NEWPOINT EQUITY FUND
SEMI-ANNUAL REPORT
MAY 31, 1998
A Diversified Portfolio of Newpoint Funds,
an Open-End, Management Investment
Company
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributors
Cusip 651722209 [LOGO] NEWPOINT(R)
G01234-01 (7/98) F U N D S
<PAGE>
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of Newpoint
Equity Fund for the six-month period from December 1, 1997, through May 31,
1998. The report begins with a brief commentary on the stock market from the
fund's portfolio manager. Following the commentary are a complete listing of the
fund's investments and its financial statements.
Newpoint Equity Fund invests in a diversified portfolio of high-quality stocks
across the industrial spectrum. As you review the fund's list of holdings, you
will recognize many of America's most prominent companies, including American
Express, Compaq Computer, Disney, General Electric, Gillette, Home Depot, Intel,
McDonald's, Microsoft, Nike, Pfizer, and Wal-Mart.
As the U.S. stock market continued its volatile advance during the reporting
period, Newpoint Equity Fund produced a six-month total return of 10.03%, or
5.09% adjusted for the sales charge*. Contributing to the fund's total return
was a 3.8% increase in share price, dividends totaling $0.01 per share and
capital gains totaling $0.95 per share. At the end of the reporting period, the
fund's total net assets reached $54 million.
Thank you for selecting Newpoint Equity Fund as a way to capture the long-term
growth opportunities of U.S. stocks. We will continue to keep you up-to-date on
your progress.
Sincerely,
/s/ EDWARD C. GONZALES
- ----------------------
President
July 15, 1998
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Through May 31, 1998, the Newpoint Equity Fund has under-performed the Standard
& Poors 500,* 10.03% (5.09% after the sales charge) versus 12.41%. Newpoint's
strongest sectors were Healthcare (21,4%) and Capital Goods Technology (21.4%)
followed by Finance (18.1%). Our over-weighting in these sectors has benefited
the performance of the fund. Unfortunately, the fund's performance was hampered
by its under-weighting in Consumer Cyclical stocks. Since we feel this sector
will continue to perform well, we have increased our weighting in this sector by
adding Home Depot. Another sector that is under-weighted, but has good prospects
is the Telecommunications sector. We feel the long distance market has the best
growth potential and WorldCom has the best position in this market so we have
increased our weighting in WorldCom. The Oil sector has been under pressure from
reduced demand from Southeast Asia and increased supplies from Iraq. The price
of oil has declined substantially during the first half of 1998, as has our
weighting in this sector. We believe that the second half of 1998 should bring
better industry fundamentals (higher oil prices) and our weighting to this
sector will increase as the industry adjusts. We find the oil service industry
the most interesting in this sector with Schlumberger our top choice.
We continue to expect a positive stock market environment driven by
demographics, globalization, and technology. The U.S.'s baby boomers have moved
into a savings phase of their life cycle while the developing world has a much
younger population moving into a high consumption phase. Aging baby boomers have
been good for the financial service industry while the younger demographics of
the developing world has been positive for the global brand companies, such as
Pepsi. Globalization has moved more of the world toward capitalism which opens
markets and increases trade. Our global brand companies have benefited from this
trend. Technology has increased the U.S.'s productivity and reduced inflationary
pressures. The confluence of these three trends has reduced interest rates,
increased productivity, and increased demand for U.S.'s products and services.
We feel these are very long term trends.
* Standard & Poor's Daily Stock Price Index of 500 Common Stocks is an unmanaged
index of common stocks in industry, transportation, financial and public
utility companies. Investments cannot be made in an index.
<PAGE>
Our over-weighted sectors are Finance, Healthcare, and Capital Goods Technology.
We particularly favor those companies in these sectors that are beneficiaries of
more than one of the trends that were discussed above. Our research is focused
on finding companies that are positioned to benefit from these trends and buy
them at a reasonable price. For example, American International Group benefits
from selling policies to baby boomers which provides capital that is then used
to finance increased penetration of developing countries' insurance markets.
Pfizer is benefiting from increased demand from aging baby boomers while also
benefiting from increased access to developing nations because of globalization.
WorldCom is benefiting from increased demand for communications around the world
because of globalization and from new technology that has lowered their costs
such as Wave Division Multiplexing (the breaking of light into its colors to
increase the carrying capacity of fiber optic lines.)
We feel the fund's present structure should provide the best opportunity for
capital appreciation for the coming year.
/s/ WESLEY C. MEINERDING
- ------------------------
Wesley C. Meinerding
Vice President and Trust Officer
FirstMerit Bank N.A.
<PAGE>
NEWPOINT EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--95.3%
- -----------------------------------------------------------------------------
BASIC MATERIALS--3.6%
------------------------------------------------------------
35,000 Monsanto Co. $ 1,938,125
------------------------------------------------------------ -----------
CAPITAL GOODS--6.0%
------------------------------------------------------------
13,504 Boeing Co. 643,128
------------------------------------------------------------
15,000 Diebold, Inc. 438,750
------------------------------------------------------------
26,200 General Electric Co. 2,184,425
------------------------------------------------------------ -----------
Total 3,266,303
------------------------------------------------------------ -----------
CAPITAL GOODS TECHNOLOGY--21.4%
------------------------------------------------------------
24,400 (a) Cisco Systems, Inc. 1,845,250
------------------------------------------------------------
20,000 (a) Compaq Computer Corp. 546,250
------------------------------------------------------------
22,500 Computer Associates International, Inc. 1,181,250
------------------------------------------------------------
20,000 Hewlett-Packard Co. 1,242,500
------------------------------------------------------------
17,000 Intel Corp. 1,214,438
------------------------------------------------------------
16,000 Lucent Technologies, Inc. 1,135,000
------------------------------------------------------------
19,000 (a) Microsoft Corp. 1,611,438
------------------------------------------------------------
18,400 Raytheon Co. 1,006,250
------------------------------------------------------------
30,000 (a) Sun Microsystems, Inc. 1,201,875
------------------------------------------------------------
20,000 Telefonaktiebolaget LM Ericsson, Class B, ADR 557,500
------------------------------------------------------------ -----------
Total 11,541,751
------------------------------------------------------------ -----------
COMMUNICATION SERVICES--2.0%
------------------------------------------------------------
15,000 (a) Westell Technologies, Inc., Class A 148,125
------------------------------------------------------------
20,000 WorldCom, Inc. 910,000
------------------------------------------------------------ -----------
Total 1,058,125
------------------------------------------------------------ -----------
CONSUMER CYCLICAL--6.9%
------------------------------------------------------------
20,000 (a) CompUSA, Inc. 315,000
------------------------------------------------------------
10,000 Home Depot, Inc. 785,625
------------------------------------------------------------
10,000 Limited, Inc. 332,500
------------------------------------------------------------
</TABLE>
<PAGE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------
CONSUMER CYCLICAL--CONTINUED
------------------------------------------------------------
15,000 Nike, Inc., Class B $ 690,000
------------------------------------------------------------
10,000 Sherwin-Williams Co. 332,500
------------------------------------------------------------
10,000 Stanley Works 475,000
------------------------------------------------------------
14,000 Wal-Mart Stores, Inc. 772,625
------------------------------------------------------------ -----------
Total 3,703,250
------------------------------------------------------------ -----------
CONSUMER STAPLES--9.7%
------------------------------------------------------------
4,000 Disney (Walt) Co. 452,500
------------------------------------------------------------
8,000 Gillette Co. 937,000
------------------------------------------------------------
10,000 McDonald's Corp. 656,250
------------------------------------------------------------
20,000 PepsiCo, Inc. 816,250
------------------------------------------------------------
20,000 Procter & Gamble Co. 1,678,750
------------------------------------------------------------
20,000 (a) Safeway, Inc. 728,750
------------------------------------------------------------ -----------
Total 5,269,500
------------------------------------------------------------ -----------
ENERGY--4.3%
------------------------------------------------------------
16,800 Exxon Corp. 1,184,400
------------------------------------------------------------
10,000 Halliburton Co. 473,750
------------------------------------------------------------
5,000 Royal Dutch Petroleum Co., ADR 280,313
------------------------------------------------------------
5,000 Schlumberger Ltd. 390,313
------------------------------------------------------------ -----------
Total 2,328,776
------------------------------------------------------------ -----------
FINANCE--INSURANCE, BANKING & OTHER--18.1%
------------------------------------------------------------
10,000 Allstate Corp. 941,250
------------------------------------------------------------
10,000 American Express Co. 1,026,250
------------------------------------------------------------
11,250 American International Group, Inc. 1,392,891
------------------------------------------------------------
45,000 Capstone Capital Trust, Inc. 1,049,063
------------------------------------------------------------
5,000 Chase Manhattan Corp. 679,688
------------------------------------------------------------
20,000 National Golf Properties, Inc. 601,250
------------------------------------------------------------
14,000 NationsBank Corp. 1,060,500
------------------------------------------------------------
</TABLE>
<PAGE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------
FINANCE--INSURANCE, BANKING & OTHER--CONTINUED
------------------------------------------------------------
15,000 Progressive Corp., Ohio $ 2,068,122
------------------------------------------------------------
16,000 Travelers Group, Inc. 976,000
------------------------------------------------------------ -----------
Total 9,795,014
------------------------------------------------------------ -----------
HEALTHCARE--21.4%
------------------------------------------------------------
26,000 (a) Boston Scientific Corp. 1,657,500
------------------------------------------------------------
10,000 (a) Forest Laboratories, Inc., Class A 330,000
------------------------------------------------------------
22,000 Lilly (Eli) & Co. 1,351,625
------------------------------------------------------------
22,000 Medtronic, Inc. 1,223,750
------------------------------------------------------------
20,000 Pfizer, Inc. 2,096,250
------------------------------------------------------------
31,500 (a) Thermo Cardiosystems, Inc. 708,750
------------------------------------------------------------
66,000 Warner-Lambert Co. 4,211,625
------------------------------------------------------------ -----------
Total 11,579,500
------------------------------------------------------------ -----------
TRANSPORTATION--1.9%
------------------------------------------------------------
16,000 (a) FDX Corp. 1,026,000
------------------------------------------------------------ -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $32,058,955) 51,506,344
------------------------------------------------------------ -----------
MUTUAL FUNDS SHARES--4.5%
- -----------------------------------------------------------------------------
2,453,840 Seven Seas Money Market Fund (AT AMORTIZED COST) 2,453,840
------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $34,512,795)(B) $53,960,184
------------------------------------------------------------ -----------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $34,512,795. The
net unrealized appreciation of investments on a federal tax basis amounts to
$19,447,389 which is comprised of $20,010,012 appreciation and $562,623
depreciation at May 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($54,066,893) at May 31, 1998.
The following acronym is used throughout this portfolio:
ADR -- American Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$34,512,795) $53,960,184
- ---------------------------------------------------------------------
Income receivable 49,676
- ---------------------------------------------------------------------
Receivable for investments sold 92,247
- ---------------------------------------------------------------------
Receivable for shares sold 3,510
- ---------------------------------------------------------------------
Deferred organizational costs 7,612
- --------------------------------------------------------------------- -----------
Total assets 54,113,229
- ---------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Income distribution payable $ 1,349
- ------------------------------------------------------------
Payable to Bank 1,713
- ------------------------------------------------------------
Accrued expenses 43,274
- ------------------------------------------------------------ -------
Total liabilities 46,336
- --------------------------------------------------------------------- -----------
Net Assets for 2,943,092 shares outstanding $54,066,893
- --------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------
Paid in capital $33,351,728
- ---------------------------------------------------------------------
Net unrealized appreciation of investments 19,447,389
- ---------------------------------------------------------------------
Accumulated net realized gain on investments 1,272,173
- ---------------------------------------------------------------------
Distributions in excess of net investment income (4,397)
- --------------------------------------------------------------------- -----------
Total Net Assets $54,066,893
- --------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
- ---------------------------------------------------------------------
Net Asset Value Per Share ($54,066,893 / 2,943,092 shares
outstanding) $18.37
- --------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $18.37)* $19.24
- --------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------
Dividends $ 245,320
- ----------------------------------------------------------------------
Interest 35,532
- ---------------------------------------------------------------------- ----------
Total income 280,852
- ----------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------
Investment advisory fee $195,869
- ------------------------------------------------------------
Administrative personnel and services fee 49,863
- ------------------------------------------------------------
Custodian fees 2,867
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 17,574
- ------------------------------------------------------------
Directors'/Trustees' fees 3,645
- ------------------------------------------------------------
Auditing fees 6,547
- ------------------------------------------------------------
Legal fees 1,087
- ------------------------------------------------------------
Portfolio accounting fees 20,222
- ------------------------------------------------------------
Share registration costs 6,936
- ------------------------------------------------------------
Printing and postage 4,034
- ------------------------------------------------------------
Insurance premiums 1,451
- ------------------------------------------------------------
Miscellaneous 2,047
- ------------------------------------------------------------ --------
Total expenses 312,142
- ------------------------------------------------------------
Waiver--
- ------------------------------------------------------------
Waiver of investment advisory fee (39,174)
- ------------------------------------------------------------ --------
Net expenses 272,968
- ---------------------------------------------------------------------- ----------
Net investment income 7,884
- ---------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------
Net realized gain on investments 1,272,163
- ----------------------------------------------------------------------
Net change in unrealized appreciation of investments 3,700,597
- ---------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 4,972,760
- ---------------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,980,644
- ---------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------
Net investment income $ 7,884 $ 108,704
- ---------------------------------------------------------
Net realized gain (loss) on investments ($1,272,163 and
$2,622,915 net gains, respectively, as computed for
federal tax purposes) 1,272,163 2,622,915
- ---------------------------------------------------------
Net change in unrealized appreciation 3,700,597 6,465,113
- --------------------------------------------------------- ----------- ---------------
Change in net assets resulting from operations 4,980,644 9,196,732
- --------------------------------------------------------- ----------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------
Distributions from net investment income (21,971) (104,440)
- ---------------------------------------------------------
Distributions from net realized gains (2,622,798) (1,800,823)
- --------------------------------------------------------- ----------- ---------------
Change in net assets resulting from distributions to
shareholders (2,644,769) (1,905,263)
- --------------------------------------------------------- ----------- ---------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------
Proceeds from sale of shares 2,029,029 4,917,490
- ---------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 2,623,547 1,806,165
- ---------------------------------------------------------
Cost of shares redeemed (1,810,929) (7,983,572)
- --------------------------------------------------------- ----------- ---------------
Change in net assets resulting from share
transactions 2,841,647 (1,259,917)
- --------------------------------------------------------- ----------- ---------------
Change in net assets 5,177,522 6,031,552
- ---------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------
Beginning of period 48,889,371 42,857,819
- --------------------------------------------------------- ----------- ---------------
End of period (including undistributed net investment
income of $0 and $9,690, respectively) $54,066,893 $48,889,371
- --------------------------------------------------------- ----------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED NOVEMBER 30,
MAY 31, ----------------------------------------
1998 1997 1996 1995 1994(A)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.69 $15.14 $12.69 $ 9.78 $10.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.00(b) 0.04 0.07 0.10 0.05
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments 1.64 3.19 2.61 2.91 (0.23)
- ------------------------------------------------ --------- ------ ------ ------ -------
Total from investment operations 1.64 3.23 2.68 3.01 (0.18)
- ------------------------------------------------ --------- ------ ------ ------ -------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.01) (0.04) (0.07) (0.10) (0.04)
- ------------------------------------------------
Distributions from net realized gain on
investments (0.95) (0.64) (0.16) -- --
- ------------------------------------------------ --------- ------ ------ ------ -------
Total distributions (0.96) (0.68) (0.23) (0.10) (0.04)
- ------------------------------------------------ --------- ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $18.37 $17.69 $15.14 $12.69 $ 9.78
- ------------------------------------------------ --------- ------ ------ ------ -------
TOTAL RETURN (C) 10.03% 22.34% 21.38% 30.97% (1.76%)
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 1.05%* 1.11% 1.13% 1.48% 1.00%*
- ------------------------------------------------
Net investment income 0.03%* 0.24% 0.51% 0.88% 2.36%*
- ------------------------------------------------
Expense waiver/reimbursement (d) 0.15%* 0.15% 0.37% 0.52% 1.72%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $54,067 $48,889 $42,858 $25,803 $11,614
- ------------------------------------------------
Average commission rate paid (e) $0.0629 $0.0572 $0.0625 $ -- $ --
- ------------------------------------------------
Portfolio turnover 19% 44% 49% 35% 0%
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 13, 1994 (date of initial
public investment) to November 30, 1994. For the period from August 30, 1994
(start of business) to September 12, 1994, the Fund had no investment
activity.
(b) Less than one cent per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Newpoint Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act") as an open-end, management investment company. The
Trust consists of two portfolios. The financial statements included herein are
only those of Newpoint Equity Fund (the "Fund"), a diversified portfolio. The
financial statements of the other portfolio are presented separately. The assets
of each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The investment objective of the Fund is to
achieve growth of capital and income.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at
the time of purchase may be valued at amortized cost, which approximates
fair market value. Investments in other open-end regulated investment
companies are valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
<PAGE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
- --------------------------------------------------------- ------------ -----------------
<S> <C> <C>
Shares sold 116,156 315,103
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 163,656 125,636
- ---------------------------------------------------------
Shares redeemed (99,985) (509,143)
- --------------------------------------------------------- ----------- --------------
Net change resulting from share transactions 179,827 (68,404)
- --------------------------------------------------------- ----------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--FirstMerit Bank, N.A., the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $35,000 were borne initially
by FAS. The Fund has reimbursed FAS for these expenses. These expenses have been
deferred and are being amortized over the five-year period following the Fund's
effective date.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
<PAGE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1998, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------
PURCHASES $ 9,758,157
- ------------------------------------------------------------ -----------
SALES $11,111,909
- ------------------------------------------------------------ -----------
</TABLE>
(6) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designated to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
<PAGE>
TRUSTEES OFFICERS
John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley
Edward C. Gonzales
John T. Conroy, Jr. President and Treasurer
William J. Copeland J. Christopher Donahue
Executive Vice President
J. Christopher Donahue
Richard B. Fisher
James E. Dowd, Esq. Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Executive Vice President and Secretary
Edward L. Flaherty, Jr., Esq.
C. Christine Thomson
Edward C. Gonzales Vice President and Assistant Treasurer
Peter E. Madden C. Todd Gibson
Assistant Secretary
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
The shares offered by the Fund are not deposits or obligations of FirstMerit
Bank, N.A., or any bank, are not endorsed or guaranteed by FirstMerit Bank,
N.A., or any bank, and are not obligations of, guaranteed by, or insured by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency. Investment in these shares involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
<PAGE>
NEWPOINT GOVERNMENT
MONEY MARKET FUND
SEMI-ANNUAL REPORT
MAY 31, 1998
A Diversified Portfolio of Newpoint Funds,
an Open-End, Management Investment
Company
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 651722100 [LOGO] NEWPOINT(R)
G00580-03 (7/98) F U N D S
<PAGE>
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of Newpoint
Government Money Market Fund for the six-month reporting period from December 1,
1997, through May 31, 1998. This report includes an investment review by the
portfolio manager, a list of the fund's investments, and complete financial
information.
During the reporting period, the fund's portfolio of U.S. government money
market securities paid dividends totaling $0.02 per share while maintaining a
stable share value of $1.00.* The fund's total net assets reached $117.4 million
on the last day of the reporting period.
Thank you for putting your ready cash to work on a daily basis through Newpoint
Government Money Market Fund. We will continue to keep you up-to-date on your
investment, and provide your account with the highest level of service.
Sincerely,
/s/ EDWARD C. GONZALES
- ----------------------
Edward C. Gonzales
President
July 15, 1998
* Although money market funds seek to maintain a share value of $1.00, there is
no guarantee that they will do so. Investments in money market funds are
neither insured nor guaranteed by the U.S. government.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The Newpoint Government Money Market Fund had an average maturity of 37 days at
the beginning of 1998 as concerns over hints that Federal Reserve Board (the
"Fed") tightening would push up money market rates. The fund's duration was
quickly increased in January to lock in the attractive rates. The fund's average
maturity drifted downward through March until rates moved back up, once again,
based on concerns over Fed tightening as a result of employment pressures and
solid growth in the economy. The fund's duration was increased to around 70 days
in April to take advantage of the higher rates.
As weak inflation continues and problems in Asia start to show in domestic
economic growth, the prospects of a Fed tightening look even less likely. As the
current assets mature in the fund, they will be reinvested in the most
attractive part of the yield curve, maintaining a duration near the long end of
the fund's 90-day limit. The fund has shifted to a tax-managed strategy. We are
currently investing only in issues with interest exempt from state and local
taxes. Investments will continue to be concentrated in agency discount paper.
We plan to continue to ladder issues in an attempt to maximize yield to
shareholders, while providing regular opportunities for reinvestment. As always,
we will monitor the interest rate environment closely and stand prepared to
invest the Newpoint Government Money Market Fund to help optimize yield within
the high quality standards of the fund.
/s/ JEFF DOERFLER
- -----------------
Jeff Doerfler
Trust Officer & Portfolio Manager
FirstMerit Bank, N.A.
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--104.4%
- ------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK DISCOUNT NOTES--17.0%
------------------------------------------------------------
$20,000,000 (a) 5.43%, 6/1/1998-7/8/1998 $ 19,944,912
------------------------------------------------------------ ------------
FEDERAL FARM CREDIT BANK--17.0%
------------------------------------------------------------
20,000,000 5.50%-5.51%, 8/3/1998-9/1/1998 20,000,000
------------------------------------------------------------ ------------
FEDERAL HOME LOAN BANK DISCOUNT NOTES--53.4%
------------------------------------------------------------
63,031,000 (a) 5.34%-5.53%, 6/1/1998-10/14/1998 62,669,108
------------------------------------------------------------ ------------
FEDERAL HOME LOAN BANK--8.5%
------------------------------------------------------------
10,000,000 5.625%, 10/8/1998 10,006,924
------------------------------------------------------------ ------------
STUDENT LOAN MARKETING ASSOCIATION--8.5%
------------------------------------------------------------
10,000,000 5.72%, 11/20/1998 10,010,960
------------------------------------------------------------ ------------
TOTAL U.S. GOVERNMENT AGENCIES 122,631,904
------------------------------------------------------------ ------------
U.S. TREASURY--4.3%
- ------------------------------------------------------------------------------
5,000,000 United States Treasury Notes, 6.25%, 6/30/1998 5,002,409
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $127,634,313
------------------------------------------------------------ ------------
</TABLE>
(a) Discount rate at time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($117,437,420) at May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $127,634,313
- -------------------------------------------------------------------------
Cash 6,006
- -------------------------------------------------------------------------
Income receivable 280,307
- ------------------------------------------------------------------------- ------------
Total assets 127,920,626
- -------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------
Payable for investments purchased $10,000,000
- ------------------------------------------------------------
Income distribution payable 483,206
- ------------------------------------------------------------ -----------
Total liabilities 10,483,206
- ------------------------------------------------------------------------- ------------
Net Assets for 117,437,420 shares outstanding $117,437,420
- ------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------
$117,437,420 / 117,437,420 shares outstanding $1.00
- ------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------
Interest $3,292,290
- -----------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee $ 299,175
- ------------------------------------------------------------
Administrative personnel and services fee 89,752
- ------------------------------------------------------------
Custodian fees 6,881
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 32,434
- ------------------------------------------------------------
Directors'/Trustees' fees 4,166
- ------------------------------------------------------------
Auditing fees 6,542
- ------------------------------------------------------------
Legal fees 1,097
- ------------------------------------------------------------
Portfolio accounting fees 20,723
- ------------------------------------------------------------
Share registration costs 6,445
- ------------------------------------------------------------
Printing and postage 4,560
- ------------------------------------------------------------
Insurance premiums 1,628
- ------------------------------------------------------------
Miscellaneous 3,104
- ------------------------------------------------------------ ---------
Total expenses 476,507
- ------------------------------------------------------------
Waiver--
- ------------------------------------------------------------
Waiver of investment advisory fee (119,670)
- ------------------------------------------------------------ ---------
Net expenses 356,837
- ----------------------------------------------------------------------- ----------
Net investment income $2,935,453
- ----------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1998 1997
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------
Net investment income $ 2,935,453 $ 4,796,842
- --------------------------------------------------------- -------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------
Distributions from net investment income (2,935,453) (4,796,842)
- --------------------------------------------------------- -------------- ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------
Proceeds from sale of shares 120,534,480 300,466,050
- ---------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,179,462 2,098,311
- ---------------------------------------------------------
Cost of shares redeemed (127,441,821) (264,629,137)
- --------------------------------------------------------- -------------- ------------
Change in net assets resulting from share
transactions (5,727,879) 37,935,224
- --------------------------------------------------------- -------------- ------------
Change in net assets (5,727,879) 37,935,224
- ---------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------
Beginning of period 123,165,299 85,230,075
- --------------------------------------------------------- -------------- ------------
End of period $ 117,437,420 $ 123,165,299
- --------------------------------------------------------- -------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
(UNAUDITED) -----------------------------------------------
MAY 31, 1998 1997 1996 1995 1994(A) 1993
------------ ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------
Net investment income 0.02 0.05 0.05 0.05 0.03 0.02
- --------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------
Distributions from net investment
income (0.02) (0.05) (0.05) (0.05) (0.03) (0.02)
- -------------------------------------- --------- ----- ----- ----- ------ -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------- --------- ----- ----- ----- ------ -----
TOTAL RETURN (B) 2.47% 4.93% 4.83% 5.24% 3.25% 2.47%
- --------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------
Expenses 0.60%* 0.60% 0.63% 0.74% 0.77% 0.74%
- --------------------------------------
Net investment income 4.91%* 4.84% 4.73% 5.12% 3.24% 2.44%
- --------------------------------------
Expense waiver/reimbursement (c) 0.20%* 0.20% 0.20% 0.20% 0.20% 0.20%
- --------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------
Net assets, end of period (000
omitted) $117,437 $123,165 $85,230 $99,674 $63,868 $48,897
- --------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) As of February 4, 1994, Investment Shares were no longer offered and ceased
to exist. Prior to that date, the Fund had offered two classes of shares
known as Trust Shares and Investment Shares. The table above presents Trust
Shares information for the period prior to November 30, 1994. For the year
ended November 30, 1993, Investment Share net assets (000 omitted) were
$10,315.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Newpoint Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end, management investment company. The
Trust consists of two portfolios. The financial statements included herein are
only those of Newpoint Government Money Market Fund (the "Fund"). The financial
statements of the other portfolio are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The investment objective of the Fund is to
provide stability of principal and current income consistent with stability of
principal.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund uses the amortized cost method to value its
portfolio securities in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At May
31, 1998, capital paid-in aggregated $117,437,420.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
- --------------------------------------------------------- ------------ -----------------
<S> <C> <C>
Shares sold 120,534,480 300,466,050
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,179,462 2,098,311
- ---------------------------------------------------------
Shares redeemed (127,441,821) (264,629,137)
- --------------------------------------------------------- ----------- ----------------
Net change resulting from share transactions (5,727,879) 37,935,224
- --------------------------------------------------------- ----------- ----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--FirstMerit Bank, N.A., the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC"), serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information
<PAGE>
NEWPOINT GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
and data from and after January 1, 2000. The Fund's Adviser and Administrator
are taking measures that they believe are reasonably designated to address the
Year 2000 issue with respect to computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken by each of the
Fund's other service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
<PAGE>
TRUSTEES OFFICERS
John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley
Edward C. Gonzales
John T. Conroy, Jr. President and Treasurer
William J. Copeland J. Christopher Donahue
Executive Vice President
J. Christopher Donahue
Richard B. Fisher
James E. Dowd, Esq. Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Executive Vice President and
Edward L. Flaherty, Jr., Esq.
Secretary
Edward C. Gonzales C. Christine Thomson
Peter E. Madden Vice President and Assistant
Treasurer
John E. Murray, Jr., J.D., S.J.D.
C. Todd Gibson
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
Mutual funds are not bank deposits or obligations of FirstMerit Bank, N.A., are
not endorsed or guaranteed by FirstMerit Bank, N.A., or any bank, and are not
obligations of, guaranteed by, or insured by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
