TO OUR SHAREHOLDERS:
The past year has been a difficult one for both the stock and bond markets.
At Cambridge, we wanted to share with you our thoughts about the markets and
suggest some simple strategies you may want to consider.
Each investor has a unique level of tolerance for risk and market
volatility. Therefore, we believe that first, it is important for you to decide
whether you are an INVESTOR or a TRADER. Let us explain. A trader is someone who
tries to capture investment gains over a fairly short period of time-say six
months to one year. For the trader, market swings like those we have witnessed
over the past several months are nervous times that lead to short-term buy and
sell decisions, based on short-term market phenomena. Investors, on the other
hand, take a long-term approach to investing. They see times of market weakness
not as nervous times, but as times of opportunity. It is during these markets
that investors are able to add to their portfolios and buy securities at prices
which are lower than perhaps they were in the past. Ask yourself, when do you
think it is the best time to buy stocks and bonds? When prices are high or when
prices are low? When opportunities are created by market volatility, doesn't it
make sense to look for those opportunities and use them to enhance portfolio
holdings? For investors, these questions are easy ones.
Let us suggest that you consider doing three things. First, call your
financial consultant and schedule an appointment with him or her to review your
financial goals. Decide what level of return you seek based on the level of risk
you are willing to accept. Don't expect your financial consultant to work
miracles. Financial consultants provide an invaluable service by helping their
clients balance their expectations with the realities of the stock and bond
markets. The higher the return you seek, the higher the risk or volatility you
must accept. It is that simple. Second, take this opportunity to adjust your
portfolio to better suit your needs. Make sure that you are diversified in
different types of investments, including some of which are con-
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servative. For years, the very best investors have put the simple discipline
of diversification to work. Finally, keep a long-term perspective. Over the
years, investors who have kept their investment disciplines intact, IN BOTH GOOD
AND BAD MARKETS, have been rewarded. In fact, while past performance is no
guarantee of future results, since 1926 history tells us that over rolling five-
year periods in the S&P 500*, investors' chances of having a positive total
return are about 90%. If you extend that horizon to 10 years, your chances of
making money increase to 99%**. We think investors should keep these facts in
mind.
All of us at Cambridge want to be helpful to you and your financial
consultant as you strive to achieve your financial goals. The following pages
list several suggested portfolio allocations using the Cambridge Family of
Funds. We hope these suggestions will be useful. Feel free to contact us at 1-
800-382-0016 if we can be of assistance. Sincerely,
(Signature of Daniel J. Ludeman) (Signature of Peter J. Quinn, Jr.)
Daniel J. Ludeman Peter J. Quinn, Jr.
CHAIRMAN PRESIDENT
* The S&P 500 is an unmanaged index which consists of 500 widely held common
stocks. An unmanaged index does not reflect expenses and may not correspond
to the Cambridge portfolios, which are actively managed and incur expenses.
INDEX HOLDINGS DIFFER FROM PORTFOLIO HOLDINGS, AND INDEX PERFORMANCE IS NOT
INDICATIVE OF PORTFOLIO PERFORMANCE.
**Source: Ibbotson & Associates 1926-1993
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INVESTOR PROFILES AND SUGGESTED ALLOCATIONS*
THE MAXIMUM GROWTH INVESTOR is oriented towards investments that maximize
returns. They are aware of and accept the higher levels of volatility that arise
from a portfolio consisting entirely of equity securities. Income is not a
necessary consideration for this type of investor.
(Pie Chart appears here with the following data points:)
Global Portfolio 30%
Capital Growth Portfolio 30%
Growth Portfolio 40%
THE CONSERVATIVE GROWTH INVESTOR prefers more moderate levels of risk
while maintaining their growth objective. Expectations are to achieve an average
or better than average return on their investments. Income is not a
consideration for the Conservative Growth Investor.
(Pie Chart appears here with the following data points:)
Income & Growth Portfolio 20%
Growth Portfolio 20%
Global Portfolio 20%
Capital Growth Portfolio 40%
THE MAXIMUM INCOME & GROWTH INVESTOR can best be characterized as one whose
investment goals consist of pursuing maximum growth opportunities while
generating some current income. This investor has a fairly high risk tolerance
and is willing to accept moderate to high levels of volatility to achieve their
desired level of higher total return.
(Pie Chart appears here with the following data points:)
Fixed-Income 10%
Growth Portfolio 10%
Capital Growth Portfolio 10%
Global Portfolio 10%
Income & Growth Portfolio 60%
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THE CONSERVATIVE INCOME AND GROWTH
INVESTOR has a moderate to low risk tolerance and seeks a conservative blend
of equity and debt securities. Their objective is to achieve an average return
while affording the opportunity for some current income. The overall goal is
growth of capital while minimizing portfolio volatility.
(Pie Chart appears here with the following data points:)
Growth Portfolio 5%
Money-Market 5%
Capital Growth Portfolio 5%
Global Portfolio 5%
Fixed-Income 20%
Income & Growth Portfolio 60%
THE MAXIMUM INCOME INVESTOR'S investment objective is current
income. They are willing to invest in securities that may be moderately volatile
if it will result in a higher level of current income. Growth of capital is not
an investment criteria for this investor.
(Pie Chart appears here with the following data points:)
Money-Market 5%
Fixed-Income 95%
THE CONSERVATIVE INCOME INVESTOR is generally
conservative and needs current income to meet normal expenses. They are willing
to accept lower levels of current income if it enables them to protect their
investment capital. Growth of capital is not a consideration for this
investor.
(Pie Chart appears here with the following data points:)
Income & Growth Portfolio 5%
Money-Market 10%
Fixed-Income 85%
* These are suggested allocations only. There can be no guarantee
that these allocations or the actual portfolio will achieve the desired
objective.
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PORTFOLIO MANAGERS' COMMENTARIES
CAMBRIDGE GROWTH PORTFOLIO
1994 was a difficult year for the portfolio. Growth stocks underperformed
the overall stock market due to increases in interest rates which resulted in
decreases in price/earnings multiples. Additionally, with a stronger economy,
investors focused on the more robust earnings gains found in the cyclical
industries, such as autos, papers, and chemicals.
Our current strategy is somewhat defensive given the current environment of
rising interest rates. We do not attempt to time the market. We normally
maintain a fully invested posture with cash of less than 10% of total assets.
Cash is currently 2% of fund assets. We are focusing on high quality growth
stocks with highly predictable earnings where earnings are less exposed to
economic risk. Approximately 18% of the portfolio is invested in technology
stocks. While these are not defensive issues, we expect that this sector will
have the potential to continue to outperform the market, given the demands for
products which generate productivity enhancements worldwide. We also have about
15% of the portfolio invested in health care. With the threats of health care
reform abating, this group is rebounding from very depressed levels.
BETH C. COTNER
CAMBRIDGE CAPITAL GROWTH PORTFOLIO
In reviewing the year, the largest factor affecting the capital markets has
been the surge in economic growth and the attendant expectation that eventually
inflation would reemerge as a problem. Although we have not, in fact, seen any
strong signs of inflationary pressures in the data to date, concern is at a
higher level now than when the Federal Reserve first began to raise rates last
February. We have now experienced four quarters in a row in which GDP rose more
than 3%, the unemployment rate has continued to tick down while the workweek is
the longest it has been in years, the dollar continues to trend lower against
major foreign currencies, and mid-term elections are taking precedence in
Washington over fiscal policy administration. Based on the aforementioned
factors, it would seem that in spite of the bond market's steep correction to
date, there may indeed be more upside to interest rates and that the equity
market's valuation at current levels continues to appear high in relation to
that of fixed income alternatives.
We are highly encouraged by the recent resurgent strength shown by quality
growth stocks as a group. The earnings reports for the second and third quarters
of 1994 showed excellent growth year over year and therefore are going to be
incredibly high hurdles to overcome next year especially if the Fed success in
slowing the momentum of the economy. Companies which will show continued
earnings momentum are going to become somewhat of a scarce item as we head into
1995 and we believe that the companies that have been most ignored by the market
over the past two years, those with the quality growth that we focus on, will be
direct beneficiaries. Some of the qualities such companies exhibit which set
them apart in an investor's eyes include strong and stable earnings growth
regardless of the point in the economic cycle, good balance sheets
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and other financial characteristics, excellent growth prospects looking
forward and competent managements.
Your portfolio benefited from many of the technology, telecommunications and
capital goods sector names which were added over the past six months. Many of
the companies in the technology sector in particular are achieving good price
gains based on excellent financial performance both in the U.S. and overseas.
The healthcare sector's good relative performance has also helped the portfolio.
Over the course of the year, there were several stocks which were sold based on
disappointing earnings, price performance or a change in the fundamental story
of the company and these stocks also detracted from the overall performance of
the portfolio. Included in this list would be the railroad stocks, and several
technology holdings.
The cash reserve position at the end of the fiscal year at 14.76% is
substantially lower than at the same time last year as we have been able to
invest in several very attractive quality growth names at reasonable valuations.
We will continue to search for and invest in those stocks most appropriate for
the objectives of the portfolio.
CATHY DUDLEY
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
Fiscal 1994 has been a year of change for the Government Portfolio. In
February, Cambridge Investment Advisors transitioned the management of the
portfolio from Federated Advisors to Pacific Investment Management Company
(PIMCO). This change was a result of Cambridge Investment Advisors desire to
decrease the portfolio's dependence on premium GNMA securities.
During Federated's tenure as manager of the portfolio, they had the
following comments regarding the markets in the quarter ended December 31, 1993:
"The fourth quarter of 1993 introduced a substantial boost in economic
statistics which caused a reactive spike in interest rates across the yield
curve. Although this abrupt end to the bull market was a near term negative for
the mortgage-backed market, the impact in the long run should be positive as
prepayment risks will subside. This outlook is supported by the MBA Refinance
Index which has fallen more than 50 percent from its all time peak in September.
This decrease in prepayment activity, combined with the change in expectations
from falling interest rates to more stable interest rates, will induce investors
to increase their mortgage-backed securities allocations as capital appreciation
gives way to yield in striving for total rate of return. This increase in
demand, combined with reduced new supply, will improve the technicals of the
mortgage-backed market.
The Fund has reduced its duration by eight tenths of a year during the
fourth quarter in light of the economic strength and increased market
volatility. The barbelled structure of the Fund remains in place, but additional
weighting has been given to the short end of the portfolio. Treasury securities
were the primary mechanism used to manipulate this weighting. The Treasury
position was moved down the yield curve as ten year notes were sold in favor of
two year notes to reduce fund volatility during the fourth quarter market sell
off. The two year note position has since been swapped into GNMA 7.5 percent in
January since this coupon now offers very little in refinancing options for the
underlying mortgage holder. In addition, the Fund eliminated the dollar roll in
FNMA 6.5 percent securities in favor of FNMA 7.0 percent securities."
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In February of 1994, PIMCO took over day-to-day management of the portfolio
and has since repositioned the portfolio into a broader array of financial
instruments. The higher than normal turnover witnessed in the portfolio this
year was a result of two factors. First, PIMCO's repositioning strategies to
move the portfolio in line with their investment bias. Second, the bond market
continued to experience heightened volatility as the increase economic growth
fueled higher interest levels. PIMCO has actively managed the portfolio to
protect the fund in this market environment and offered the following comments
relative to their tenure as portfolio manager:
We seek to provide a portfolio with the interest rate risk similar to a five
year U.S. government Treasury bond while providing a higher total return. We
pursue our objective by investing at least 65% of the portfolio value in U.S.
government securities, including U.S. agency mortgage-backed securities. Up to
35% of the Fund may be invested in non-U.S. government securities such as
corporate bonds (subject to a Baa minimum quality), non-agency mortgages)
subject to a A minimum quality), securities of foreign issuers and less liquid
securities (subject to a 15% maximum). The Fund may borrow up to 33% of the
Funds total market value, however reverse repurchase agreements are limited to
15%.
We plan to use the mortgage sector extensively in our strategies, including
interest-only and principal only securities (up to 10%), non-agency mortgage-
backed securities and floating rate mortgage-backed securities. We will use
mortgages in a diversified manner (spreading risk along a number of dimensions)
and prudently to keep the overall risk characteristics of the Fund in line with
the 5-year Treasury benchmark. We will also use leverage periodically, including
reverse repurchase agreements, to enhance the income of the Fund. But again, we
will not use leverage to alter the risks of the Fund significantly beyond the 5-
year Treasury benchmark.
In regard to the performance of the portfolio, fiscal year 1994 has been an
extremely difficult year in the bond market, however it has been a relatively
good year for the Fund. The bond market has suffered through its worst period
since the late 1960's due to a strong economy, several tightening moves by the
Fed and a weak dollar. Despite registering negative returns over the February
September period, the Fund significantly outperformed its 5-year Treasury
benchmark due to our barbelled maturity mix (short and long maturities) and our
sector weightings (mostly mortgages, with some Treasuries and investment grade
corporates).
Despite five increases in interest rates by the Fed, the economy is still
showing signs of near term strength. The impact of tighter monetary policy will
probably occur in mid 1995. The economy should slow at this point, leading to a
mild bond market rally next year. While cogniscent of this, we will remain
somewhat defensive in the near term by keeping the duration (interest rate
sensitivity) of the Fund close to the 5-year Treasury benchmark, while remaining
in a barbelled maturity mix. We will continue to focus on enhancing yield in the
portfolio by holding a diversified range of mortgage securities and a small (8-
10%) position in investment grade corporates.
PETER J. QUINN, JR.,
CAMBRIDGE INVESTMENT ADVISORS
DAVID EDINGTON, PIMCO
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CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Performance of the portfolio was hampered by a longer than average maturity
structure early in calendar year 1994. The Federal Reserve's efforts to raise
short-term interest rates caused the fixed income markets to perform poorly in
1994, as the fear of inflation drove interest rates higher.
We expected the municipal market to outperform the taxable fixed income
markets because of a combination of different factors: lower supply of
municipals, higher tax rates which normally translate into increased demand and
high after-tax equivalent yields of municipals. However, as the taxable market
traded down, munis followed step, paying no attention to the factors listed
above. As interest rates have moved higher during 1994, we believe that
municipals will govern more attention into 1995.
DAVID C. JOHNSON
WILLIAM V. GRADY
CAMBRIDGE INCOME & GROWTH PORTFOLIO
Fiscal year 1994 was indeed a banner year. The fund ranked 2nd among the 133
funds in the Lipper Balanced category for the twelve months ending September 30,
1994. The Fund's relative outperformance during the year was attributable mainly
to the Fund's large equity weighting (an average of 66% of net assets over the
year) vs. the Lipper category, and to individual stock selection within the
equity component of the portfolio.
In terms of asset mix, as of September 30, 1994, the Fund held 65% in
equities, 31% in fixed income, and 4% in cash. Over the course of the past year,
the equity component has been as high as 68%. We are now on our way to bringing
the equity component closer to 60% as we take a more neutral stance toward
relative valuations between the equity and the fixed income markets.
On the equity side of the portfolio, we continue to find a number of
investment opportunities on a bottom-up basis. Given that the domestic expansion
has slowed, we continue to see the most promise among internationally oriented,
cyclically sensitive issues. Among industrial stocks, we are emphasizing
selected materials producers, such as paper and aluminum companies, that have
regained pricing power as the global expansion picks up speed. We also remain
overweighted in the finance sector, although we have modestly shifted emphasis
away from banks and towards insurers.
On the fixed income side of the portfolio, the average maturity stands at
13.5 years. We are currently underweighted in corporate bonds as valuations for
corporates appear rich. Our expectations for long-term inflation remain within a
range of 3 to 4%. Given our inflation outlook, we think that long-term bonds at
current yield levels are attractive.
ARNIE SCHNEIDER
PAUL KAPLAN
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CAMBRIDGE GLOBAL PORTFOLIO
The portfolio's relative underperformance against the Morgan Stanley World
Index* during the six month period ended 9/30/94 was attributable mainly to the
following reasons:
Japan was one of the top performers during the quarter ended 6/30/94 and it
represent approximately 30% of the World Index. The Cambridge portfolio's Japan
weighting was not fully established at the beginning of the quarter and was
about half of the Index's at the end of the period.
Smaller markets in Asia and Europe outperformed larger, more matured markets
in general during the six months ended 9/30/94. The Cambridge portfolio's core
holding during this period represented mostly well-established companies in
matured countries.
The Cambridge Portfolio was established at the beginning of April 1994. The
portfolio was not fully invested during the entire six month period. As is the
case with most new portfolios, it takes time to build the desired investment
positions.
Recent portfolio activities included telecom investment in Malaysia and Hong
Kong, metals and minerals producers in Australia, Canada and South Africa, and
capital goods manufacturers in Germany and Denmark. We continued to emphasize
economically sensitive issues that can benefit from rising capital goods demand
as emerging countries embark on new infrastructure building and developed
nations replace worn facilities and equipment.
The European recovery has shown unexpected strength and speed led by
manufacturers with markets in Eastern Europe and Asia. One positive factor for
sustainable non-inflationary growth in 1995 is ongoing corporate restructuring
including emphasis on lower cost manufacturing in Eastern Europe. Veba, a
producer of capital goods, electricity, chemicals and oil based in West Germany,
was added to the portfolio. Also, additional purchases were made in FLS, a
global cement plant builder based in Denmark.
The Swedish market has been volatile in response to high national debt,
rising interest rates and the reinstatement of a more liberal government.
Holdings within the Trust, however, are global firms whose earnings are not
dependent upon the Swedish economy. They are auto, drug, and capital goods
companies that should continue to benefit from world growth.
South Korea posted the best global performance this year, reaching record
levels on the Seoul Index* as prospects of domestic economic growth and
expanding trade opportunities in Asia continues to be strong. The portfolio has
approximately a 3% position in South Korea as of 9/30/94.
The pace of Japan's economic deregulation and of the value of the yen have
significant consequences for the global economy. If Japan opens its economy to
foreign competition, dramatic price deflation and a subsequent decline in the
value of the yen are likely to ensue. Japanese savings, which have largely
stayed in Japan since the late 1980s, may then be lured away and stimulate other
economies where savings are less plentiful. We consider investments in Japan
expensive, but we do not anticipate this situation to endure. The portfolio's
investments in Japan have been structure in order to benefit from a decline in
the value of the yen.
WILLIAM HOLZER
ALICE HO
All investments are subject to certain risks. For example, those which
include common stock are affected by fluctuating stock prices. Investments
outside the U.S. are subject to additional risks, including currency
fluctuations, political and social instability, differing securities regulations
and accounting standards, limited public information, possible changes in
taxation, and periods of illiquidity. Accordingly, investors should maintain a
long-term perspective.
*Morgan Stanley Capital International World Index and Seoul Index are
unmanaged indices. The performance of countries and unmanaged indices does not
reflect expenses and may not correspond to the performance of the fund, which is
actively managed and incurs expenses.
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CAMBRIDGE GROWTH PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
GROWTH PORTFOLIO CLASS A AND CLASS B SHARES
AND S&P 500~.
(Chart appears here with the following data points:)
Date A Shares B Shares S&P 500
4/29/92 9,450 10,000 10,000
9/30/92 9,417 9,965 10,140
9/30/93 11,141 11,700 11,139
9/30/94 9,799 10,240 10,814
AVERAGE ANNUAL TOTAL RETURNS AT 9/30/94
1 Year Since Inception*
Class A Shares (16.87%) (0.84%)
Class B Shares (12.48%) 0.99%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Growth Portfolio Class A and Class B
Shares from the date of initial public investment 4/29/92 through 9/30/94.
** Represents a hypothetical investment of $10,000 in Cambridge Growth
Portfolio Class A Shares, after deducting the maximum sales charge of 5.50%
($10,000 investment minus $550 sales charge = $9,450). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Growth
Portfolio Class B Shares. Class B Shares are charged a redemption fee of 1.00%
on any redemption less than 1 year from the purchase date. The Class B Shares'
performance assumes the reinvestment of all dividends and distributions.
~ The S&P 500 is adjusted to reflect reinvestment of dividends on securities
in the index. The S&P 500 is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Portfolio's performance.
10
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CAMBRIDGE CAPITAL GROWTH PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
CAPITAL GROWTH PORTFOLIO CLASS A AND CLASS B
SHARES AND S&P 500~.
(Graph appears here with the following data points:)
Date A Shares B Shares S&P 500
4/29/92 9,450 10,000 10,000
9/30/92 9,525 10,061 10,140
9/30/93 10,306 10,818 11,139
9/30/94 10,165 10,601 10,814
AVERAGE ANNUAL TOTAL RETURNS AT 9/30/94
1 Year Inception*
Class A (6.79%) 0.68%
Class B (2.00%) 2.44%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Capital Growth Portfolio Class A and
Class B Shares from the date of initial public investment 4/29/92 through
9/30/94.
** Represents a hypothetical investment of $10,000 in Cambridge Capital
Growth Portfolio Class A Shares, after deducting the maximum sales charge of
5.50% ($10,000 investment minus $550 sales charge = $9,450). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Capital
Growth Portfolio Class B Shares. Class B Shares are charged a redemption fee of
1.00% on any redemption less than 1 year from the purchase date. The Class B
Shares' performance assumes the reinvestment of all dividends and distributions.
~ The S&P 500 is adjusted to reflect reinvestment of dividends on securities
in the index. The S&P 500 is not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Portfolio's performance.
11
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CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
GOVERNMENT INCOME PORTFOLIO CLASS A AND
CLASS B SHARES AND MERRILL LYNCH 5-YEAR
TREASURY INDEX~.
(Graph appears here with the following data points:)
Merrill Lynch
Date A Shares B Shares 5 Year Treasury Index
4/29/92 9,525 10,000 10,000
9/30/92 9,846 10,324 10,946
9/30/93 10,378 10,826 11,869
9/30/94 10,035 10,405 10,354
AVERAGE ANNUAL TOTAL RETURNS AT 9/30/94
1 Year Inception*
Class A (7.97%) 0.14%
Class B (3.97%) 1.66%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Government Income Portfolio Class A and
Class B Shares from the date of initial public investment 4/29/92 through
9/30/94.
** Represents a hypothetical investment of $10,000 in Cambridge Government
Income Portfolio Class A Shares, after deducting the maximum sales charge of
4.75% ($10,000 investment minus $475 sales charge = $9,525). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Government
Income Portfolio Class B Shares. Class B Shares are charged a redemption fee of
1.00% on any redemption less than 1 year from the purchase date. The Class B
Shares' performance assumes the reinvestment of all dividends and distributions.
~ The Merrill Lynch 5-Year Treasury Index is adjusted to reflect
reinvestment of interest on securities in the index. The Merrill Lynch 5-Year
Treasury Index is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
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CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
MUNICIPAL INCOME PORTFOLIO CLASS A AND CLASS
B SHARES AND LEHMAN MUNICIPAL BOND INDEX~.
(Graph appears here with the following data points:)
Lehman Municipal
Date A Shares B Shares Bond Index
4/29/92 9,525 10,000 10,000
9/30/92 10,034 10,528 10,846
9/30/93 11,639 12,136 12,874
9/30/94 11,101 11,512 12,436
AVERAGE ANNUAL TOTAL RETURNS AT 9/30/94
1 Year Inception*
Class A (9.35%) 4.42%
Class B (5.34%) 6.00%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Municipal Income Portfolio Class A and
Class B Shares from the date of initial public investment 4/29/92 through
9/30/94.
** Represents a hypothetical investment of $10,000 in Cambridge Municipal
Income Portfolio Class A Shares, after deducting the maximum sales charge of
4.75% ($10,000 investment minus $475 sales charge = $9,525). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Municipal
Income Portfolio Class B Shares. Class B Shares are charged a redemption fee of
1.00% on any redemption less than 1 year from the purchase date. The Class B
Shares' performance assumes the reinvestment of all dividends and distributions.
~ The Lehman Municipal Bond Index is adjusted to reflect reinvestment of
interest on securities in the index. The Lehman Municipal Bond Index is not
adjusted to reflect sales loads, expenses, or other fees that the SEC requires
to be reflected in the Portfolio's performance.
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CAMBRIDGE INCOME & GROWTH PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
INCOME & GROWTH PORTFOLIO CLASS A AND
CLASS B SHARES AND S&P 500~ AND SHEARSON
LEHMAN AGGREGATE BOND INDEX~.
(Graph appears here with the following data points:)
Date A Shares B Shares S&P 500 SLAG G
5/24/93 9,450 10,000 10,000 10,000
9/30/93 9,928 10,506 10,288 10,446
9/30/94 10,578 11,101 10,668 10,109
AVERAGE ANNUAL TOTAL RETURNS AT 9/30/94
1 Year Inception*
Class A 0.68% 4.30%
Class B 5.66% 8.15%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Income and Growth Portfolio Class A and
Class B Shares from 5/31/93 through 9/30/94. The date of initial public
investment was May 24, 1993. Performance begins May 31, 1993 to show competitive
data.
** Represents a hypothetical investment of $10,000 in Cambridge Income and
Growth Portfolio Class A Shares, after deducting the maximum sales charge of
5.50% ($10,000 investment minus $550 sales charge = $9,450). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Income and
Growth Portfolio Class B Shares. Class B Shares are charged a redemption fee of
1.00% on any redemption less than 1 year from the purchase date. The Class B
Shares' performance assumes the reinvestment of all dividends and distributions.
~ The Shearson Lehman Aggregate Bond Index and S&P 500 are adjusted to
reflect reinvestment of dividends on securities in the indices. The Shearson
Lehman Aggregate Bond Index and S&P 500 are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be
14
<PAGE>
CAMBRIDGE GLOBAL PORTFOLIO
PERFORMANCE COMPARISON
(unaudited)
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 PURCHASE IN CAMBRIDGE
GLOBAL PORTFOLIO CLASS A AND CLASS B SHARES
AND MORGAN STANLEY CAPITAL INTERNATIONAL~.
(Graph appears here with the following data points:)
Morgan Stanley
Capital International
Date A Shares B Shares MSCI
3/30/94 9,450 10,000 10,000
9/30/94 9,487 9,883 10,405
TOTAL RETURNS SINCE INCEPTION*
Class A (5.17%)
Class B (1.21%)
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR QUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Reflects operations of Cambridge Global Portfolio Class A and Class B
Shares from the date of initial public investment 3/29/94 through 9/30/94.
** Represents a hypothetical investment of $10,000 in Cambridge Global
Portfolio Class A Shares, after deducting the maximum sales charge of 5.50%
($10,000 investment minus $550 sales charge = $9,450). The Class A Shares'
performance assumes the reinvestment of all dividends and distributions.
***Represents a hypothetical investment of $10,000 in Cambridge Global
Portfolio Class B Shares. Class B Shares are charged a redemption fee of 1.00%
on any redemption less than 1 year from the purchase date. The Class B Shares'
performance assumes the reinvestment of all dividends and distributions.
~ The Morgan Stanley Capital International is adjusted to reflect
reinvestment of dividends on securities in the index. The Morgan Stanley Capital
International is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
15
<PAGE>
CAMBRIDGE GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PERCENT OF MARKET
NET ASSETS SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS 96.72%
BASIC MATERIALS 8.65%
Air Products & Chemicals, Inc. 8,000 $ 374,000
Alco Standard Corporation 8,000 497,000
Consolidated Papers, Inc. 1,000 51,750
Kimberly Clark Corporation 8,000 470,000
Minerals Technologies, Inc. 10,500 311,063
Monsanto Company 5,000 401,875
Morton International, Inc. 7,500 206,250
Newell Company 28,000 623,000
Nucor Corporation 11,500 805,000
3,739,938
CAPITAL GOODS & CONSTRUCTION 5.37%
Automotive Industries* 14,400 349,200
Emerson Electric Company 8,900 530,663
General Electric Company 14,100 678,562
Grainger, Inc. 3,500 207,375
Magna International, Inc. 13,600 501,500
Trimas Corporation 2,500 56,875
2,324,175
CONSUMER CYCLICAL 18.62%
Ann Taylor Stores, Inc.* 5,700 205,200
Brinker International, Inc.* 21,300 511,200
CUC International, Inc.* 6,900 227,700
Duracell International, Inc. 3,500 159,688
Franklin Quest Company* 13,500 506,250
General Nutrition Companies, Inc.* 12,900 287,025
Harcourt General, Inc. 6,000 206,250
Heilig-Meyers Company 11,600 304,500
Home Depot, Inc. 19,300 810,600
International Game Technology 7,400 152,625
Kohl's Corporation* 3,000 145,500
Lone Star Steakhouse & Saloon,
Inc.* 2,000 50,750
Manpower, Inc. 26,500 725,438
McDonald' s Corporation 14,000 367,500
Office Depot, Inc.* 10,800 280,800
Promus Companies, Inc.* 21,000 706,125
Shaw Industries, Inc. 20,900 300,438
Starbucks Corporation* 9,000 207,562
Station Casinos, Inc.* 7,900 106,650
The Bombay Company, Inc.* 4,900 64,925
The Walt Disney Company 6,000 233,250
Tribune Company 4,400 237,600
Viacom, Inc.-Class A* 384 15,696
Viacom, Inc.-Class B* 2,909 115,633
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
CONSUMER CYCLICAL (CONTINUED)
Viacom, Inc.- Rights* 4,800 $ 6,300
Viking Office Products, Inc.* 18,800 568,700
WalMart Stores, Inc. 23,600 551,650
8,055,555
CONSUMER STAPLES 9.90%
Abbott Laboratories 4,100 128,638
Campbell Soup Company 10,800 426,600
Coca Cola Company 15,000 729,375
Conagra, Inc. 12,600 396,900
CPC International, Inc. 11,000 556,875
Gillette Company 7,000 495,250
Philip Morris Companies, Inc. 9,900 605,138
Procter & Gamble Company 11,000 655,875
UST, Inc. 10,000 286,250
4,280,901
ENERGY 1.82%
Enron Corporation 16,900 511,225
Mobile Corporation 3,000 237,375
Repsol SA~ 1,200 36,579
785,179
FINANCIAL 9.31%
Bankers Life Holding Corporation 7,200 169,200
Boatmen's Bancshares, Inc. 14,000 434,875
Conseco, Inc. 6,500 291,688
Equity Residential Properties Trust 7,500 238,125
Federal National Mortgage Association 4,000 315,000
First USA, Inc. 12,100 425,012
General RE Corporation 3,400 359,975
MBNA Corporation 23,500 543,438
MGIC Investment Corporation 19,900 599,488
Nationsbank Corporation 10,000 490,000
Western National Corporation 12,000 162,000
4,028,801
HEALTH 14.94%
American Medical Holdings, Inc.* 4,000 89,500
Columbia HCA Healthcare Corporation 12,500 543,750
Cordis Corporation* 7,600 400,900
Forest Laboratories, Inc.* 8,000 394,000
Foundation Health Corporation* 1,900 66,975
Idexx Laboratories, Inc.* 8,400 247,800
Integrated Health Services, Inc.* 16,000 568,000
</TABLE>
17
<PAGE>
CAMBRIDGE GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
HEALTH(CONTINUED)
Johnson & Johnson 6,000 $ 309,750
Medtronic, Inc. 10,600 560,475
Mid Atlantic Medical Services, Inc.* 9,400 282,000
Pfizer, Inc. 4,000 276,500
Schering Plough Corporation 11,800 837,800
United Healthcare Corporation 7,500 397,500
US Healthcare, Inc. 6,500 302,656
Value Health, Inc.* 14,500 696,000
Warner Lambert Company 6,100 489,525
6,463,131
TECHNOLOGY 18.95%
3COM Corporation* 7,200 269,100
ADC Telecommunications, Inc.* 7,400 296,925
Applied Materials, Inc.* 10,400 486,200
AT&T Corporation 7,900 426,600
Cisco Systems, Inc.* 6,000 164,250
Compaq Computer Corporation* 12,100 394,763
Compuware Corporation* 8,000 376,500
EMC Corporation* 20,000 402,500
First Data Corporation 7,600 381,900
General Motors Corporation - Class E 10,400 395,200
Intel Corporation 5,000 307,500
Linear Technology Corporation 8,000 354,500
Loral Corporation 3,000 118,125
Maxim Integrated Products, Inc.* 1,300 79,625
Microchip Technology , Inc.* 1,500 58,875
Microsoft Corporation* 8,000 449,000
Motorola, Inc. 10,800 569,700
Oracle Systems Corporation* 14,100 606,300
Parametric Technology Corporation* 14,000 465,500
Reynolds & Reynolds Company 10,000 251,250
Scientific Atlanta, Inc. 5,700 232,988
Silicon Graphics, Inc.* 23,000 592,250
Solectron Corporation* 3,500 92,313
Tellabs, Inc.* 10,000 425,000
8,196,864
TRANSPORTATION & SERVICES 3.69%
Conrail, Inc. 7,600 376,200
Kansas City Southern Industries, Inc. 5,800 205,175
Southwest Airlines Company 11,000 247,500
Union Pacific Corporation 6,700 359,288
Wisconsin Central Transport* 9,900 405,900
1,594,063
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
FOREIGN SECURITIES 5.47%
AAlberts Industries 400 $ 18,626
Amway Japan, Ltd.* 2,100 33,338
Atlas Copco AB 4,500 56,469
BBC Brown Boveri 40 34,485
BMW Bayerische Motoren 50 24,125
BPB Industries 5,500 26,191
British Petroleum Company 3,500 22,048
Broken Hill Proprietary* 1,400 20,347
Carter Holt Harvey 8,600 19,524
Cementos De Mexico ACP 1,400 12,575
Comercial Del Plata 3,000 10,446
Creative Technology, Ltd. 500 8,833
CRH PLC 10,000 54,644
DDI Corporation 10 87,229
Ericsson 2,000 106,262
Grupo Carso ADR~ 500 11,500
Hagemeyer NV 200 16,085
Honda Motors Company 4,000 66,633
Keiyo Company 3,000 58,152
Keppel Corporation 5,000 40,459
Koninklijke Van Ommeren 1,300 34,378
Kyocera Corporation 1,000 71,479
Maderas Y Sinteticos Sociedad 800 22,800
Malaysian Helicopter 2,760 8,558
Matsushita Electric 4,000 63,806
Metsa Serla `B' 400 19,241
Nokia AB 500 58,073
Noranda, Inc. 1,100 22,237
Philips Electronics 1,900 57,999
Polygram NV 400 17,315
Road Builder Holdings 3,000 19,541
Sanyo Sihinpan Finance Company 600 63,604
Sharp Corporation 3,000 53,306
SIAM City Bank, Ltd. 20,200 25,710
Siebe PLC 7,000 59,603
Siemens AG 100 40,939
STET Societa Finanz 13,600 42,078
Technology Resources Industries 6,900 28,259
Telecom Argentina 3,300 22,121
Telefonos De Mexico 700 43,750
TNT Limited 10,300 18,217
Tokio Marine & Fire Insurance 5,000 59,566
Tokyo Electron, Ltd. 2,000 63,806
Universal Robina Corporation 11,000 10,329
Veba AG 200 66,288
Vodagone Group PLC 19,800 61,660
</TABLE>
19
<PAGE>
CAMBRIDGE GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES OR
COMMON STOCKS PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
Wai Kee Holdings 58,000 $16,663
Wai Kee Holdings-Warrants* 10,600 178
Western Mining Corporation 3,700 21,548
Wilson & Horton, Ltd. 4,000 18,307
WMX Technologies, Inc. 18,000 519,750
Woolwor ths, Ltd. 3,862 8,059
2,367,139
TOTAL COMMON STOCKS
(COST $38,688,583) 41,835,746
CORPORATE BOND 0.38%
Argosy Gaming Corporation,
12.00%, 6/1/01 (cost $150,000) $ 150,000 163,500
TOTAL INVESTMENTS
(COST $38,838,583) 97.10% 41,999,246
OTHER ASSETS LESS LIABILITIES 2.90% 1,257,440
NET ASSETS 100.00% $43,256,686
</TABLE>
* Non-income producing.
~ American Depository Receipts.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
CAMBRIDGE CAPITAL GROWTH PORTFOLIO
Portfolio of Investments
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS 81.70%
BASIC MATERIALS 4.42%
Akzo Nobel 5,000 $ 586,663
British Steel ORD 200,000 544,784
DuPont EI de Nemours & Company 17,000 986,000
Dutch State Mines 7,500 635,958
2,753,405
CAPITAL GOODS & CONST RUCTION 8.44%
Brown Boveri & Cie 800 689,709
Browning Ferris Indus tries, Inc. 30,000 952,500
Fluor Corporation 12,000 597,000
PPG Industries, Inc. 25,000 990,625
Raytheon Company 17,000 1,090,125
United Technologies Corporation 15,000 939,375
5,259,334
CONSUMER CYCLICAL 17.72%
Capital Cities/ABC 11,000 902,000
Carnival Corporation 25,000 1,096,875
Dayton-Hudson Corporation 12,500 956,250
Harcourt General, Inc. 22,500 773,438
Home Depot, Inc. 30,000 1,260,000
Marriott International, Inc. 31,500 909,562
May Department Stores Company 30,000 1,181,250
Mirage Resorts, Inc.* 48,000 1,032,000
Price Costco, Inc.* 50,000 803,125
Toys R Us, Inc.* 38,000 1,353,750
Whirlpool Corporation 15,000 770,625
11,038,875
CONSUMER STAPLES 11.85%
Abbott Laboratories 40,000 1,255,000
Amgen, Inc.* 15,000 798,750
Astra AB 37,500 898,590
Columbia/HCA Healthcare
Corporation 25,000 1,087,500
Merck & Company, Inc. 40,000 1,420,000
Philip Morris Companies, Inc. 14,000 855,750
Schering-Plough Corporation 15,000 1,065,000
7,380,590
ENERGY 9.60%
British Petroleum PLC , ADS~ 13,000 984,750
Chevron Corporation 25,000 1,040,625
Dresser Industries, Inc. 50,000 1,012,500
</TABLE>
21
<PAGE>
CAMBRIDGE CAPITAL GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
ENERGY (CONTINUED)
Enron Corporation 25,000 $ 756,250
Mobil Corporation 12,000 949,500
Royal Dutch Petroleum Company 8,500 912,688
Tidewater, Inc. 15,000 322,500
5,978,813
FINANCIAL 5.98%
American International Group, Inc. 15,000 1,333,125
Federal National Mortgage Association 20,000 1,575,000
U.S. Healthcare, Inc. 17,500 814,844
3,722,969
TECHNOLOGY 15.21%
Cirrus Logic, Inc.* 35,000 980,000
Computer Associates International,
Inc. 30,000 1,335,000
Ericsson Telecommunication Company 15,000 806,250
General Motors Corporation - Class E 23,000 874,000
Hewlett Packard Company 15,000 1,310,625
International Business Machines
Corporation 9,000 625,500
Parametric Technology Corporation* 28,300 940,975
Perkin-Elmer Corporation 15,000 470,625
Philips Electronics Holdings Company 35,000 1,063,125
Xerox Corporation 10,000 1,067,500
9,473,600
TRANSPORTATION & SERVICES 2.61%
CSX Corporation 10,000 685,000
Union Pacific Corporation 17,500 938,438
1,623,438
UTILITIES 3.91%
Ameritech Corporation 20,000 805,000
Royal PTT Nederland 22,500 677,781
Sprint Corporation 25,000 953,125
2,435,906
MISCELLANEOUS 1.96%
Eastman Kodak Company 7,500 388,125
ITT Corporation 10,000 833,750
1,221,875
TOTAL COMMON STOCKS (COST $49,335,346) 50,888,805
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SHARES OR
PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
PREFERRED STOCKS 0.47%
Nokia AB (cost $202,825) $ 2,500 $ 290,363
GOVERNMENT BOND 3.14%
U.S. Treasury Note, 6.00%, 6/30/96
(cost $1,974,735) $1,975,000 1,958,726
SHORT-TERM INVESTMENTS 16.00%
COMMERCIAL PAPER 13.37%
Bellsouth Telecommunications, Inc.,
4.79%, 10/20/94 1,650,000 1,645,829
Exxon Imperial U.S., Inc.,
4.82%, 10/7/94 1,630,000 1,628,691
General Electric Company,
4.87%, 10/24/94 1,500,000 1,495,333
Johnson & Johnson, 4.90%, 10/24/94 745,000 742,668
Private Export Funding Corporation,
4.73%, 10/14/94 1,245,000 1,242,873
Private Export Funding Corporation,
4.72%, 10/20/94 225,000 224,439
Proctor & Gamble Corporation,
4.83%, 10/21/94 1,350,000 1,346,377
TOTAL COMMERCIAL PAPER 8,326,210
U.S. GOVERNMENT AGENCIES 2.63%
Federal Home Loan Mortgage
Corporation, 4.70%, 10/4/94 1,240,000 1,239,514
Federal National Mortgage Association,
4.76%, 10/26/94 400,000 398,678
TOTAL U.S. GOVERNMENT AGENCIES 1,638,192
TOTAL SHORT-TERM INVESTMENTS
(COST $9,964,402) 9,964,402
TOTAL INVESTMENTS
(COST $61,477,308) 101.31% 63,102,296
OTHER ASSETS LESS LIABILITIES (1.31%) (815,383)
NET ASSETS 100.00% $62,286,913
</TABLE>
* Non-income producing.
~ American Depository Receipts.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PERCENT OF PRINCIPAL MARKET
NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
LONG-TERM INVESTMENTS 121.63%
U.S. GOVERNMENT AND
FEDERAL AGENCIES 94.08%
FEDERAL HOME LOAN
MORTGAGE CORPORATION 34.03%
6.00%, 1/15/20 $ 5,236,000 $ 4,707,478
10.00%, 3/1/21 1,548,772 1,651,316
6.75%, 5/15/21 3,000,000 2,669,040
9.50%, 12/1/22 776,622 811,080
6.00%, 11/14/24 (c) 13,000,000 11,208,444
CMO, IO, 9.98% - 11.66%,
7/15/06 - 1/15/16 23,277,819 4,806,943
CMO, REMIC, 8.50%, 6/25/19 1,976,636 2,003,815
IO, REMIC, 4.00% -7.00%,
12/15/08 -3/25/24 92,193,018 8,907,180
36,765,296
FEDERAL HOUSING AGENCY 3.65%
7.38%, 7/1/21 (a) 2,979,428 2,962,669
7.43%, 12/1/21 (a) 998,994 977,890
3,940,559
FEDERAL NATIONAL
MORTGAGE ASSOCIATION 0.46%
11.00%, 12/1/20 449,589 494,547
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - REMIC 15.03%
8.00%, 1991 Class 155ZA, 2/25/17 4,085,083 4,092,722
6.15%, 1993 Class 160AG, 12/25/20 2,000,000 1,805,620
6.00%, 1991 Class 140D, 10/25/21 9,875,000 8,612,778
6.50%, 1993 Class 189PK, 3/25/22 2,000,000 1,730,620
16,241,740
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION 39.15%
12.00%, 12/15/12 - 5/15/15 3,178,281 3,607,349
11.50%, 2/15/13 - 6/20/19 643,805 712,580
10.50%, 5/20/14 - 6/20/19 2,815,070 3,033,890
11.00%, 1/15/16 - 6/15/21 3,130,421 3,459,694
6.50%, 11/15/23 1,487,152 1,298,462
6.00%, 8/20/24 - 9/20/24* 11,430,001 11,088,632
9.50%, 9/15/10 - 1/15/28 5,023,272 5,274,436
9.00%, 1/15/28 2,842,244 2,914,181
8.75%, 1/15/28 - 5/15/28 4,394,051 4,398,137
10.00%, 5/15/24 - 7/15/28 4,017,475 4,301,189
9.75%, 2/15/29 2,061,048 2,201,199
42,289,749
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
TREASURY SECURITIES 1.76%
U.S. Treasury Note, 6.38%, 1/15/009 $1,980,000 $1,898,93
TOTAL U.S. GOVERNMENT
AND FEDERAL AGENCIES 101,630,830
CORPORATE BONDS 10.14%
CONSUMER NON-DURABLES 3.20%
RJR Nabisco, Inc., 8.30%, 4/15/99 3,600,000 3,451,500
FINANCE 0.92%
Banesto Finance, 6.13%, 4/25/03 1,000,000 1,002,900
TRANSPORTATION 4.49%
American Airlines, 9.78%, 11/26/11 5,000,000 4,846,000
MISCELLANEOUS 1.53%
BR W Real Estate
Operating Company, 5.69%, 12/1/98
(3/24/94, $1,664,501) (a) (b) 1,668,672 1,652,508
TOTAL CORPORATE BONDS 10,952,908
COLLATERALIZED MORTGAGE OBLIGATIONS 15.19%
Prudential Home Mortgage
Securities Corporation,
Series 1992-34, 6.50%, 11/25/07 3,000,000 2,839,680
Prudential Home Mortgage
Securities Corporation,
Series 1992-46, 7.00%, 12/1/07 4,000,000 3,985,938
Prudential Home Mortgage
Securities Corporation,
Series 1993-15, 11.50%, 5/25/08 3,549,431 3,752,692
Resolution Trust Corporation,
Series 1992-C5, 6.90%, 5/25/22 (a) 1,679,665 1,633,471
Resolution T rust Corporation,
Series 1992-C1, 8.80%, 8/25/23 (a) 3,275,983 3,343,550
Sears Mortgage Securities Corporation,
Series 1992-9, 5.76%, 6/25/22 (a) 875,806 857,278
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 16,412,609
MORTGAGES 2.22%
Chase Mortgage Finance
Corporation, IO, Series 1994-F , Class A,
2.50%, 3/25/25 10,511,000 817,892
Prudential Home Mortgage
Securities Corporation, IO, CMO,
Series 1993-63, 6.75%, 1/25/24 4,451,111 1,016,105
Residential Funding Mortgage
Securities, IO, 6.50%, 3/25/09 2,912,931 561,877
TOTAL MORTGAGES 2,395,874
</TABLE>
25
<PAGE>
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
TOTAL LONG-TERM INVESTMENTS
(COST $136,708,288) $131,392,221
SHORT-TERM INVESTMENT 0.90%
United Missouri Bank,
Time Deposit, 3.77%,
10/3/94 $ 974,000 974,000
TOTAL SHORT-TERM INVESTMENTS
(COST $974,000) 974,000
TOTAL INVESTMENTS
(COST $137,682,288) 122.53% 132,366,221
OTHER ASSETS LESS LIABILITIES (22.53%) (24,336,572)
NET ASSETS 100.00% $108,029,649
</TABLE>
INVESTMENT ABBREVIATIONS
CMO - Collateralized Mortgage Obligation
IO - Interest Only Security
REMIC - Real Estate Mortgage Investment Conduit
* Government National Mortgage Association, 6.00%, 9/20/24 with a market
value of $9,390,015 was segregated as collateral for a reverse repurchase
agreement at September 30, 1994.
(a) Securities are valued based upon their fair value determined under
procedures approved by the Board of Trustees. At September 30, 1994, the fair
value of these securities was $11,427,366 (10.6% of net assets).
(b) All or a portion of these securities are restricted (i.e., securities
which may not be publicly sold without registration under the Federal Securities
Act of 1933). Dates of acquisition and costs are set forth in parentheses after
the title of the restricted securities.
(c)At September 30, 1994 cost of securities purchased on a when-issued
basis totalled $11,456,250.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
PERCENT OF PRINCIPAL MARKET
NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
LONG-TERM
MUNICIPAL SECURITIES 98.92%
CALIFORNIA 16.67%
California Educational
Facilities, College of
Osteopathic Medicine,
7.50%, 6/1/18 $ 985,000 $ 1,003,675
California State Revenue
Anticipation Bond, WTS, Series C,
5.75%, 4/25/96 3,000,000 3,041,550
Carson Improvement Board Act 1915,
Special Assessment District 92,
7.38%, 9/2/22 740,000 754,237
Los Angeles Convention,
Series A, 5.13%, 8/15/21 1,750,000 1,427,055
Los Angeles County
Metropolitan, 5.00%, 7/1/21 4,500,000 3,600,630
Orange County
Community Facilities District,
Series A, 7.35%, 8/15/18 300,000 343,602
San Francisco City Sewer
Revenue Refunding, 5.38%, 10/1/22 2,000,000 1,695,740
11,866,489
COLORADO 4.80%
Colorado HFA, SFM,
Series A-3, 7.00%, 11/01/24 655,000 661,857
Denver City & County
Airport Revenue, Series D,
7.75%, 11/15/13 1,000,000 997,880
Denver City & County
Airport Revenue, Series A,
8.50%, 11/15/23 1,700,000 1,750,830
3,410,567
DISTRICT OF COLUMBIA 3.94%
District of Columbia
Certificates of Partnership,
Participation Note,
7.30%, 1/1/13 1,000,000 1,012,130
District of Columbia Hospital
Revenue, Series A, 7.13%, 8/15/19 1,000,000 991,250
Metropolitan Washington,
General Airport Revenue,
Series A, 6.63%, 10/1/19 800,000 800,864
2,804,244
</TABLE>
27
<PAGE>
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LONG-TERM
MUNICIPAL SECURITIES PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
FLORIDA 4.50%
Dade County, 6.50%, 10/1/26 $1,930,000 $ 1,950,921
Sarasota County, Health Facilities
Authority Revenue, 10.00%, 7/1/22 1,200,000 1,253,400
3,204,321
GEORGIA 2.90%
Cobb County Development
Authority Revenue Bonds,
Series 92A, 8.00%, 6/1/22 1,000,000 1,040,000
Monroe County
Development Authority PCR,
6.75%, 1/1/10 1,000,000 1,024,800
2,064,800
ILLINOIS 6.81%
Broadview T ax Increment Revenue,
Tax Allocation, 8.25%, 07/01/13 1,000,000 985,740
Chicago Heights Residential
Mortgage Revenue,
Series B, (effective yield-2.51%) (a),
6/1/09 3,465,000 1,215,591
Chicago O'Hare International
Airpor t Special Facilities
Revenue, 6.75%, 1/1/18 1,350,000 1,356,251
Illinois Health Facilities
Authority Revenue, 9.50%, 10/1/22 1,250,000 1,293,450
4,851,032
INDIANA 6.88%
Indiana Health Facilities
Hospital Revenue, 7.20%, 10/1/22 1,815,000 1,784,780
Indianapolis Public Improvement Bond,
Series D, 6.75%, 2/1/20 2,400,000 2,405,040
Indiana Transportation
Finance Authority, Series A,
(effective yield-1.50% - 1.70%) (a),
12/1/15 - 6/1/17 3,000,000 706,710
4,896,530
IOWA 0.95%
Student Loan Liquidity Corporation,
Student Loan Revenue,
Series C, 6.95%, 3/1/06 625,000 670,931
KENTUCKY 2.64%
Jefferson County, Hospital
Revenue, 9.05%, 10/1/08 500,000 518,750
</TABLE>
28
<PAGE>
<TABLE>
LONG-TERM
MUNICIPAL SECURITIES PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
KENTUCKY 2.64%
Kenton County Airport
Board Revenue, OID, 7.50%, 2/1/20 $ 1,400,000 $ 1,359,666
1,878,416
LOUISIANA 0.58%
Louisiana Public Facilities
Authority Revenue, 6.80%, 5/15/12 400,000 415,984
MAINE 1.39%
Maine State Housing Authority ,
Series C, 6.88%, 11/5/24 1,000,000 993,040
MASSACHUSETTS 2.54%
Massachusetts State Health
and Educational Facilities Authority ,
OID Revenue Bonds,
Series A, 6.00%, 10/1/23 2,000,000 1,296,000
Plymouth County,
Certificates of Partnership,
Participation Notes,
Series A, 7.00%, 4/1/22 500,000 513,755
1,809,755
MICHIGAN 1.94%
Michigan State Strategic Funding,
7.50%, 1/1/21 1,000,000 953,810
Romulus Community School,
Refunding, (effective yield-3.86%) (a),
5/1/20 2,385,000 429,896
1,383,706
MONTANA 0.66%
Montana State Resource
Recovery Revenue Bonds,
7.00%, 12/31/19 500,000 472,895
NEBRASKA 0.52%
Nebraska Finance Authority,
SFM, 10.02%, 9/15/24 400,000 372,500
NEVADA 0.72%
Henderson Local Improvement
District, Special Assessment,
Series A, 8.50%, 11/1/12 500,000 510,125
NEW JERSEY 2.63%
New Jersey Economic Development
Authority, Electric Energy Facilities
Revenue, 7.88%, 6/1/19 1,000,000 1,035,880
</TABLE>
29
<PAGE>
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LONG-TERM
MUNICIPAL SECURITIES PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
NEW JERSEY (CONTINUED)
New Jersey Healthcare Facilities
Financing Authority, Refunding,
6.80%, 7/1/11 $ 825,000 $ 839,578
1,875,458
NEW YORK 8.84%
Refunding & Improvement, 8.00%, 1/1/20 1,000,000 977,730
Herkimer County, IDA, 8.00%, 1/1/09 1,000,000 1,041,160
New York City, Series H, 7.00%, 2/1/16 500,000 508,835
New York City, OID,
Series H, 7.10%, 2/1/12 300,000 308,400
New York City, OID,
Series H, 7.00%, 2/1/20 600,000 610,602
New York City, OID Refunding,
Series A, 6.25%, 8/1/21 600,000 559,464
New York, New York, Series A,
7.00%, 8/1/04 1,000,000 1,056,110
Onondaga County Residential
Recovery Agency Revenue Project,
7.00%, 5/1/15 1,225,000 1,234,237
6,296,538
OHIO 1.32%
Cleveland Airport Revenue, Series A,
6.00%, 1/1/24 1,000,000 938,510
OKLAHOMA 4.13%
Oklahoma City, Industrial and
Cultural Facilities Trust, 6.75%, 9/15/17 1,000,000 1,004,150
Tulsa, Municipal Airport Trust Revenue,
7.38%, 12/1/20 2,000,000 1,937,860
2,942,010
PENNSYLVANIA 7.56%
Delaware County Healthcare Authority,
Series A, 5.13%, 11/15/12 2,000,000 1,685,760
Lehigh County General Purpose
Authority Revenue, OID,
Series A, 6.60%, 7/15/22 1,000,000 924,820
Pennsylvania Economic
Development, 6.40%, 1/1/09 500,000 482,540
Pennsylvania HFA, SFM,
Series 4, 7.00%, 4/1/24 500,000 509,360
Pennsylvania Intergovernmental
Cooperative Authority,
Special Tax Revenue, 6.80%, 6/15/12 750,000 813,353
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
MUNICIPAL SECURITIES PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
Philadelphia Hospital and
Higher Education Facilities,
6.50%, 11/15/08 $ 1,000,000 $ 965,900
5,381,733
PUERTO RICO 1.22%
Puerto Rico, Commonwealth
Highway Transportation
Authority, Series T, 6.50%, 7/1/22 800,000 869,584
RHODE ISLAND 0.67%
West Warwick, Series A, G.O. Bonds,
6.80% - 7.30%, 7/15/98 - 7/15/08 475,000 480,564
TENNESSEE 2.26%
Memphis, Shelby County Airport
Authority Special Facilities
Revenue Refunding, 7.88%, 9/1/09 1,500,000 1,609,560
TEXAS 6.02%
Brazos Higher Education Authority
Student Loan Revenue, 7.10%,
11/1/04 1,000,000 1,012,820
Dallas-Fort Worth International
Airport Facility Revenue Bonds,
7.63%, 11/1/21 625,000 614,738
Dallas-Fort Worth International
Airport Facility Revenue
Bonds, 7.25%, 11/1/30 1,000,000 947,600
Leander Independent
School District Capital Appreciation
Refunding, (effective yield-3.92%)
(a), 8/15/15 3,995,000 969,227
Texas State Department
of Housing and Community Affairs
Refunding, Series C, 10.13%, 7/2/24 750,000 745,313
4,289,698
UTAH 0.36%
Bountiful Hospital Revenue,
9.50%, 12/15/18 250,000 257,370
WASHINGTON 0.60%
Washington State Housing
Finance Commission, SFM,
7.10%, 7/1/22 425,000 430,640
WEST VIRGINIA 4.73%
Harrison County,
Waste Disposal Revenue,
6.75%, 8/1/24 2,000,000 2,007,820
</TABLE>
31
<PAGE>
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LONG-TERM
MUNICIPAL SECURITIES PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
WEST VIRGINIA (CONTINUED)
West Virginia State Hospital
Finance Authority Revenue,
9.70%, 1/1/18 $ 1,500,000 $1,359,090
3,366,910
OTHER 0.14%
Virgin Islands Public Finance
Authority Revenue Refunding
Series A, 7.25%, 10/1/18 100,000 101,642
TOTAL LONG-TERM MUNICIPAL SECURITIES
(COST $72,276,934) 70,445,552
SHORT-TERM MUNICIPAL SECURITIES 1.12%
CALIFORNIA
California Pollution Control, 3.60%,
VRDN 800,000 800,000
TOTAL SHORT-TERM
MUNICIPAL SECURITIES (COST $800,000) 800,000
TOTAL INVESTMENTS
(COST $73,076,934) 100.04% 71,245,552
OTHER ASSETS LESS LIABILITIES (0.04%) (31,798)
NET ASSETS 100.00% $ 71,213,754
</TABLE>
INVESTMENT ABBREVIATIONS
HFA - Housing Finance Authority
PFA - Public Financing Authority
IDA - Industrial Development Authority
SFM - Single Family Mortgage
OID - Original Issue Discount
PCR - Pollution Control Revenue
VRDN - Variable Rate Demand Note, rate shown represents current
interest rate at 9/30/94.
(a) Effective yield is the yield as calculated at time of purchase at which
the bond accretes on an annual basis until its maturity date.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
CAMBRIDGE INCOME & GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PERCENT OF MARKET
NET ASSETS SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS 62.17%
BASIC MATERIALS 14.16%
Aluminum Company of America 23,000 $1,949,249
Boise Cascade Corporation 19,700 581,150
Cleveland Cliffs, Inc. 1,700 65,875
Dekalb Genetics Corporation 900 26,100
Gaylord Container Corporation-
Warrants* 10,000 70,000
Georgia Pacific Corporation 3,000 229,500
International Paper Company 23,200 1,821,199
International Specialty Products,
Inc. 12,600 99,225
Kaiser Aluminum Corporation* 14,900 156,450
Norsk Hydro AS~ 19,300 711,688
Pichiney SA 12,000 863,000
Potlatch Corporation 2,700 111,375
Rayonier, Inc. 5,100 164,475
Rhone Poulenc SA~ 15,700 361,100
St. Lawrence Cement, Inc.* 25,000 223,580
Temple-Inland, Inc. 12,900 712,725
Willamette Industries, Inc. 9,500 486,875
8,633,566
CAPITAL GOODS & CONSTRUCTION 6.43%
American R E Partners 1,400 11,025
Ameron, Inc. 2,300 82,800
BE Aerospace, Inc.* 32,700 302,475
Black & Decker Corporation 32,000 700,000
Centex Construction Products,
Inc.* 18,200 227,500
Giant Cement Holding, Inc. 7,300 102,200
Honeywell, Inc. 900 31,050
Kaufman & Broad Home Corporation 20,900 284,762
Lafarge Corporation 2,400 48,300
National Gypsum Company* 8,100 307,800
Ryland Group, Inc. 5,700 90,488
Sequa Corporation* 18,100 486,437
Southdown, Inc.* 7,700 161,700
Standard Pacific Corporation 22,200 160,950
United T echnologies Corporation 400 25,050
USG Corporation* 16,600 342,375
Welbilt Corporation* 9,700 244,925
York International Corporation 7,500 312,188
3,922,025
</TABLE>
33
<PAGE>
<TABLE>
CAMBRIDGE INCOME & GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
CONSUMER CYCLICAL 3.51%
Borg-Warner Automotive, Inc. 4,000 $ 101,500
General Motors Corporation 27,900 1,307,812
Host Marriott Corporation* 17,400 171,825
Navistar International* 30,200 419,025
Servico, Inc.* 4,200 35,700
Valassis Communications, Inc. 6,600 102,300
2,138,162
CONSUMER STAPLES 4.35%
Davids, Ltd. 110,000 122,100
Fleming Companies, Inc. 13,900 324,913
Hills Stores Company* 10,000 213,750
Interstate Bakeries Corporation 19,000 247,000
Monk Austin, Inc. 11,800 172,575
Morningstar Group, Inc.* 15,200 106,400
Seagram Company, Ltd. 2,500 75,625
Standard Commercial Corporation 16,000 242,000
Universal Corporation 47,000 1,151,500
2,655,863
ENERGY 5.64%
Amerada Hess Corporation 2,600 120,900
Arethusa Off-Shore, Ltd.* 5,200 55,250
Atlantic Richfield Company 900 90,787
Burlington Resources, Inc. 200 7,500
Enserch Corporation 9,400 130,425
Gerrity Oil & Gas Corporation* 17,000 119,000
Gulf Canada Resources, Ltd.* 26,300 100,269
Home Oil Company* 13,200 181,500
Indresco, Inc. 2,200 28,875
Lone Star Technologies, Inc. 25,100 156,875
Maxus Energy Corporation* 61,900 278,550
Nabors Industries, Inc.* 15,000 91,875
Noble Drilling Corporation* 39,300 294,750
Nowsco Well Service, Ltd. 1,700 26,350
Petroleum Heat & Power Company 13,400 123,950
Phillips Petroleum Company 2,600 89,050
Ranchmen's Resources, Ltd.* 41,900 226,394
Santa Fe Energy Resources, Inc.* 10,000 92,500
Sonat Offshore Drilling, Inc. 22,400 445,200
U.S.X. Marathon Group, Inc. 18,000 319,500
Unocal Corporation 16,400 463,300
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
FINANCIAL 19.10%
ACE, Ltd. 32,500 $ 780,000
Aetna Life & Casualty Company 5,900 273,613
Alexander & Alexander Services, Inc. 18,600 362,700
American Express Company 9,200 279,450
Astoria Financial Corporation* 5,300 159,662
BankAmerica Corporation 31,338 1,382,756
California Federal Bank* 17,556 237,006
Capital Guaranty Corporation 22,800 350,550
Chase Manhattan Corporation 8,300 287,388
Chubb Corporation 12,300 874,837
CIGNA Corporation 8,900 548,463
Coast Savings Financial, Inc.* 8,800 156,200
Colonial Properties Trust 14,900 324,075
Enhance Financial Services Group, Inc. 10,400 198,900
Exel Limited 8,900 345,988
Federal National Mortgage Association 1,000 78,750
First Union Corporation 2,000 86,500
Firstfed Financial Corporation* 6,400 99,200
Gables Residential Trust 13,800 313,950
GP Financial Corporation 7,400 175,750
Holly Residential Properties 16,900 253,500
ITT Corporation 1,500 125,062
Keycorp 5,100 155,550
Koger Equity, Inc. REIT* 36,800 331,200
Lehman Brothers Holding, Inc. 24,840 366,390
Loews Corporation 1,200 106,050
Mellon Bank Corporation 2,400 135,000
National Bank of Canada 47,800 333,973
Newhall Land & Farming Company 3,100 45,725
Old Republic International Corporation 16,000 334,000
Policy Management Systems Corporation* 6,900 275,138
Reinsurance Group of America 3,600 82,800
Storage Equities, Inc. 21,300 319,500
Twentieth Century Industries* 37,000 471,750
U.S. Bank Corporation 3,200 81,600
Unidanmark A/S*~(b) 5,100 196,085
Union Bank 15,200 467,400
Unitrin, Inc. 5,200 250,900
11,647,361
TECHNOLOGY 3.51%
B.C.E., Inc. 25,400 911,225
Comsat Corporation 5,500 140,938
Cooper Industries, Inc. 7,600 305,900
</TABLE>
35
<PAGE>
CAMBRIDGE INCOME & GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
Digital Equipment Corporation* 2,000 $ 53,000
IDB Communications Group, Inc.* 28,900 260,100
Raychem Corporation 11,500 471,500
2,142,663
TRANSPORTATION & SERVICES 2.09%
Canadian Pacific, Ltd. 23,500 393,625
Canadian Pacific, Ltd.*
(2/14/94, $16,814) (a) 1,000 16,769
Continental Airlines, Inc.* 11,000 189,750
MESA Airlines, Inc.* 1,700 11,262
OMI Corporation* 18,400 117,300
Overseas Shipholding Group 5,000 108,750
Tidewater , Inc. 5,300 113,950
Trinity Industries, Inc. 8,500 269,874
Union Pacific Corporation 1,000 53,625
1,274,905
UTILITIES 0.43%
Central Maine Power Company 6,100 68,625
New York State Electric & Gas
Company 1,500 27,938
Niagra Mohawk Power 3,700 49,025
Telecom Italia Spa 11,000 30,972
Unicom Corporation 3,800 84,550
261,110
MISCELLANEOUS 2.95%
Brascan, Ltd. 19,200 276,000
CRSS, Inc. 2,900 32,988
Essex Property Trust, Inc. 15,500 279,000
Innkeepers U.S.A. T rust 9,000 87,188
Shurgard Storage Centers, Inc. 1,600 36,800
Sun Communities, Inc. 12,600 289,800
T ucker Properties Corporation 13,900 224,138
Unilab Corporation* 5,100 27,413
United Mobile Homes, Inc. 36,000 270,000
W.M.X. Technologies, Inc. 9,600 277,200
1,800,527
TOTAL COMMON STOCKS (COST
$36,159,724) 37,918,982
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
SHARES OR
PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
PREFERRED STOCKS 2.25%
BASIC MATERIALS 0.52%
Boise Cascade Corporation 9,000 $ 237,375
Reynolds Metals Company 1,500 80,812
318,187
CONSUMER STAPLES 0.04%
FHP International Corporation 800 21,900
FINANCIAL 1.16%
Glendale Federal Bank 21,700 707,963
TRANSPORTATION & SERVICES 0.53%
AMR Corporation (b) 5,000 205,000
UAL Corporation (b) 1,400 115,850
320,850
TOTAL PREFERRED STOCKS
(COST $1,150,737) 1,368,900
CORPORATE BONDS 7.86%
BASIC MATERIALS 0.36%
Aluminum Company of America,
5.75%, 2/1/01 $250,000 221,600
CAPITAL GOODS & CONSTRUCTION 0.15%
Lockheed Corporation, 6.75%,
3/15/03 100,000 90,219
CONSUMER CYCLICAL 1.04%
Circus Circus Enterprises, Inc.,
7.63%, 7/15/13 250,000 219,865
Sears Roebuck Company,
9.25%, 4/15/98 175,000 183,622
Time Warner Entertainment, Inc.,
8.88%, 10/1/12 250,000 230,187
633,674
CONSUMER STAPLES 0.34%
Gillette Company,
5.75%, 10/15/05 250,000 206,638
ENERGY 0.39%
Coastal Corporation,
8.13%, 9/15/02 250,000 239,820
</TABLE>
37
<PAGE>
CAMBRIDGE INCOME & GROWTH PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
CORPORATE BONDS PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
FINANCIAL 3.62%
American General Finance
Corporation,
5.88%, 7/1/00 $ 250,000 $ 226,650
Associates Corporation
of North America,
5.25%, 3/30/00 250,000 219,713
Bank of Boston,
6.63%, 2/1/04 250,000 222,420
Chase Manhattan Corporation,
7.75%, 11/1/99 250,000 246,210
Chrysler Financial Corporation,
6.63%, 8/15/20 250,000 231,413
Comerica Bank Inc.,
7.13%, 12/1/13 250,000 213,245
Dean W itter Discover,
6.25%, 3/15/00 100,000 91,837
Ford Motor Credit,
8.88%, 6/15/99 100,000 103,633
Great Western Financial,
6.38%, 7/1/00 250,000 226,750
Home Savings of Americas,
6.00%, 11/01/00 250,000 225,140
Toronto-Dominion Bank-NY,
6.13%, 11/1/08 250,000 201,107
2,208,118
UTILITIES 1.96%
Duke Power Company,
7.00%, 6/1/00 100,000 96,534
Florida Power & Light Company,
5.38%, 4/1/00 250,000 223,015
Long Island Lighting Company,
7.05%, 3/15/03 100,000 80,934
Pacific Gas & Electric Company,
5.93%, 10/8/03 250,000 216,515
Philadelphia Electric Company,
7.5%, 1/15/99 100,000 98,841
Southwestern Public Service Company,
6.88%, 12/1/99 250,000 241,443
Union Electric Company,
6.75%, 10/15/99 250,000 238,420
1,195,702
TOTAL CORPORATE BONDS (COST
$5,454,869) 4,795,771
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
GOVERNMENT BONDS 23.15%
Government National Mortgage
Association,
7.00%, 1/15/24 $ 2,474,696 $ 2,243,460
Government National Mortgage
Association,
6.50%, 9/15/23-4/15/24 1,484,365 1,296,489
U.S. Treasury Note,
4.75%, 9/30/98 2,000,000 1,837,060
U.S. Treasury Note,
5.75%, 8/15/03 2,000,000 1,763,680
U.S. Treasury Bond,
7.25%, 5/15/16 5,500,000 5,081,230
U.S. Treasury Bond,
7.50%, 11/15/16 2,000,000 1,895,980
TOTAL GOVERNMENT BONDS (COST
$15,179,888) 14,117,899
SHORT-TERM INVESTMENT 2.95%
REPURCHASE AGREEMENT
Lehman Brothers, Inc.
Dated 9/29/94, 4.85%, Due 10/3/94,
collateralized by $1,620,000,
U.S. Treasury Bond, 9.25%, 2/15/16 1,797,000 1,797,000
TOTAL SHORT-TERM INVESTMENTS
(COST $ 1,797,000) 1,797,000
TOTAL INVESTMENTS
(COST $59,742,218) 98.38% 59,998,552
OTHER ASSETS LESS LIABILITIES 1.62% 992,964
NET ASSETS 100.00% $60,991,516
</TABLE>
* Non-income producing.
~ American Depository Receipts.
REIT - Real Estate Investment Trust
(a) All or a portion of these securities are restricted (i.e., securities
which may not be publicly sold without registration under the Federal
Securities Act of 1933). Dates of acquisition and costs are set forth in
parentheses after the title of the restricted securities.
(b) These are securities that may be resold to "qualified institutional
buyers" under Rule 144A or securities offered pursuant to Section 4 (2) of the
Securities Act of 1933, as amended. These securities have been determined to be
liquid under guidelines established by the Board of Trustees.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
CAMBRIDGE GLOBAL PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PERCENT OF MARKET
NET ASSETS SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS 91.63%
AUSTRALIA 5.07%
Broken Hill Proprietary Company* 24,033 $ 349,286
Western Mining Corporation
Holdings, Ltd. ORD 36,450 212,278
Woodside Petroleum, Ltd. 79,500 294,150
855,714
CANADA 4.70%
Alcan Aluminum, Ltd. 7,300 192,456
Canadian Pacific, Ltd. 16,600 278,357
Rogers Communications, Inc.* 21,200 321,918
792,731
DENMARK 1.55%
FLS Industries A/S `B' 3,750 260,899
FRANCE 1.45%
Alcatel Alsthom (CGE)~ 13,200 244,200
GERMANY 6.14%
Hoechst AG 1,390 295,766
Mannesmann AG 1,100 273,530
Munich Reinsurance 155 271,097
Veba AG 590 195,552
1,035,945
GREAT BRITAIN 10.24%
Carlton Communications ORD 18,600 245,773
Enterprise Oil ORD 45,500 277,651
Lasmo PLC 129,857 313,281
Rio Tinto-Zinc Corporation ORD 19,700 272,888
Saint James Place 130,000 243,931
Waste Management International PLC* 30,600 261,998
Willis Corroon Group PLC 48,000 111,259
1,726,781
HONG KONG 1.66%
Hong Kong Telecom, Ltd. 69,000 137,961
Hutchison Whampoa, Ltd. 30,000 141,707
279,668
</TABLE>
40
<PAGE>
<TABLE>
COMMON STOCKS PERCENT OF MARKET
(CONTINUED) NET ASSETS SHARES VALUE
<S> <C> <C> <C>
ITALY 4.71%
Instituto Mobilaire Italiano 4,000 $ 27,644
Instituto Nazionale ORD 112,000 166,635
Rinascente 39,000 124,410
Rinascente - Warrants* 10,400 0
Telecom Italia SPA 90,600 255,097
STET Societa Finanz 71,300 220,602
794,388
JAPAN 9.27%
Canon, Inc. 16,000 281,070
Hitachi, Ltd. 31,000 299,202
Kyocera Corporation 4,000 285,916
Matsushita Electric 8,000 127,612
NKS, Ltd. 2,000 15,063
Sony Corporation~ 500 29,188
Sony Corporation 4,000 232,610
Toshiba Corporation 39,000 293,337
1,563,998
SOUTH AFRICA 1.47%
Impala Platinum Holdings~ 10,400 248,430
SOUTH KOREA 2.95%
Goldstar (b) 13,400 298,150
Yukong, Ltd.* (b) 8,000 200,000
498,150
SWEDEN 5.93%
Astra AB A-F 7,000 167,737
Autoliv AB 8,900 267,324
SKF AB* 15,200 264,801
Volvo AB 16,500 300,665
1,000,527
SWITZERLAND 9.73%
Brown Boveri & CIE AG 295 254,330
CIBA Geigy AG Basel 480 271,410
Nestle Cham Et Vevey 302 274,204
SCHW Rueckversicherungs 600 291,728
SGS Societe Gen De Surveill 165 256,311
Sulzer AG* (Participation Certificate) 443 294,186
1,642,169
</TABLE>
41
<PAGE>
CAMBRIDGE GLOBAL PORTFOLIO
Portfolio of Investments
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES OR
COMMON STOCKS PERCENT OF PRINCIPAL MARKET
(CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C>
UNITED STATES 25.30%
Allegheny Ludlum Corporation 1,700 $ 36,550
Ambac, Inc. 7,600 281,200
American President Cos., Ltd. 12,200 308,050
Amway Asia Pacific, Ltd. 1,600 48,200
Boeing Company 4,700 202,688
Destec Energy , Inc.* 27,400 311,675
Enron Corporation 8,700 263,175
Exel, Ltd. ORD 7,400 287,675
General RE Corporation 2,220 235,043
Harnischfeger 1,300 34,287
LaFarge Corporation 13,800 277,725
MBIA, Inc. 5,200 310,050
Mid Ocean, Ltd. ORD* 10,800 273,375
Partnerre Holdings, Ltd. 12,600 275,625
Schlumberger, Ltd. 4,600 250,125
Thermo Electron Corporation* 2,700 123,863
United Healthcare Corporation 4,600 243,800
United Technologies Corporation 3,300 206,663
WMX Technologies, Inc. 10,300 297,412
4,267,181
VENEZUELA 1.46%
Venezolana De Prerredicidos*
(4/13/94, $260,293) (a) (b) 35,600 246,975
TOTAL COMMON STOCKS (COST $15,437,475) 15,457,756
CORPORATE BONDS 0.72%
CANADA 0.46%
Teck Corporation, 3.75%, 7/15/06~ $80,000 78,000
ITALY 0.16%
Mediobanca, 4.50%, 1/1/00* 25,852 26,620
MALAYSIA 0.10%
Telekom Malaysia Berhad,
4.00%, 10/3/04~ (a) (b)
(9/22/94, $170,000) 170,000 169,958
TOTAL CORPORATE BONDS (COST $260,604) 274,578
SHORT- TERM INVESTMENTS 8.59%
Federal Home Loan Bank, OID,
4.80%, 10/28/94 800,000 797,120
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
SHARES OR
SHORT-TERM PERCENT OF PRINCIPAL MARKET
INVESTMENTS (CONTINUED) NET ASSETS AMOUNT VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENT
Donaldson, Lufkin, & Jenrette Securities Corporation
Dated 9/30/94, 4.80%, due 10/3/94,
collateralized by $473,000,
U.S. Treasury Bond, 12.75%, 11/15/10 $651,000 $ 651,000
TOTAL SHORT-TERM INVESTMENTS
(COST $1,448,120) 1,448,120
TOTAL INVESTMENTS
(COST $17,146,199) 100.94% 17,180,454
OTHER ASSETS LESS LIABILITIES (0.94%) (310,915)
NET ASSETS 100.00% $16,869,539
</TABLE>
* Non-income producing.
~ American Depository Receipts.
(a) All or a portion of these securities are restricted (i.e., securities
which may not be publicly sold without registration under the Federal Securities
Act of 1933). Dates of acquisition and costs are set forth in parentheses after
the title of the restricted securities.
(b) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4 (2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
CAMBRIDGE SERIES TRUST
Statements of Assets and Liabilities
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
CAMBRIDGE CAMBRIDGE CAMBRIDGE CAMBRIDGE
CAMBRIDGE CAPITAL GOVERNMENT MUNICIPAL INCOME AND CAMBRIDGE
GROWTH GROWTH INCOME INCOME GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at market value* (Note 2) $41,999,246 $63,102,296 $132,366,221 $71,245,552 $59,998,552 $17,180,454
Cash 859,416 - - 130,404 - 2,344
Receivables
Investments sold 832,966 741,914 - - 904,135 -
Fund shares sold 11,126 42,470 34,094 23,324 200,362 94,816
Dividends and interest 95,051 139,759 1,170,752 1,348,724 439,641 28,360
Deferred organization expenses (Note 2) 9,039 11,351 33,502 10,468 9,964 45,295
Other assets - 5,101 - 4,496 - -
Total assets 43,806,844 64,042,891 133,604,569 72,762,968 61,552,654 17,351,269
LIABILITIES
Payables
Investments purchased 141,000 1,342,854 14,362,419 1,006,858 124,141 381,081
Reverse repurchase agreement (Note 2) - - 8,956,501 - - -
Fund shares redeemed 250,951 218,520 908,895 207,479 208,711 3,771
Dividends - - 274,254 177,981 - -
Forward contract payable (Note 7) - - - - - 14,160
Variation margin (Note 2) - - - 25,000 - -
Accrued administration expenses
(Note 4) 5,285 7,531 13,372 5,429 4,619 12,809
Accrued distribution expenses 21,847 53,090 43,523 24,552 9,555 9,723
Accrued expenses and other liabilities 131,075 133,983 1,015,956 101,915 214,112 60,186
Total liabilities 550,158 1,755,978 25,574,920 1,549,214 561,138 481,730
NET ASSETS $43,256,686 $62,286,913 $108,029,649 $71,213,754 $60,991,516 $16,869,539
Net Assets represented by: (Note 2)
Additional paid-in capital $42,915,639 $59,500,018 $124,898,930 $73,383,330 $59,544,077 $16,831,407
Undistributed net investment
income - - 165,284 - 75,944 -
Accumulated distributions in
excess of net investment income - (103,086) - (58,877) - -
Undistributed realized gain (loss)
on investment transactions (2,819,616) 1,264,435 (11,718,498) (631,634) 1,115,161 17,822
Net unrealized appreciation
(depreciation) of investments and
foreign currency related
transactions 3,160,663 1,625,546 (5,316,067) (1,479,065) 256,334 20,310
Net Assets $43,256,686 $62,286,913 $108,029,649 $71,213,754 $60,991,516 $16,869,539
NET ASSET VALUE PER SHARE
Class A Shares $14.68 $ 14.88 $ 12.75 $ 14.42 $ 15.27 $ 14.23
Class B Shares $14.53 $ 14.80 $ 12.76 $ 14.43 $ 15.28 $ 14.15
OFFERING PRICE PER SHARE
Class A $15.53 (a) $ 15.75(a) $ 13.39(b) $ 15.14(b) $ 16.16(a) $ 15.06(a)
Class B $14.53 $ 14.80 $ 12.76 $ 14.43 $ 15.28 $ 14.15
REDEMPTION PROCEEDS PER SHARE
Class A $14.68 $ 14.88 $ 12.75 $ 14.42 $ 15.27 $ 14.23
Class B (c) $14.38 $ 14.65 $ 12.63 $ 14.29 $ 15.13 $ 14.01
SHARES OUTSTANDING
Class A Shares 993,054 1,423,010 2,363,773 1,738,078 1,164,060 624,181
Class B Shares 1,974,036 2,778,026 6,103,595 3,198,229 2,828,735 564,671
Total Shares Outstanding 2,967,090 4,201,036 8,467,368 4,936,307 3,992,795 1,188,852
</TABLE>
* Investments at cost $38,838,583, $61,477,308, $137,682,288, $73,076,934,
$59,742,218, and $17,146,199 respectively.
(a) Computation of offering price: 100/94.50 of net asset value.
(b) Computation of offering price: 100/95.25 of
net asset value.
(c) Computation of redemption proceeds: 99/100 of net asset value.
SEE NOTES TO FINANCIAL STATEMENTS.
44 45
<PAGE>
CAMBRIDGE SERIES TRUST
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 CAMBRIDGE CAMBRIDGE CAMBRIDGE CAMBRIDGE
CAMBRIDGE CAPITAL GOVERNMENT MUNICIPAL INCOME AND CAMBRIDGE
GROWTH GROWTH INCOME INCOME GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO**
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 72,373 $ 498,408 $11,163,429* $5,211,568 $1,100,703 $ 41,716
Dividends (Net of withholding taxes)*** 525,699 1,152,741 - - 869,081 80,443
Total investment income (Note 2) 598,072 1,651,149 11,163,429 5,211,568 1,969,784 122,159
EXPENSES
Management fee (Note 4) 410,955 590,693 839,139 468,787 374,462 69,515
Distribution fees (Note 4) 253,834 360,712 511,023 253,801 252,486 20,749
Transfer agent fee 163,583 213,354 135,467 88,237 107,910 40,323
Shareholder services fees (Note 4) 128,423 184,588 349,642 195,328 124,821 15,340
Administration fee (Note 4) 64,195 92,278 174,797 97,653 62,315 7,670
Custodian fee 71,513 67,014 271,676 72,717 97,592 36,000
Registration fees 30,000 27,000 36,000 23,000 38,000 -
Shareholder reports 25,338 36,777 65,132 41,328 37,476 8,091
Organizational expenses 12,275 12,195 12,114 10,397 2,941 1,904
Professional fees 11,008 15,782 27,500 17,912 14,914 4,014
Directors' fees 7,180 7,180 7,180 7,180 7,180 3,590
Other 13,472 13,705 24,573 30,733 11,429 10,889
Total expenses 1,191,776 1,621,278 2,454,243 1,307,073 1,131,526 218,085
Deduct
Waiver of administration fee (Note 4) 6,569 - 23,563 - 15,033 530
Waiver of management fee (Note 4) - - - 81,713 - 69,515
Net Expenses 1,185,207 1,621,278 2,430,680 1,225,360 1,116,493 148,040
Net investment income (loss) (587,135) 29,871 8,732,749 3,986,208 853,291 (25,881)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss)
on investments (Note 2) (514,259) 1,128,751 (8,118,106) (527,018)(a) 1,523,312 17,822
Change in unrealized
appreciation (depreciation) (5,796,253) (2,465,351) (5,963,957) (7,578,461)(b) (248,910) 20,310(b)
Net realized and unrealized
gain (loss) on investments (6,310,512) (1,336,600) (14,082,063) (8,105,479) 1,274,402 38,132
Net increase (decrease) in net assets
resulting from operations $ (6,897,647) $(1,306,729) $(5,349,314) $(4,119,271) $2,127,693 $12,251
</TABLE>
* Net of interest expense ($7,680).
** For the period from March 29, 1994 (date of initial public investment)
to September 30, 1994.
***Withholding taxes were $1,534, $1,232, and $2,960 for the Capital Growth Port
folio, Income and Growth Portfolio and Global Portfolio respectively for the
year ended September 30, 1994. (a) Includes net realized gain on futures of
$167,132. (b) Includes unrealized appreciation on variation margin receivable
of $352,317 on Cambridge Municipal Income Portfolio and unrealized
depreciation on forward exchange contracts of $14,160 on Cambridge Global
Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS.
46 47
<PAGE>
CAMBRIDGE SERIES TRUST
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
CAMBRIDGE CAMBRIDGE CAMBRIDGE
GROWTH CAPITAL GROWTH GOVERNMENT INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ (587,135) $ (370,213) $ 29,871 $ 362,476 $ 8,732,749 $ 10,265,188
Net realized gain (loss) on
investments (514,259) (1,548,366) 1,128,751 1,367,380 (8,118,106) (3,077,078)
Change in unrealized appreciation
(depreciation) of investments (5,796,253) 8,221,415 (2,465,351) 3,040,826 (5,963,957) (60,842)
Increase (decrease) in net assets
from operations (6,897,647) 6,302,836 (1,306,729) 4,770,682 (5,349,314) 7,127,268
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A - - (87,466) (204,040) (2,342,783) (3,306,334)
Class B - - - (94,762) (5,799,239) (6,958,854)
Distributions in excess of
net investment income
Class A - (22,462) - - - (146,203)
Class B - - - (35,370) - (301,354)
Net realized gain on investments
Class A - - (241,102) - -
Class B - - (445,582) - -
Net decrease from distributions - (22,462) (774,150) (334,172) (8,142,022) (10,712,745)
CAPITAL SHARE TRANSACTIONS (NOTE 8)
Net proceeds from sale of shares 15,028,646 30,595,316 9,607,870 47,948,857 14,581,398 103,828,094
Reinvested distributions - 22,029 755,452 324,735 5,302,074 6,788,193
Cost of shares redeemed (19,651,657) (7,411,912) (34,385,554) (10,651,945) (73,488,727) (34,305,532)
Change in net assets from capital
share transactions (4,623,011) 23,205,433 (24,022,232) 37,621,647 (53,605,255) 76,310,755
Increase (decrease) in net assets (1 1,520, 658) 29,485,807 (26,103,111) 42,058,157 (67,096,591) 72,725,278
NET ASSETS
Beginning of period 54,777,344 25,291,537 88,390,024 46,331,867 175,126,240 102,400,962
End of period $ 43,256,686 $ 54,777,344 $ 62,286,913 $ 88,390,024 $108,029,649 $175,126,240
</TABLE>
48 49
<PAGE>
CAMBRIDGE SERIES TRUST
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
CAMBRIDGE CAMBRIDGE CAMBRIDGE
MUNICIPAL INCOME INCOME AND GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1994 1993** 1994*
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 3,986,208 $ 3,527,864 $ 853,291 $ 114,097 $ (25,881)
Net realized gain (loss) on
investments (527,018) 435,238 1,523,312 258,659 17,822
Net unrealized appreciation
(depreciation) of investments (7,578,461) 5,587,476 (248,910) 505,244 20,310
Increase (decrease) in net assets
from operations (4,119,271) 9,550,578 2,127,693 878,000 12,251
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
Class A (1,463,600) (1,450,546) (300,723) (50,722) -
Class B (2,444,169) (2,077,318) (476,423) (55,843) -
Distributions in excess of
net investment income
Class A - (57,691) - - -
Class B - (90,022) - - -
Net realized gain on investments
Class A (189,589) (3,927) (204,420) - -
Class B (340,533) (5,805) (470,138) - -
Net decrease from distributions (4,437,891) (3,685,309) (1,451,704) (106,565) -
CAPITAL SHARE T RANSACTIONS
Net proceeds from sale of shares 14,229,526 39,212,917 38,661,567 27,786,270 18,542,494
Reinvested distributions 2,491,222 1,918,307 1,370,230 98,283 -
Cost of shares redeemed (17,170,919) (9,841,523) (7,692,563) (679,695) (1,685,206)
Change in net assets from capital
share transactions (450,171) 31,289,701 32,339,234 27,204,858 16,857,288
Increase (decrease) in net assets (9,007,333) 37,154,970 33,015,223 27,976,293 16,869,539
NET ASSETS
Beginning of period 80,221,087 43,066,117 27,976,293 - -
End of period $ 71,213,754 $80,221,087 $60,991,516 $27,976,293 $ 16,869,539
</TABLE>
* For the period from March 29, 1994 (date of initial public investment) to
September 30, 1994.
** For the period from May 24, 1993 (date of initial public investment) to
September30, 1993.
SEE NOTES TO FINANCIAL STATEMENTS.
50 51
<PAGE>
CAMBRIDGE SERIES TRUST
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares CAMBRIDGE CAMBRIDGE
GROWTH PORTFOLIO CAPITAL GROWTH PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.69 $ 14.14 $ 14.18 $ 15.26 $ 14.21 $ 14.18
Income from investment operations
Net investment income (loss) (0.11) (0.07) 0.03 0.09 0.14 0.08
Net realized and unrealized
gain (loss) on investments (1.90) 2.65 (0.07) (0.30) 1.02 0.03
Total from investment operations (2.01) 2.58 (0.04) (0.21) 1.16 0.11
Less distributions
Dividends from income - - - (0.04) (0.11) (0.08)
Distributions from capital gains - - - (0.13) - -
Distributions in excess of
net investment income - (0.03) - - - -
Total distributions - (0.03) - (0.17) (0.11) (0.08)
NET ASSET VALUE, END OF PERIOD $ 14.68 $ 16.69 $ 14.14 $ 14.88 $ 15.26 $ 14.21
Total Return (12.04%) 18.23% (0.28%) (1.37%) 8.21% 0.78%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 14,579 $ 19,708 $ 11,464 $ 21,181 $ 31,360 $ 20,864
Ratio of expenses to average net assets 1.81% 1.66% 1.33% (a) 1.70% 1.49% 1.14%(a)
Ratio of expenses to average net assets
excluding waiver 1.82% 1.78% 1.72% (a) 1.70% 1.59% 1.43%(a)
Ratio of net investment income (loss)
to average net assets (0.65%) (0.49%) 0.59% (a) 0.53% 0.96% 1.54%(a)
Portfolio turnover rate 132% 137% 26% 149% 192% 61%
</TABLE>
*Reflects operations for the period from April 29, 1992 (date of initial public
investment) to September 30, 1992.
(a) Annualized.
52 53
<PAGE>
CAMBRIDGE SERIES TRUST
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares (continued)
CAMBRIDGE CAMBRIDGE
GOVERNMENT INCOME PORTFOLIO MUNICIPAL INCOME PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.04 $ 14.39 $ 14.30 $ 16.05 $ 14.76 $ 14.29
Income from investment operations
Net investment income 0.84 1.06 0.44 0.82 0.92 0.32
Net realized and unrealized
gain (loss) on investments (1.30) (0.31) 0.09 (1.54) 1.32 0.47
Total from investment operations (0.46) 0.75 0.53 (0.72) 2.24 0.79
Less distributions
Dividends from income (0.83) (1.06) (0.44) (0.81) (0.92) (0.32)
Distributions from capital gain - - - (0.10) - -
Distributions in excess of
net investment income - (0.04) - - (0.03) -
Total distributions (0.83) (1.10) (0.44) (0.91) (0.95) (0.32)
NET ASSET VALUE, END OF PERIOD $ 12.75 $ 14.04 $ 14.39 $ 14.42 $ 16.05 $ 14.76
Total Return (3.39%) 5.41% 3.37% (4.83%) 16.00% 5.34%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $30,142 $47,780 $ 36,740 $25,056 $29,245 $ 18,801
Ratio of expenses to average net assets 1.38% 1.04% 0.36% (a) 1.24% 0.71% 0.00%(a)
Ratio of expenses to average net assets
excluding waiver 1.39% 1.22% 1.21% (a) 1.33% 1.39% 1.26%(a)
Ratio of net investment income
to average net assets 6.33% 7.31% 8.00% (a) 5.43% 5.92% 6.21%(a)
Portfolio turnover rate 455% 102% 9% 87% 88% 0%
</TABLE>
* Reflects operations for the period from April 29, 1992 (date of initial
public in vestment) to September 30, 1992.
(a) Annualized.
54 55
<PAGE>
CAMBRIDGE SERIES TRUST
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
CAMBRIDGE CAMBRIDGE
(continued) INCOME AND GROWTH PORTFOLIO GLOBAL PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993*** 1994(B)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.88 $ 14.14 $ 14.18
Income from investment operations
Net investment income (loss) 0.31 0.09 (0.01)
Net realized and unrealized
gain on investments 0.64 0.73 0.06
Total from investment operations 0.95 0.82 0.05
Less distributions
Dividends from income (0.30) (0.08) 0.00
Distributions from capital gains (0.26) 0.00 0.00
Distributions in excess of
net investment income - 0.00 0.00
Total distributions (0.56) (0.08) 0.00
NET ASSET VALUE, END OF PERIOD $ 15.27 $ 14.88 $ 14.23
Total Return 6.54% 5.54% 0.35%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $17,773 $ 9,849 $ 8,882
Ratio of expenses to average net assets 1.75% 1.56%(a) 2.09% (a)
Ratio of expenses to average net assets
excluding waiver 1.75% 1.94%(a) 3.18% (a)
Ratio of net investment income (loss)
to average net assets 2.20% 2.35%(a) (0.10%)(a)
Portfolio turnover rate 78% 13% 2%
</TABLE>
*** Reflects operations for the period from May 24, 1993 (date of initial
public investment) to September 30, 1993.
(a) Annualized.
(b) Reflects operations for the period from March 29, 1994 (date of initial
public investment) to September 30, 1994
.
SEE NOTES TO FINANCIAL STATEMENTS.
56 57
<PAGE>
CAMBRIDGE SERIES TRUST
Financial Highlights
<TABLE>
<CAPTION>
Class B Shares CAMBRIDGE CAMBRIDGE
GROWTH PORTFOLIO CAPITAL GROWTH PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.59 $ 14.14 $ 14.18 $ 15.23 $ 14.22 $ 14.18
Income from investment operations
Net investment income (loss) (0.25) (0.14) (0.01) (0.04) 0.05 0.46
Net realized and unrealized
gain (loss) on investments (1.81) 2.59 (0.03) (0.26) 1.02 0.04
Total from investment operations (2.06) 2.45 (0.04) (0.30) 1.07 0.50
Less distributions
Dividends from income - - - - (0.05) (0.46)
Distributions from capital gains - - - (0.13) - -
Distributions in excess of
net investment income - - - - (0.01) -
Total distributions - - - (0.13) (0.06) (0.46)
NET ASSET VALUE, END OF PERIOD $ 14.53 $ 16.59 $ 14.14 $ 14.80 $ 15.23 $ 14.22
Total Return (12.48%) 17.33% (0.28%) (2.00%) 7.52% 0.61%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 28,678 $35,069 $ 13,828 $41,106 $57,030 $ 25,468
Ratio of expenses to average net assets 2.56% 2.41% 2.07% (a) 2.46% 2.24% 1.86% (a)
Ratio of expenses to average net assets
excluding waiver 2.58% 2.53% 2.47% (a) 2.46% 2.34% 2.16%(a)
Ratio of net investment income (loss)
to average net assets (1.40%) (1.24%) (0.17%) (a) (0.22%) 0.21% 0.83%(a)
Portfolio turnover rate 132% 137% 26% 149% 192% 61%
</TABLE>
* Reflects operations for the period from April 29, 1992 (date of initial
public investment) to September 30, 1992.
(a) Annualized.
58 59
<PAGE>
CAMBRIDGE SERIES TRUST
Financial Highlights
<TABLE>
<CAPTION>
Class B Shares CAMBRIDGE CAMBRIDGE
(continued) GOVERNMENT INCOME PORTFOLIO MUNICIPAL INCOME PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.06 $ 14.40 $ 14.30 $ 16.06 $ 14.78 $ 14.29
Income from investment operations
Net investment income 0.82 0.99 0.41 0.74 0.82 0.29
Net realized and unrealized
gain (loss) on investments (1.37) (0.31) 0.10 (1.54) 1.32 0.49
Total from investment operations (0.55) 0.68 0.51 (0.80) 2.14 0.78
Less distributions
Dividends from income (0.75) (0.99) (0.41) (0.73) (0.82) (0.29)
Distributions from capital gains - - - (0.10) - -
Distributions in excess of
net investment income - (0.03) - - (0.04) -
Total distributions (0.75) (1.02) (0.41) (0.83) (0.86) (0.29)
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 14.06 $ 14.40 $ 14.43 $ 16.06 $ 14.78
Total Return (3.97%) 4.86% 3.24% (5.34%) 15.27% 5.28%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $77,888 $127,346 $ 65,661 $46,157 $50,976 $ 24,265
Ratio of expenses to average net assets 1.88% 1.54% 0.83%(a) 1.74% 1.21% 0.50%(a)
Ratio of expenses to average net assets
excluding waiver 1.90% 1.72% 1.67%(a) 1.86% 1.89% 1.76%(a)
Ratio of net investment income
to average net assets 6.21% 6.81% 7.53%(a) 4.93% 5.42% 5.80%(a)
Portfolio turnover rate 455% 102% 9% 87% 88% 0%
</TABLE>
* Reflects operations for the period from April 29, 1992 (date of initial
public investment) to September 30, 1992.
(a) Annualized.
60 61
<PAGE>
<TABLE>
CAMBRIDGE SERIES TRUST
Financial Highlights
Class B Shares
CAMBRIDGE
(continued) INCOME AND CAMBRIDGE
GROWTH PORTFOLIO GLOBAL PORTFOLIO
YEAR ENDED SEPTEMBER 30, 1994 1993** 1994 (B)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.91 $ 14.14 $ 14.18
Income from investment operations
Net investment income (loss) 0.21 0.05 (0.04)
Net realized and unrealized
gain on investments 0.61 0.77 0.01
Total from investment operations 0.82 0.82 (0.03)
Less distributions
Dividends from income (0.19) (0.05) -
Distributions from capital gains (0.26) - -
Distributions in excess of
net investment income - - -
Total distributions (0.45) (0.05) -
NET ASSET VALUE, END OF PERIOD $ 15.28 $ 14.91 $ 14.15
Total Return 5.66% 5.54% (0.21%)
Ratios/Supplemental Data
Net assets, end of period (in thousands) $43,219 $ 18,127 $ 7,987
Ratio of expenses to average net assets 2.44% 2.31% (a) 2.79% (a)
Ratio of expenses to average net assets
excluding waiver 2.44% 2.69% (a) 3.93% (a)
Ratio of net investment income (loss)
to average net assets 1.51% 1.60% (a) (0.82%) (a)
</TABLE>
** Reflects operations for the period from May 24, 1993 (date of initial
public investment) to September 30, 1993.
(a) Annualized.
(b) Reflects operations for the period from March 29, 1994 (date of initial
public investment) to September 30, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
62 63
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements
NOTE 1: ORGANIZATION
Cambridge Series Trust ("Trust") is registered under the Investment Company
Act of 1940, as amended, as an
open-end management investment company. The Trust consists of six separate
diversified portfolios (hereinafter each individually referred to as a
"Portfolio" or collectively as the "Portfolios") at September 30, 1994, as
follows:
Cambridge Growth Portfolio
("Growth Portfolio")
Cambridge Capital Growth Portfolio
("Capital Growth Portfolio")
Cambridge Government Income Portfolio
("Government Income Portfolio")
Cambridge Municipal Income Portfolio
("Municipal Income Portfolio")
Cambridge Income and Growth Portfolio
("Income and Growth Portfolio")
Cambridge Global Portfolio
("Global Portfolio")
The assets of each Portfolio of the Trust are segregated and a shareholder's
interest is limited to the Portfolio in which shares are held.
Each Portfolio provides two classes of shares ("Class A and Class B" ).
Class B shares are identical in all respects to Class A shares except that Class
B shares are sold pursuant to a distribution plan ("Plan") adopted in accordance
with Investment Company Act Rule 12b-1 and are not subject to a sales load.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios:
(a) Valuation of Securities-Listed equity securities held by the Growth
Portfolio, the Capital Growth Portfolio, the Income and Growth Portfolio and the
Global Portfolio are valued at the last sale prices reported on national
securities exchanges. Listed equity securities in which there were no sales are
valued at the mean between the bid and asked prices. Unlisted equity securities
are valued at the latest mean price. Bonds and other fixed-income securities are
valued at the last sale price on a national
64
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
securities exchange, if available. Otherwise, they are valued on the basis
of prices furnished by an independent pricing service. Short-term obligations
are ordinarily valued at the mean between the bid and asked prices as furnished
by an independent pricing service. However, short-term obligations with
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
U.S. government obligations, held by the Government Income Portfolio and
the Income and Growth Portfolio are valued at the mean between the over-the-
counter bid and asked prices as furnished by an independent pricing service.
U.S. government obligations and other short-term obligations maturing in 60 days
or less are valued at amortized cost, which approximates market value.
Debt securities held by the Government Income Portfolio for which current
market quotations are not readily available are valued at their fair value. An
independent pricing service values such securities taking into consideration
yield, stability, risk, quality, coupon, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and any
other factors or market data it deems relevant in determining valuations for
normal institutional size trading units of debt securities and does not rely
exclusively on quoted prices.
Municipal bonds, held by the Municipal Income Portfolio, are valued at fair
value. An independent pricing service values the Portfolio's municipal bonds
taking into consideration yield, stability, risk, quality, coupon, maturity,
type of issue, trading characteristics, special circumstances of a security or
trading market, and any other factors or market data it deems relevant in
determining valuations for normal institutional size trading units of debt
securities and does not rely exclusively on quoted prices.
(b) Repurchase Agreements-Repurchase agreements are purchases of securities
where the seller agrees to repurchase the securities at a specified time and
price. It is the policy of the Trust to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book entry system,
or to have segregated within the custodian bank's vault all securities held as
collateral in support of repurchase agreement investments. Addi-
65
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
tionally, procedures have been established by the Trust to monitor, on a
daily basis, the market value of each repurchase agreement's underlying
securities to ensure the existence of a proper level of collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Trust's adviser to be creditworthy pursuant to guidelines established by the
Trustees. Risks may arise from the potential inability of counterparties to
honor the terms of the repurchase agreement. Accordingly, the Trust could
receive less than the repurchase price on the sale of collateral securities.
(c) Borrowings-Each of the Portfolios may, under certain circumstances,
borrow money directly or through reverse repurchase agreements (arrangements in
which the Portfolio sells a security for a percentage of its market value with
an agreement to buy it back on a set date) or pledge securities. The Municipal
Income Portfolio may borrow up to 5% of its total assets and may pledge up to
10% of the value of those assets to secure such borrowings. Under certain
circumstances, each remaining Portfolio may borrow up to one-third of the value
of its net assets and pledge up to 10% of the value of those assets to secure
such borrowings. At September 30, 1994, Government Income Portfolio had an
outstanding reverse repurchase agreement which amounted to $8,956,501 with a
rate of 5.23%, and a maturity date of 12/22/94.
(d) Security Transactions and Investment Income-Security transactions for
the Portfolios are accounted for on the trade date. Dividend income is recorded
on the ex-dividend date. Interest income (except for Municipal Income Portfolio)
is recorded on the accrual basis. Interest income includes interest and discount
earned (net of premium) on short-term obligations, and interest earned on all
other debt securities including original issue discount as required by the
Internal Revenue Code. Dividends to shareholders and capital gain distributions,
if any, are recorded on the ex-dividend date.
Interest income for the Municipal Income Portfolio includes interest earned
net of premium, and original issue discount as required by the Internal Revenue
Code.
66
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
(e) Federal Taxes-No provision for federal income taxes has been made since
it is each Portfolio's intent to comply with the provisions applicable to
regulated investment companies under the Internal Revenue Code and to distribute
to its shareholders within the allowable time limits substantially all taxable
income and realized capital gains.
Dividends paid by the Municipal Income Portfolio representing net interest
received on tax-exempt municipal securities are not includable by shareholders
as gross income for federal income tax purposes because the Portfolio intends to
meet certain requirements of the Internal Revenue Code applicable to regulated
investment companies which will enable the Portfolio to pay tax-exempt interest
dividends. The portion of such interest, if any, earned on private purpose
municipal bonds issued after August 7, 1986, may be considered a tax preference
item to shareholders.
At September 30, 1994, Growth Portfolio for federal tax purposes, had a
capital loss carryforward of approximately $2,690,000. Pursuant to the Code,
such capital loss carry-forwards expire as follows: $1,065,000 in 2001 and
$1,625,000 in 2002.
At September 30, 1994, Government Income Portfolio for federal tax
purposes, had a capital loss carryforward of approximately $4,500,000. Pursuant
to the Code, such capital loss carryforwards expire as follows: $821,000 in 2001
and $3,679,000 in 2002.
At September 30, 1994, Income and Growth Portfolio for Federal tax
purposes, had a capital loss carryforward of approximately $92,000. Pursuant to
the Code, such capital less carryforward will expire in 2002.
Such capital loss carryforwards will reduce the Portfolios' taxable income
arising from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise relieve the Portfolios of
any liability for federal tax.
(f) When-Issued and Delayed Delivery Transactions-The Portfolios may engage
in when-issued or delayed delivery transactions. To the extent the Portfolios
engage in such transactions, they will do so for the purpose of acquiring
portfolio securities consistent with their invest-
67
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
ment objectives and policies and not for the purpose of investment leverage.
The Portfolios will record a when-issued security and the related liability on
the trade date. Until the securities are received and paid for, the Portfolios
will maintain 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.
(g) Futures Contracts-Upon entering into a futures contract with a broker,
the Municipal Income Portfolio is required to deposit in a segregated account an
amount ("initial margin") of cash or U.S. government securities equal to a
percentage of the contract value. When entering into the contract the Portfolios
agree to receive from or pay the broker an amount of cash equal to a specific
dollar amount times the difference between the closing value of the stock index
and the price at which the contract was made. On a daily basis, the value of a
futures contract is determined and any difference between such value and the
original futures contract value is reflected in the "variation margin" account.
Daily variation margin adjustments, arising from this "marking to market"
process, are recorded as unrealized gains or losses. At September 30, 1994, the
Municipal Income Portfolio had open U.S. Treasury Bond futures contracts with an
aggregate notional value of $10,000,000. The Portfolio recorded unrealized gains
of $352,317 on such futures contracts.
The Portfolio may decide to close their position on a contract at any time
prior to the contract's expiration. When a contract is closed, a realized gain
or loss is recognized. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. For the year ended September 30, 1994, the Municipal Income
Portfolio had realized gains of $167,132 on closed futures contracts.
(h) Option Contracts-The Growth Portfolio may write or purchase stock index
option contracts. A written stock index option obligates the Growth Portfolio to
deliver (a call), or to receive (a put), the contract amount of foreign currency
68
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
upon exercise by the holder of the option. The value of the option contract
is recorded as a liability and the unrealized gain or loss is measured by the
difference between the current value and the premium received. The Growth
Portfolio had no options outstanding at September 30, 1994.
(i) Deferred Organization Expenses- Costs incurred by the Portfolios in
connection with their initial share registration, other than organization
expenses, were deferred and are being amortized on a straight-line basis through
April 1997.
(j) Expenses-Expenses of the Portfolios (other than distribution fees) and
waivers and reimbursements, if any, are allocated to each class of shares based
on their relative average daily net assets for the period. Expenses incurred by
the Portfolios which do not specifically relate to an individual Portfolio are
allocated among all Portfolios based on a Portfolio's relative net asset value
size or as deemed appropriate by the administrator.
(k) Dollar Roll Transactions-The Government Income Portfolio, Income and
Growth Portfolio and Global Portfolio may enter into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in which
the Portfolios sell mortgage securities to financial institutions and
simultaneously agree to repurchase substantially similar (same type, coupon and
maturity) securities at a later date at an agreed upon price. During the period
between the sale and repurchase, the Portfolios forgo principal and interest
paid on the mortgage security sold. The Portfolios are compensated by the
interest earned on the cash proceeds of the initial sale and any additional fee
income received on the sale.
(l) Currency Transactions-Foreign currency amounts are converted into U.S.
dollars at the current rate of such currencies against U.S. dollars as follows:
assets and liabilities at the rate of exchange at the end of the respective
period; purchases and sales of securities and income and expenses at the rate of
exchange prevailing on the dates of such transactions. It is not practicable to
isolate that portion of the results of operations arising from changes in the
exchange rates from the portion arising from changes in the market prices of
investment securities.
69
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
(m) Distributions to shareholders are determined in accordance with income
tax regulations. Distributions from taxable net investment income and net
capital gains can exceed book basis net investment income and net capital gains.
Effective October 1, 1993, the Portfolios adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies. As a
result of this statement, the Portfolios changed the financial statement
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, the following Portfolios
have made reclassifications as of September 30, 1993 to reflect the adoption of
the statement. The Growth Portfolio reclassification resulted in an increase in
undistributed net investment income of $367,348 and a decrease in additional
paid-in capital of $367,348. The Capital Growth Portfolio reclassification
resulted in an increase in undistributed net investment income of $49,507 and a
decrease in undistributed realized gain (loss) on investment transactions and
additional paid-in capital of $49,484 and $23, respectively.
Differences between book basis investment income available for distribution
and tax basisinvestment income available for distribution are primarily
attributable to differences in the treatment on net operation losses.
NOTE 3: DIVIDENDS
Dividends will be declared daily and paid monthly to all shareholders
invested in the Government Income Portfolio and the Municipal Income Portfolio
on the record date. Dividends are declared and paid semi-annually to all
shareholders invested in the Capital Growth Portfolio on the record date,
dividends are declared and paid annually to all shareholders invested in the
Growth Portfolio and the Global Portfolio on the record date, and dividends are
declared and paid quarterly to all shareholders invested in the Income and
Growth Portfolio on the record date. Dividends will be reinvested in additional
shares of the same class and Portfolio on payment dates at the ex-dividend date
net asset value without a sales charge unless
70
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
cash payments are requested by shareholders in writing to the Trust. Capital
gains realized by each portfolio, if any, will be distributed at least once
every 12 months.
NOTE 4: INVESTMENT ADVISORY FEE AND OTHER
Cambridge Investment Advisors, Inc., the Portfolios' investment adviser
("Investment Adviser"), receives for its services an annual investment advisory
fee not to exceed the following percentages of the average daily net assets of
the particular Portfolio: Growth Portfolio, 0.80%; Capital Growth Portfolio,
0.80%; Government Income Portfolio, 0.60%; Municipal Income Portfolio, 0.60%;
Income and Growth Portfolio, 0.75%; and Global Portfolio, 1.10%. The Investment
Adviser may, from time to time, voluntarily waive some or all of its investment
advisory fee and may terminate any such voluntary waiver at any time at its sole
discretion.
The Investment Adviser pays each sub-adviser an annual fee not to exceed
the following percentage of Portfolio average daily net assets: Growth
Portfolio, 0.40%, Capital Growth Portfolio, 0.40%; Government Income Portfolio,
0.30%; and Municipal Income Portfolio, 0.30%. The sub-adviser to the Income and
Growth Portfolio receives from the Investment Adviser an annual fee expressed as
a percentage of that Portfolio's average daily net assets as follows: 0.325% of
the first $50 million in Portfolio average daily net assets, 0.275% of the next
$150 million, 0.225% of the next $300 million and 0.200% of any amounts over
$500 million. The sub-adviser to the Global Portfolio receives from the
Investment Adviser an annual fee expressed as a percentage of that Portfolio's
average daily net assets as follows: 0.55% of the first $75 million in average
daily net assets, and 0.50% of any amounts over $75 million. No performance or
incentive fees are paid to the sub-advisers. Under certain sub-advisory
agreements, the particular sub-adviser may, from time to time, voluntarily waive
some or all of its sub-advisory fee charged to the Investment Adviser and may
terminate any such voluntary waiver at any time in its sole discretion. For the
year ended September 30, 1994 the Investment Adviser and sub-advisers earned and
voluntarily waived the following advisory fees:
71
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
<TABLE>
<CAPTION>
Sub-Adviser
Adviser Adviser Fee Sub-Adviser Fee
Fee Voluntarily Fee Voluntarily
Portfolio Earned Waived Earned Waiver
<S> <C> <C> <C> <C>
Growth $410,955 - $205,478 -
Capital Growth 590,693 - 295,347 -
Government Income 839,139 - 419,570 -
Municipal Income 468,787 81,713 234,393 -
Income and Growth 374,462 - 187,231 -
Global 69,515 69,515 34,757 -
</TABLE>
Administrative personnel and services are provided by Investment Management
Group, Inc. ("IMG" ) at an annual rate of .125 of 1% on the first $1.5 billion
of average aggregate daily net assets of the Trust and .120 of 1% on average
aggregate daily net assets in excess of $1.5 billion. Prior to June 1, 1994,
administrative personnel and services were provided by Cambridge Administration
Services ("CAS") at the same annual rate. IMG may voluntarily waive some or all
of its fee.
During the year ended September 30, 1994, CAS and IMG earned and
voluntarily waived the following administrative fees:
<TABLE>
<CAPTION>
Administrative Administrative Administrative Administrative
Fee Earned Fee Waived Fee Earned Fee Waived
Portfolio CAS CAS IMG IMG
<S> <C> <C> <C> <C>
Growth $ 45,092 $ 6,569 $19,103 -
Capital Growth 65,005 - 27,273 -
Government Income 126,300 23,563 48,497 -
Municipal Income 66,804 - 30,849 -
Income and Growth 37,484 15,033 24,831 -
Global 1,326 530 6,344 -
</TABLE>
The Class B shares of the Portfolios have adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Each
Portfolio will reimburse Cambridge Distributors, Inc. (the "Distributor"), from
the assets of the Class B Shares of each Portfolio, for fees it paid which
relate to the distribution and administration of each Portfolio's Class B
Shares. The Plan provides that the Portfolio may incur distribution expenses up
to 0.75% of 1% of the average daily net assets of the Class B shares for the
Growth Portfolio, Capital Growth Portfolio, Income and Growth Portfolio and
Global Portfolio and 0.50% of 1% of the average daily net assets of the Class B
shares for the Government Income Portfolio and Municipal Income Portfolio.
72
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
The Trust has adopted a Shareholder Servicing Plan (the "Service Plan") with
respect to Class A and Class B shares of each Portfolio.Under the Service Plan,
financial institutions will enter into shareholder service agreements with the
Portfolios to provide administrative support services to their customers who
from time to time may be owners of record or beneficial owners of Class A or
Class B shares of one or more Portfolios. In return for providing these support
services, a financial institution may receive payments from one or more
Portfolios at a rate not exceeding 0.25 of 1% of the average daily net assets of
the Class A or Class B shares of the particular Portfolio or Portfolios
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship.
Organization expenses of the Growth Portfolio ($55,060), Capital Growth
Portfolio ($51,200), Government Income Portfolio ($51,301), Municipal Income
Portfolio ($49,701), Income and Growth Portfolio ($29,179) and Global Portfolio
($45,771) were borne initially by CAS. Each Portfolio has agreed to reimburse
CAS for the organization expenses initially borne by CAS during the five-year
period following the date the Trust's Portfolios' registration became effective.
The amounts reimbursed to CAS for the year ended September 30, 1994 were as
follows: Growth Portfolio ($11,012), Capital Growth Portfolio ($10,240),
Government Income Portfolio ($10,260), Municipal Income Portfolio ($9,940),
Income and Growth Portfolio ($5,836).
NOTE 5: INVESTMENT TRANSACTIONS
Purchases, and sales of investments (excluding short-term investments), for
the fiscal year ended September 30,
1994, were as follows:
Portfolio Purchases Sales
Growth $ 66,113,202 $ 68,718,113
Capital Growth 90,983,444 104,459,473
Government Income 764,033,260 766,987,854
Municipal Income 67,155,011 66,953,196
Income and Growth 64,498,072 37,345,870
Global 15,956,459 276,203
73
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
NOTE 6: UNREALIZED APPRECIATION AND DEPRECIATION
OF INVESTMENTS
At September 30, 1994, the cost of investments for federal income tax
purposes, amounted to $38,969,059 for the Growth Portfolio, $61,477,308 for the
Capital Growth Portfolio, $137,682,288 for the Government Income Portfolio,
$73,076,934 for Municipal Income Portfolio, $59,801,451 for the Income and
Growth Portfolio, and $17,146,199 for the Global Portfolio. Gross unrealized
appreciation and depreciation of investments based on such cost at September 30,
1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation/
Portfolio Appreciation Depreciation (Depreciation)
<S> <C> <C> <C>
Growth $4,509,389 $1,479,202 $ 3,030,187
Capital Growth 3,033,125 1,408,137 1,624,988
Government Income 327,206 5,643,273 (5,316,067)
Municipal Income 879,782 2,711,164 (1,831,382)
Income and Growth 3,199,063 3,001,962 197,101
Global 709,272 675,017 34,255
</TABLE>
NOTE 7: FORWARD CONTRACTS
In connection with portfolio purchases and sales of securities denominated
in a foreign currency, the Growth Portfolio, the Capital Growth Portfolio, the
Income and Growth Portfolio and the Global Portfolio may enter into forward
foreign currency exchange contracts ("contracts"). Additionally, from time to
time the Growth Portfolio, Capital Growth Portfolio, the Income and Growth
Portfolio and the Global Portfolio may enter into contracts to hedge certain
foreign currency assets. Contracts are recorded at market value. Realized gains
and losses arising from such transactions are included in net gain (loss) on
investments and forward foreign currency exchange contracts. The Portfolios are
subject to the credit risk that the other party will not complete the
obligations of the contract. At September 30, 1994 the Global Portfolio had
outstanding forward contracts as set forth below.
74
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Net Unrealized
to Deliver/ In Exchange Appreciation
Settlement Date Receive For (Depreciation)
Sales
4/25/96 Japan-Yen 52,596,340 $562,843 $ (15,282)
7/1/96 Japan-Yen 29,851,660 $321,878 $ 1,122
$884,721 $ (14,160)
Net unrealized
depreciation
on Forward Contracts $ (14,160)
NOTE 8: CAPITAL SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value) for
each class of shares. Transactions in Portfolio shares were as follows:
CAMBRIDGE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Year Year
Ended 9/30/94 Ended 9/30/93
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS A:
Shares outstanding,
beginning of period 1,180,695 $17,187,308 810,934 $11,500,191
Shares sold 220,548 3,512,282 557,050 8,601,094
Shares issued upon
reinvestment
of distributions - - 1,460 22,029
Shares redeemed (408,189) (6,315,589) (188,749) (2,936,006)
Shares outstanding,
end of period 993,054 $14,384,001 1,180,695 $17,187,308
CLASS B:
Shares outstanding,
beginning of period 2,113,910 $31,296,376 978,243 $13,778,060
Shares sold 733,554 11,516,364 1,426,86 121,994,222
Shares issued
upon reinvestment
of distributions - - - -
Shares redeemed (873,428) (13,336,068) (291,194) (4,475,906)
Shares outstanding,
end of period 1,974,036 $29,476,672 2,113,910 $31,296,376
</TABLE>
75
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
<TABLE>
<CAPTION>
CAMBRIDGE CAPITAL GROWTH PORTFOLIO
Year Year
Ended 9/30/94 Ended 9/30/93
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS A:
Shares outstanding,
beginning of period 2,055,500 $29,379,736 1,467,971 $20,673,912
Shares sold 155,406 2,353,285 866,833 12,868,150
Shares issued
upon reinvestment
of distributions 21,385 320,355 13,495 198,314
Shares redeemed (809,281) (12,181,621) (292,799) (4,360,640)
Shares outstanding,
end of period 1,423,010 $19,871,755 2,055,500 $29,379,736
CLASS B:
Shares outstanding,
beginning of period 3,744,511 $54,154,730 1,790,373 $25,238,907
Shares sold 484,356 7,254,585 2,369,048 35,080,707
Shares issued
upon reinvestment
of distributions 29,045 435,097 8,583 126,421
Shares redeemed (1,479,886) (22,203,933) (423,493) (6,291,305)
Shares outstanding,
end of period 2,778,026 $39,640,479 3,744,511 $54,154,730
</TABLE>
<TABLE>
<CAPTION>
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
Year Year
Ended 9/30/94 Ended 9/30/93
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS A:
Shares outstanding,
beginning of period 3,403,828 $48,807,954 2,552,475 $36,680,594
Shares sold 175,391 2,326,934 1,223,573 17,167,884
Shares issued
upon reinvestment
of distributions 104,113 1,395,612 141,599 2,252,607
Shares redeemed (1,319,559) (17,795,382) (513,819) (7,293,131)
Shares outstanding,
end of period 2,363,773 $34,735,118 3,403,828 $48,807,954
</TABLE>
76
<PAGE>
<TABLE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
Year Year
Ended 9/30/94 Ended 9/30/93
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS B:
Shares outstanding,
beginning of period 9,059,536 $129,708,345 4,558,855 $65,524,950
Shares sold 895,699 12,254,465 6,067,033 86,660,210
Shares issued
upon reinvestment
of distributions 290,900 3,906,462 336,653 4,535,586
Shares redeemed (4,142,540) (55,693,345) (1,903,005) (27,012,401)
Shares outstanding,
end of period 6,103,595 90,175,927 9,059,536 $129,708,345
</TABLE>
<TABLE>
<CAPTION>
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO
Year Year
Ended 9/30/94 Ended 9/30/93
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS A:
Shares outstanding,
beginning of period 1,822,030 $26,713,229 1,273,427 $18,482,871
Shares sold 192,548 2,946,139 699,910 10,541,396
Shares issued
upon reinvestment
of distributions 51,632 797,051 44,317 672,587
Shares redeemed (328,132) (4,975,320) (195,624) (2,983,625)
Shares outstanding,
end of period 1,738,078 $25,481,099 1,822,030 $26,713,229
CLASS B:
Shares outstanding,
beginning of period 3,173,809 $47,130,669 1,642,240 $24,071,326
Shares sold 723,926 11,283,387 1,890,537 28,671,521
Shares issued
upon reinvestment
of distributions 109,721 1,694,171 81,888 1,245,720
Shares redeemed (809,227) (12,195,599) (440,856) (6,857,898)
Shares outstanding,
end of period 3,198,229 $47,912,628 3,173,809 $47,130,669
</TABLE>
77
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
<TABLE>
<CAPTION>
CAMBRIDGE INCOME AND GROWTH PORTFOLIO
Year Period
Ended 9/30/94 Ended 9/30/93*
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
CLASS A:
Shares outstanding,
beginning of period 661,893 $9,518,102 - $ -
Shares sold 621,368 9,508,705 692,725 9,965,467
Shares issued
upon reinvestment
of distributions 31,362 474,885 3,200 47,907
Shares redeemed (150,563) (2,281,176) (34,032) (495,272)
Shares outstanding,
end of period 1,164,060 17,220,516 661,893 $9,518,102
CLASS B:
Shares outstanding,
beginning of period 1,216,165 $17,686,756 - $ -
Shares sold 1,909,839 29,152,862 1,225,260 17,820,803
Shares issued
upon reinvestment
of distributions 59,116 895,345 3,359 50,376
Shares redeemed (356,385) (5,411,387) (12,454) (184,423)
Shares outstanding,
end of period 2,828,735 $42,323,576 1,216,165 $17,686,756
</TABLE>
CAMBRIDGE GLOBAL PORTFOLIO **
Period
Ended 9/30/94
Shares Dollars
CLASS A:
Shares outstanding,
beginning of period - -
Shares sold 713,962 $10,133,334
Shares issued
upon reinvestment
of distributions - -
Shares redeemed (89,781) (1,281,155)
Shares outstanding,
end of period 624,181 $ 8,852,179
78
<PAGE>
CAMBRIDGE SERIES TRUST
Notes to the Financial Statements (continued)
CAMBRIDGE GLOBAL PORTFOLIO **
Period
Ended 9/30/94
Shares Dollars
CLASS B:
Shares outstanding,
beginning of period - -
Shares sold 593,033 $8,409,160
Shares issued
upon reinvestment
of distributions - -
Shares redeemed (28,362) (404,051)
Shares outstanding,
end of period 564,671 $8,005,109
* For the period from May 24, 1993 (date of initial public investment)
to September 30, 1993.
** For the period from March 29, 1994 (date of initial public invest--
ment) to September 30, 1994.
79
<PAGE>
CAMBRIDGE SERIES TRUST
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS
CAMBRIDGE SERIES TRUST
We have audited the accompanying statements of assets and liabilities of the
Growth, Capital Growth, Government Income, Municipal Income, Income and Growth
and Global Portfolios, portfolios of Cambridge Series Trust, including the
portfolios of investments, as of September 30, 1994 and related statements of
operations for the year then ended for the Growth, Capital Growth, Government
Income, Municipal Income, and Income and Growth Portfolios and for the period
from March 29, 1994 (date of initial public investment) to September 30, 1994
for the Global Portfolio, the statements of changes in net assets for each of
the years in the two year period ended September 30, 1994 for the Growth,
Capital Growth, Government Income and Municipal Income Portfolios, for the year
ended September 30, 1994 and for the period from May 24, 1993 (date of initial
public investment) to September 30, 1993 for the Income and Growth Portfolio and
for the period from March 29, 1994 to September 30, 1994 for the Global
Portfolio, and the financial highlights for the periods presented on pages 52 to
63. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
September 30, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Growth, Capital Growth, Government Income, Municipal Income, Income and Growth
and Global Portfolios, as of September 30, 1994, the results of their operations
for the year then ended for the Growth, Capital Growth, Government Income,
Municipal Income and Income and Growth Portfolios and for the period from March
29, 1994 to September 30, 1994 for the Global Portfolio, the changes in their
net assets for each of the aforementioned years or periods in the two year
period then ended and the financial highlights for each of the years or periods
as indicated on pages 52 to 63, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 11, 1994
80
