,880
Swedish Krona (sold).................. 01/15/98 4,050,000 533,527 510,298 23,229
Swedish Krona (bought)................ 02/11/98 2,400,000 318,979 302,630 (16,349)
Swedish Krona (sold).................. 02/11/98 2,400,000 305,732 302,630 3,102
Swedish Krona (bought)................ 03/04/98 750,000 96,724 94,626 (2,098)
Swedish Krona (bought)................ 03/04/98 1,000,000 126,630 126,169 (461)
Swedish Krona (sold).................. 03/04/98 2,700,000 338,299 340,655 (2,356)
Swedish Krona (bought)................ 03/11/98 1,800,000 239,399 227,141 (12,258)
Swedish Krona (sold).................. 03/11/98 1,800,000 237,969 227,141 10,828
--------
$(36,912)
========
(a) See Note 1a to the financial statements.
(b) Federal Tax Information:
At December 31, 1997 the net unrealized appreciation on investments based on cost of $923,817,152
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 .................................................................................. $132,504,719
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax
cost over value ................................................................................ (37,209,497)
------------
Net unrealized appreciation..................................................................... $ 95,295,222
============
(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 foreign issuer described.
The values of ADRs are significantly influenced by trading on exchanges not
located in the United States.
(e) Including deposits in foreign denominated currencies with a value of
$10,315 and a cost of $10,729
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments at value .................................. $1,019,112,374
Cash ................................................. 62,567
Foreign cash at value (Cost $10,729) .................. 10,315
Receivable for:
Fund shares sold .................................... 1,102,495
Securities sold ..................................... 6,210,222
Accrued dividends and interest ...................... 1,148,900
Foreign taxes ....................................... 22,936
Prepaid registration expense .......................... 15,000
Unamortized organization expense ...................... 58,125
--------------
$1,027,742,934
LIABILITIES
Payable for:
Securities purchased ................................ $14,561,377
Open forward currency contracts - net ............... 36,912
Fund shares redeemed ................................ 1,585,997
Accrued expenses:
Management fees ..................................... 885,841
Deferred trustees' fees ............................. 10,859
Accounting and administrative ....................... 11,038
Other ............................................. 261,422
-----------
17,353,446
--------------
NET ASSETS .............................................. $1,010,389,488
==============
Net Assets consist of:
Capital paid in .................................... $ 900,683,176
Undistributed net investment income ................ 162,760
Accumulated net realized gains ..................... 13,320,439
Unrealized appreciation on investments, forward
currency contracts and foreign currency
transactions ..................................... 97,233,113
--------------
NET ASSETS .............................................. $1,010,389,488
==============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($416,937,569 divided by 22,952,729 shares of
beneficial interest) .................................. $ 18.17
==============
Offering price per share (100/94.25 of $18.17) .......... $ 19.28*
==============
Net asset value and offering price of Class B shares
($462,034,053 divided by 26,207,485 shares of
beneficial interest) .................................. $ 17.63**
==============
Net asset value and offering price of Class C shares
($94,412,169 divided by 5,351,261 shares of
beneficial interest) .................................. $ 17.64
==============
Net asset value and offering price of Class Y shares
($37,005,697 divided by 2,010,517 shares of
beneficial interest) .................................. $ 18.41
==============
Identified cost of investments .......................... $ 921,851,553
==============
*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.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
Year Ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Dividends ........................................... $ 8,651,948(a)
Interest ............................................ 5,442,295
------------
14,094,243
Expenses
Management fees ................................... $ 9,732,113
Service fees - Class A ............................ 967,853
Service and distribution fees - Class B ........... 4,220,821
Service and distribution fees - Class C ........... 875,440
Trustees' fees and expenses ....................... 22,486
Accounting and administrative ..................... 130,709
Custodian ......................................... 529,117
Transfer agent .................................... 2,001,046
Audit and tax services ............................ 45,990
Legal ............................................. 10,779
Printing .......................................... 379,254
Registration ...................................... 126,601
Amortization of organization expenses ............. 25,671
Miscellaneous ..................................... 48,650
------------
Total expenses ...................................... 19,116,530
------------
Net investment loss ................................. (5,022,287)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments - net ................................. 179,799,312
Foreign currency transactions - net ............... 981,246
------------
Net realized gain on investments and foreign
currency transactions ........................... 180,780,558
------------
Unrealized depreciation on:
Investments - net ................................. (10,410,235)
Forward currency contracts ........................ (49,777)
Foreign currency transactions - net ............... (433)
------------
Net unrealized depreciation on investments, and
foreign currency
transactions ...................................... (10,460,445)
------------
Net gain on investment transactions ................. 170,320,113
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............ $165,297,826
============
(a) Net of foreign taxes of: $99,899
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------- --------------
FROM OPERATIONS
<S> <C> <C>
Net investment loss ................................. $ (4,909,272) $ (5,022,287)
Net realized gain on investments and foreign
currency transactions .............................. 73,998,381 180,780,558
Unrealized appreciation (depreciation) on investments
and foreign currency transactions .................. 37,717,140 (10,460,445)
------------ --------------
Increase in net assets from operations .............. 106,806,249 165,297,826
------------ --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gain on investments
Class A ........................................... (28,709,305) (71,019,226)
Class B .......................................... (30,201,992) (80,282,014)
Class C .......................................... (6,605,753) (16,094,369)
Class Y .......................................... (1,223,707) (5,967,515)
------------ --------------
(66,740,757) (173,363,124)
------------ --------------
Increase in net assets derived from capital share
transactions ........................................ 278,927,348 204,607,502
------------ -------------
Total increase in net assets .......................... 318,992,840 196,542,204
NET ASSETS
Beginning of the year ............................... 494,854,444 813,847,284
------------ --------------
End of the year ..................................... $813,847,284 $1,010,389,488
============ ==============
UNDISTRIBUTED NET INVESTMENT INCOME/
(ACCUMULATED NET INVESTMENT LOSS)
Beginning of the year ............................... $ (134,869) $ (10,972)
============ ==============
End of the year ..................................... $ (10,972) $ 162,760
============ ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
JULY 7, 1994(a)
THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997
----------------- -------------- -------------- --------------
Net Asset Value,
<S> <C> <C> <C> <C>
Beginning of Period ............ $ 12.50 $ 13.25 $ 16.78 $ 18.18
------- -------- -------- --------
Income From Investment
Operations
Net Investment Income (loss) .... 0.05 0.00 (0.06) (0.02)(f)
Net Realized and Unrealized
Gain on Investments ........... 0.75 4.52 3.17 3.62
------- -------- -------- --------
Total From Investment
Operations .................... 0.80 4.52 3.11 3.60
------- -------- -------- --------
Less Distributions
Dividends From Net Investment
Income ........................ (0.05) 0.00 0.00 0.00
Distributions From Net Realized
Capital Gains ................. 0.00 (0.99) (1.71) (3.61)
------- -------- -------- --------
Total Distributions ............. (0.05) (0.99) (1.71) (3.61)
------- -------- -------- --------
Net Asset Value, End of Period .. $ 13.25 $ 16.78 $ 18.18 $ 18.17
======= ======== ======== ========
Total Return (%) (c) ............ 6.4 34.4 19.0 20.2
Ratio of Operating Expenses to
Average Net Assets (%) (d) .... 1.94(b) 1.82 1.68 1.66
Ratio of Net Investment
Income (loss) to Average
Net Assets (%) ................ 1.06(b) (0.33) (0.36) (0.14)
Portfolio Turnover Rate (%) ..... 100 142 127 168
Average Commission Rate (e) ..... -- -- $ 0.0595 $ 0.0250
Net Assets, End of Period (000).. $91,218 $223,596 $348,573 $416,938
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge is not reflected in total return calculations. Periods less
than one year are not annualized.
(d) The ratio of operating expenses to average net assets without giving effect
to the voluntary fee waiver in effect through December 31, 1994 would have
been 1.98% for the period ended December 31, 1994.
(e) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose it's 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.
(f) Per share net investment loss has been calculated using the average shares
outstanding during the year.
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
JULY 7, 1994(a)
THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997
----------------- -------------- -------------- --------------
Net Asset Value, Beginning of
<S> <C> <C> <C> <C>
Period ...................... $ 12.50 $ 13.23 $ 16.63 $ 17.86
------- -------- -------- --------
Income From Investment
Operations ..................
Net Investment Income (loss) .. 0.02 0.00 (0.20)(f) (0.17)(f)
Net Realized and Unrealized
Gain on Investments ......... 0.73 4.39 3.14 3.55
------- -------- -------- --------
Total From Investment
Operations .................. 0.75 4.39 2.94 3.38
------- -------- -------- --------
Less Distributions
Dividends From Net Investment
Income ...................... (0.02) 0.00 0.00 0.00
Distributions From Net Realized
Capital Gains ............... 0.00 (0.99) (1.71) (3.61)
------- -------- -------- --------
Total Distributions ........... (0.02) (0.99) (1.71) (3.61)
------- -------- -------- --------
Net Asset Value, End of Period $ 13.23 $ 16.63 $ 17.86 $ 17.63
======= ======== ======== ========
Total Return (%) (c) .......... 6.0 33.4 18.1 19.3
Ratio of Operating Expenses to
Average Net Assets (%) (d) .. 2.69(b) 2.57 2.43 2.41
Ratio of Net Investment Income
(loss) to Average Net Assets
(%) ......................... 0.31(b) (1.08) (1.11) (0.89)
Portfolio Turnover Rate (%) ... 100 142 127 168
Average Commission Rate (e) ... -- -- $0.0595 $0.0250
Net Assets, End of period (000). $72,889 $220,017 $366,314 $462,034
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A contingent deferred sales charge is not reflected in total return
calculations. Periods less than one year are not annualized.
(d) The ratio of operating expenses to average net assets without giving effect
to the voluntary fee waiver in effect through December 31, 1994 would have
been 2.75% for the period ended December 31, 1994.
(e) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose it's 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.
(f) Per share net investment loss has been calculated using the average shares
outstanding during the year.
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------
JULY 7, 1994(a)
THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997
----------------- -------------- -------------- --------------
Net Asset Value, Beginning of
<S> <C> <C> <C> <C>
Period ...................... $ 12.50 $ 13.24 $ 16.65 $ 17.87
------- -------- -------- --------
Income From Investment
Operations
Net Investment Income (loss) .. 0.02 0.00 (0.20)(f) (0.17)(f)
Net Realized and Unrealized
Gain on Investments ......... 0.74 4.40 3.13 3.55
------- -------- -------- --------
Total From Investment
Operations .................. 0.76 4.40 2.93 3.38
------- -------- -------- --------
Less Distributions
Dividends From Net Investment
Income ...................... (0.02) 0.00 0.00 0.00
Distributions From Net Realized
Capital Gains ............... 0.00 (0.99) (1.71) (3.61)
------- -------- -------- --------
Total Distributions ........... (0.02) (0.99) (1.71) (3.61)
------- -------- -------- --------
Net Asset Value, End of Period $ 13.24 $ 16.65 $ 17.87 $ 17.64
======= ======== ======== ========
Total Return (%) (c) .......... 6.0 33.4 18.0 19.3
Ratio of Operating Expenses to
Average Net Assets (%) (d) .. 2.69(b) 2.57 2.43 2.41
Ratio of Net Investment Income
(loss) to Average Net
Assets (%) ................. 0.31(b) (1.08) (1.11) (0.89)
Portfolio Turnover Rate (%) ... 100 142 127 168
Average Commission Rate (e) ... -- -- $ 0.0595 $ 0.0250
Net Assets, End of Period (000). $20,096 $ 45,672 $ 80,312 $ 94,412
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Periods less than one year are not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving
effect to the voluntary fee waiver in effect through December 31, 1994 would
have been 2.75% for the period ended December 31, 1994.
(e) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose it's 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.
(f) Per share net investment loss has been calculated using the average shares
outstanding during the year.
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS Y
------------------------------------------------------------------------
NOVEMBER 15(a)
THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997
----------------- -------------- -------------- --------------
Net Asset Value, Beginning of
<S> <C> <C> <C> <C>
Period ...................... $ 13.59 $ 13.24 $ 16.83 $ 18.33
------- -------- -------- --------
Income From Investment
Operations
Net Investment Income (loss) .. 0.06 0.00 (0.02)(f) 0.03(f)
Net Realized and Unrealized
Gain on Investments ......... (0.35) 4.58 3.23 3.66
------- -------- -------- --------
Total From Investment
Operations .................. (0.29) 4.58 3.21 3.69
------- -------- -------- --------
Less Distributions
Dividends From Net Investment
Income ...................... (0.06) 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains ...... 0.00 (0.99) (1.71) (3.61)
------- -------- -------- --------
Total Distributions ........... (0.06) (0.99) (1.71) (3.61)
------- -------- -------- --------
Net Asset Value, End of Period. $ 13.24 $ 16.83 $ 18.33 $ 18.41
======= ======== ======== ========
Total Return (%) (c) .......... (2.1) 34.8 19.6 20.5
Ratio of Operating Expenses to
Average Net Assets (%) (d) .. 1.79(b) 1.57 1.43 1.41
Ratio of Net Investment
Income (loss) to Average
Net Assets (%) .............. 2.26(b) (0.08) (0.11) 0.11
Portfolio Turnover Rate (%) ... 100 142 127 168
Average Commission Rate (e) ... -- -- $ 0.0595 $ 0.0250
Net Assets, End of Period (000) $ 196 $ 5,569 $ 18,649 $ 37,006
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Periods less than one year are not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving
effect to the voluntary fee waiver in effect through December 31, 1994 would
have been 1.90% for the period ended December 31, 1994.
(e) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose it's 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.
(f) Per share net investment loss has been calculated using the average shares
outstanding during the year.
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 six years of purchase (or five years if purchased before May 1, 1997).
Class C shares do not pay front end or contingent deferred sales charges and do
not convert to any other class of shares, but they do pay a higher ongoing
distribution fee than Class A shares. 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. All other securities and assets are valued at their fair
value as determined in good faith by the Fund's adviser, New England Funds
Management L.P., and the respective subadviser, under the supervision of the
Fund's trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date or when the Fund learns of
the dividend and interest income is recorded on the accrual basis. 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
Fund'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 year ended December 31, 1997 were $1,394,094,611 and
$1,370,106,100, respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. Effective July 25,
1997, Harris Associates succeeded Berger Associates, Inc. as subadviser to their
segment of the Fund, and is responsible for day-to-day management of the
segment's investment operations under the oversight of New England Funds
Management L.P. (The "Adviser"). Accordingly during the year ended December 31,
1997 that segment of the fund operated under two subadvisory agreements as noted
below.
The Fund pays management fees to its adviser, New England Funds Management,
L.P., at the annual rate of 1.05% on the first $1 billion of the Fund's average
daily net assets and 1.00% of such assets in excess of $1 billion. The Adviser
pays the Fund's investment Subadvisers, Berger Associates (January 1, 1997
through August 31, 1997), Founders Asset Management, Inc., Harris Associates
(September 1, 1997 through December 31, 1997), Janus Capital Corporation and
Loomis, Sayles & Company, L.P. (the "Subadvisers") as follows: Berger
Associates, Inc, Founders Asset Management, Inc., and Loomis, Sayles & Company,
L.P. at the annual rate of 0.55% of the first $50 million of the average daily
net assets of the segment of the Fund that the Subadviser manages, 0.50% of the
next $200 million and 0.475% of such assets in excess of $250 million. NEFM pays
Harris Associates at the annual rate of 0.65% of the first $50 million of the
average daily net assets of the segment of the Fund that the Subadviser manages,
0.60% of the next $50 million and 0.55% of such assets in excess of $100
million. NEFM pays Janus Capital Corporation at the annual rate of 0.55% of the
first $50 million of average daily net assets, and 0.50% of such assets in
excess of $50 million. Certain officers and directors of the Adviser are also
officers or trustees of the Fund. The Adviser, Harris Associates and Loomis,
Sayles & Company, L.P. are wholly owned subsidiaries of New England Investment
Companies, L.P., which is a subsidiary of Metropolitan Life Insurance Company.
Fees retained by the Adviser and paid to each Subadviser under the management
agreement in effect during the year ended December 31, 1997 are as follows:
$4,960,311 New England Funds Management, L.P.
704,081 Berger Associates, Inc. (January 1, 1997
through August 31, 1997)
431,615 Harris Associates (September 1, 1997
through December 31, 1997)
1,263,834 Founders Asset Management, Inc.
1,108,615 Janus Capital Corporation
1,263,657 Loomis, Sayles & Company, L.P.
----------
$9,732,113
==========
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, and
financial reporting functions and clerical functions relating to the Fund, and
(ii) expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance. For the year ended December 31, 1997, these
expenses amounted to $130,709 and are shown separately in the financial
statements as accounting and administrative.
C. TRANSFER AGENT FEES. New England Funds is the transfer and shareholder
servicing agent for the Fund. For the year ended December 31, 1997, the Fund
paid New England Funds $1,502,192 as compensation for its services in that
capacity. For the year ended December 31, 1997, the Fund received $18,187 in
transfer agent credits. The transfer agent expense in the Statement of
Operations is net of these credits.
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 year
ended December 31, 1997, the Fund paid New England Funds $967,853 in fees under
the Class A Plan.
Under the Class B and Class C Plans, the Fund pays New England Funds monthly
service fees at the annual rate of up to 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses (including certain payments to securities
dealers, who may be affiliated with New England Funds) incurred by New England
Funds in providing personal services to investors in Class B and Class C shares
and/or the maintenance of shareholder accounts. For the year ended December 31,
1997 the Fund paid New England Funds $1,055,205 and $218,860 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 year ended December 31, 1997, the Fund paid New England Funds $3,165,616
and $656,580 in distribution fees under the Class B and Class C plans,
respectively.
Commissions (including contingent deferred sales charges) on Fund shares paid to
New England Funds by investors in shares of the Fund during the year ended
December 31, 1997 amounted to $3,121,649.
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 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 $1,947
Meeting Fee $109/meeting
Committee Meeting Fee $65/meeting
Committee Chairman Retainer $342/year
A deferred compensation plan is available to the trustees on a voluntary basis.
Each participating trustee will receive an amount equal to the value that such
deferred compensation would have been, had it been invested in the Fund on the
normal payment date.
4. CAPITAL SHARES. At December 31, 1997 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 YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------ -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ....................... 7,691,218 $139,876,241 11,237,845 $216,916,475
Shares issued in connection with
the reinvestment of:
Distributions from net realized
gain ........................... 1,578,726 27,875,496 3,794,070 69,274,984
----------- ------------ ---------- -------------
9,269,944 167,751,737 15,031,915 286,191,459
Shares repurchased ................ (3,418,502) (61,553,540) (11,253,282) (216,169,035)
----------- ------------ ---------- ------------
Net increase ...................... 5,851,442 $106,198,197 3,778,633 $ 70,022,424
------------ ------------ ---------- ------------
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------- ------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ....................... 7,630,405 $135,846,816 4,908,106 $ 89,778,147
Shares issued in connection with the
reinvestment of:
Distributions from net realized
gain ............................ 1,660,548 28,858,732 4,286,660 76,148,745
----------- ------------ ---------- ------------
9,290,953 164,705,548 9,194,766 165,926,892
Shares repurchased ................ (2,008,111) (35,730,310) (3,497,668) (65,093,904)
----------- ------------- ---------- ------------
Net increase ...................... 7,282,842 $128,975,238 5,697,098 $100,832,988
----------- ------------ ---------- ------------
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------- ------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ....................... 2,328,617 $ 41,733,783 1,933,560 $ 35,540,097
Shares issued in connection with
the reinvestment of:
Distributions from net realized
gain .......................... 356,206 6,194,589 877,348 15,592,950
----------- ------------ ---------- ------------
2,684,823 47,928,372 2,810,908 51,133,047
Shares repurchased ................ (934,175) (16,650,873) (1,953,987) (36,192,030)
----------- ------------- ---------- ------------
Net increase ..................... 1,750,648 $ 31,277,499 856,921 $ 14,941,017
----------- ------------- ---------- ------------
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------- -----------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ....................... 671,715 $ 12,225,769 1,010,270 $ 19,247,891
Shares issued in connection
with the reinvestment of:
Distributions from net realized
gain .......................... 68,787 1,223,704 322,823 5,967,509
----------- ------------ ----------- ------------
740,502 13,449,473 1,333,093 25,215,400
Shares repurchased ................ (53,979) (973,059) (340,009) (6,404,327)
----------- ------------ ---------- ------------
Net increase ..................... 686,523 12,476,414 993,084 18,811,073
----------- ------------ ---------- ------------
Increase derived from capital
shares transactions ............. 15,571,455 $278,927,348 11,325,736 $204,607,502
=========== ============ ========== ============
</TABLE>
<PAGE>
5. SHAREHOLDER MEETING (UNAUDITED) At a special shareholders' meeting held
October 17, 1997, shareholders of the Star Advisers Fund voted for the following
proposals:
1. Subadvisory agreement relating to the Fund between NEFM and Harris
Associates.
VOTED VOTED ABSTAINED BROKER TOTAL
FOR AGAINST VOTES NON-VOTES VOTES
---- ------- --------- --------- ------
22,508,711.882 409,514.134 1,350,742.131 0.000 24,268,968.147
2. Subadvisory agreement relating to the Fund between NEFM and Founders Asset
Management.
VOTED VOTED ABSTAINED BROKER TOTAL
FOR AGAINST VOTES NON-VOTES VOTES
---- ------- --------- --------- -----
22,508,797.363 379,785.486 1,380,148.455 0.000 24,268,731.304
3. Subadvisory agreement relating to the Fund between NEFM and Loomis, Sayles &
Company, L.P.
VOTED VOTED ABSTAINED BROKER TOTAL
FOR AGAINST VOTES NON-VOTES VOTES
----- ------- --------- --------- ------
22,573,282.180 349,301.145 1,346,384.822 0.000 24,268,968.147
4. To the extent permitted by exemptions granted by the SEC, to permit NEFM to
enter into new and amended agreements with sub-advisers with respect to the
Fund without obtaining shareholder approval of such agreements, and to permit
such sub-advisers to manage assets of the Fund (or a segment thereof)
pursuant to such sub-advisory agreements.
VOTED VOTED ABSTAINED BROKER TOTAL
FOR AGAINST VOTES NON-VOTES VOTES
---- ------- --------- --------- ------
16,695,680.740 1,418,527.980 1,572,213.351 4,582,546.000 24,268,968.071
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of New England Funds Trust I and Shareholders of
NEW ENGLAND STAR ADVISERS FUND
In our opinion, the accompanying statement of assets & liabilities, including
the portfolio composition, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of New England Star Advisers Fund
("the Fund"), a series of New England Funds Trust I, at December 31, 1997, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and the financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1997 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 12, 1998
<PAGE>
NEW ENGLAND FUNDS
Supplement dated March 1, 1998 to the New England Stock Funds Prospectus for
Class A, B and C shares dated May 1, 1997 (as supplemented August 1, 1997,
November 17, 1997 and January 1, 1998); the New England Star Funds Prospectus
for Class A, B and C shares dated May 1, 1997 (as supplemented June 30, 1997,
July 28, 1997, November 17, 1997 and January 1, 1998); and the New England
Equity Income Fund Prospectus for Class A, B and C shares dated September 1,
1997 (as supplemented November 17, 1997 and January 1, 1998).
THIS SUPPLEMENT APPLIES TO ALL FUNDS OFFERING CLASS C SHARES:
The cover page of each Prospectus is revised to reflect:
o While no initial sales charge applies to Class B or Class C share purchases,
a contingent deferred sales charge (a "CDSC") is imposed upon certain
redemptions of Class B and Class C shares.
o New England Funds Trust I, New England Funds Trust II and New England Funds
Trust III are referred to in the Prospectus as the "Trusts."
THE SHAREHOLDER TRANSACTION EXPENSES CHART FOR CLASS C SHARES APPEARING IN THE
"SCHEDULE OF FEES" SECTION IS REVISED WITH RESPECT TO CLASS C SHARES TO READ
AS FOLLOWS:
CLASS C
------------------
Maximum Initial Sales Charge Imposed on a Purchase
(as a percentage of offering price)(2) ................... None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)(2) ................... 1.00%
(2) Does not apply to reinvested distributions.
In the tables that appear under "Example" in the "Schedule of Fees" section,
the expense amounts in the Prospectus for Class C shares for the 1 Year period
assume no redemption. If shares are redeemed at period end, expense amounts
for each Fund would be as follows: New England Capital Growth Fund, $33; New
England Balanced Fund, $31; New England International Equity Fund, $35; New
England Value Fund, $31; New England Growth Opportunities Fund, $31; New
England Star Advisers Fund, $35; New England Star Worldwide Fund, $44; New
England Star Small Cap Fund, $38; New England Equity Income Fund, $33.
THE SECTION ENTITLED "BUYING FUND SHARES--SALES CHARGES--CLASS C SHARES" IS
REVISED TO READ AS FOLLOWS:
Class C shares are offered at net asset value, without an initial sales
charge, are subject to a 0.25% annual service fee and a 0.75% annual
distribution fee, are subject to a CDSC of 1.00% on redemptions made within
one year from the date of purchase and do not convert into another class.
The Distributor pays to investment dealers at the time of sale a sales
commission of 1.00% of the sales price of Class C shares sold by such
investment dealer. The Distributor will retain the service and distribution
fees assessed against Class C shares in the first year of investment, and the
entire amount of the CDSC paid by Class C shareholders upon redemption in the
first year, in order to compensate the Distributor for providing distribution-
related services to the Fund in connection with the sale of Class C shares,
and to reimburse the Distributor, in whole or in part, for the commissions
paid (and related financing costs) to investment dealers at the time of a sale
of Class C shares. Unlike Class B shares, there are no conversion features
associated with Class C shares; therefore, if Class C shares are held for more
than eight years Class C shareholders will thereafter be subject to higher
distribution fees than shareholders of other classes.
The holding period for determining the CDSC will continue to run after an
exchange to Class C shares of another series of the Trusts. If an exchange is
made to Class C shares of a Money Market Fund, then the one-year holding
period for purposes of determining the expiration of the CDSC will stop and
resumes only when an exchange is made back into Class C shares of a series of
the Trusts. If the Money Market Fund shares are redeemed rather than exchanged
back into a series of the Trusts, then the CDSC applies to the redemption. For
purposes of the CDSC, it is assumed that the shares held longest are the first
to be redeemed.
The CDSC on Class C shares is not imposed on shares purchased prior to March
1, 1998.
The CDSC will be assessed on an amount equal to the lesser of the cost of the
shares being redeemed or their net asset value at the time of redemption.
Accordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on shares of the
same Fund purchased with reinvested dividends or capital gain distributions.
The first year of purchase ends one year after the day on which the purchase
was accepted.
The CDSC is deducted from the proceeds of the redemption, not the amount
remaining in the account, unless otherwise requested. The CDSC may be
eliminated for certain persons and organizations. See "Sales Charges--General"
below.
THE SECTION ENTITLED "OWNING FUND SHARES--EXCHANGING AMONG NEW ENGLAND FUNDS--
CLASS C SHARES" IS REVISED TO READ AS FOLLOWS:
You may exchange Class C shares of any series of the Trusts for Class C shares
of any other series of the Trusts which offers Class C shares or for Class C
shares of New England Cash Management Trust - Money Market Series. Such
exchanges will be made at the next-determined net asset value of the shares.
IN THE SECTION ENTITLED "FUND DETAILS--PERFORMANCE CRITERIA," THE THIRD
SENTENCE IN THE FIRST PARAGRAPH IS REVISED TO READ AS FOLLOWS:
Total return is measured by comparing the value of a hypothetical $1,000
investment in a class at the beginning of the relevant period to the value of
the investment at the end of the period (assuming deduction of the current
maximum sales charge on Class A shares, automatic reinvestment of all
dividends and capital gains distributions and, in the case of Class B and C
shares, imposition of the CDSC relevant to the period quoted).
<PAGE>
GLOSSARY FOR MUTUAL FUND INVESTORS
- -------------------------------------------------------------------------------
TOTAL RETURN - The change in value of a mutual fund investment over a specific
time period, assuming all earnings are reinvested in additional shares of the
fund. Expressed as a percentage.
INCOME DISTRIBUTIONS - Payments to shareholders resulting from the net interest
or dividend income earned by a fund's portfolio.
CAPITAL GAINS DISTRIBUTIONS - Payments to shareholders of profits earned from
selling securities in a fund's portfolio. Capital gains distributions are
usually paid once a year.
PRICE/EARNINGS RATIO - Current market price of a stock divided by its earnings
per share. Also known as the "multiple," the price/earnings ratio gives
investors an idea of how much they are paying for a company's earning power and
is a useful tool for evaluating the costs of different issues.
GROWTH INVESTING - An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
VALUE INVESTING - A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets
aren't fully reflected in their stock prices. Value stocks will tend to have a
lower price/earnings ratio than that of growth stocks.
STANDARD & POOR'S 500 - Market value-weighted index showing the change in
aggregate market value of 500 stocks relative to the base period of 1941-1943.
It is composed mostly of companies listed on the New York Stock Exchange.
<PAGE>
SAVING FOR RETIREMENT
- --------------------------------------------------------------------------------
AN EARLY START CAN MAKE A BIG DIFFERENCE
With today's lengthening life spans, you may be retired for 20 years or more
after you complete your working career. Living these retirement years the way
you've dreamed of will require considerable financial resources. While it's
never too late to start a retirement savings program, it's certainly never too
early: The sooner you begin, the longer the time your money has to grow.
The chart below illustrates this point dramatically. One investor starts at age
30, saves for just 10 years, then leaves the investment to grow. The second
investor starts 10 years later but saves much longer -- for 25 years, in fact.
Can you guess which investor accumulates the greater retirement nest egg? For
the answer, look at the chart.
AN EARLY START CAN MAKE A BIG DIFFERENCE
- --------------------------------------------------------------------------------
[A 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:]
[plot points to come]
Assumes 10% hypothetical appreciation. For illustrative purposes only and not
indicative of future performance of any New England Fund.
Investor A invested $20,000, less than half of Investor B's commitment -- and
for less than half the time. Yet Investor A wound up with a much greater
retirement nest egg. The reason? It's all thanks to an early start.
New England Funds has prepared a number of informative retirement planning
guides. Call your financial representative or New England Funds today, and ask
for the guide that best fits your personal needs.
<PAGE>
- --------------------------------------------------------------------------------
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 financing retirement or
college funding.
5. It can help you benefit from the ups and downs of the market. With
Investment Builder, New England Fund's automatic investment program, you can
invest as little as $100 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 $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 Funds
account. 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
Star Small Cap Fund
Growth Fund
Star Advisers Fund
Capital Growth Fund
Growth Opportunities Fund
Value Fund
Equity Income Fund
Balanced Fund
INTERNATIONAL STOCK FUNDS
International Equity Fund
Star Worldwide Fund
BOND FUNDS
High Income Fund
Strategic Income Fund
Bond Income Fund
Government Securities Fund
Limited Term U.S. Government Fund
Adjustable Rate U.S. Government Fund
TAX EXEMPT FUNDS
Municipal Income Fund
Massachusetts Tax Free Income Fund
Intermediate Term Tax Free Fund of California
Intermediate Term Tax Free Fund of New York
MONEY MARKET FUNDS
Cash Management Trust, Money Market Series
Tax Exempt Money Market Trust
To learn more, and for a free prospectus,
contact your financial representative.
Visit our World Wide Web site at www.mutualfunds.com
New England Funds, L.P., Distributor
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors when it is
preceded or accompanied by the Fund's current prospectus, which contains
information about distribution charges, management and other items of interest.
Investors are advised to read the prospectus carefully before investing.
<PAGE>
--------------
(Logo) BULK RATE
NEW ENGLAND FUNDS(R) U.S. POSTAGE
Where The Best Minds Meet(R) PAID
BROCKTON, MA
PERMIT NO. 770
--------------
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
- ---------------------
[Logo]
MUTUAL FUND
SERVICE AWARD
- ---------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
- ---------------------
1995 o 1996 o 1997
SA56-1297
[recycle symbol] Printed On Recycled Paper
