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Previous: RESIDENTIAL ACCREDIT LOANS INC, 8-K, 1996-09-09 |
Next: ECHOSTAR COMMUNICATIONS CORP, S-8, 1996-09-09 |
<PAGE>
[Logo]
NEW ENGLAND FUNDS
- ----------------------------------
SEMI-ANNUAL REPORT AND PERFORMANCE
UPDATE
- ----------------------------------
NEW ENGLAND
EQUITY INCOME FUND
- -----------------
JUNE 30, 1996
- -----------------
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
PORTFOLIO COMPOSITION AS OF JUNE 30, 1996
(unaudited)
COMMON STOCKS - 97.6% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE (A)
- -------------------------------------------------------------------------------
AUTOMOBILES & RELATED-5.8%
1,100 Chrysler Corp. $ 68,200
1,200 General Motors Corp. 62,850
----------
131,050
----------
BANKS-MONEY CENTER-8.2%
1,200 Bank of New York, Inc. 61,500
1,200 Bank of Boston Corp. 59,400
2,250 MBNA Corp. 64,125
----------
185,025
----------
CHEMICAL-8.3%
800 Dow Chemical Co. 60,800
800 E.I duPont de Nemours & Co. 63,300
1,300 PPG Industries, Inc. 63,375
----------
187,475
----------
CONSTRUCTION MATERIALS-2.5%
1,900 Masco Corp. 57,475
----------
COSMETICS & TOILETRIES-3.2%
1,600 Avon Products, Inc. 72,200
----------
DOMESTIC OIL-3.1%
1,700 Phillips Petroleum Co. 71,187
----------
ELECTRIC UTILITIES-2.8%
3,600 Edison International 63,450
----------
ELECTRICAL EQUIPMENT-3.4%
900 General Electric Co. 77,850
----------
See accompanying notes to financial statements.
<PAGE>
COMMON STOCK - CONTINUED
SHARES DESCRIPTION VALUE (A)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES-5.4%
1,100 Beneficial Corp. $ 61,738
1,400 Fleet Financial Group, Inc. 60,900
----------
122,638
----------
FOOD & BEVERAGES-5.5%
4,300 Flowers Industries, Inc. 69,337
1,000 General Mills, Inc. 54,500
----------
123,837
----------
GAS UTILITIES- 2.8%
1,900 Panenergy Corp. 62,463
----------
HEALTH CARE - DRUGS-5.8%
1,600 Pharmacia & Upjohn, Inc. 71,000
1,100 Smithkline Beecham PLC (ADR) (c) 59,813
----------
130,813
----------
HOUSEHOLD APPLIANCES - FURNISHINGS-2.2%
1,000 Whirlpool Corp. 49,625
----------
INSURANCE-2.4%
1,200 Lincoln National Corp., Inc. 55,500
----------
MULTI-INDUSTRY-5.7%
1,200 Tenneco, Inc. 61,350
600 United Technologies Corp. 69,000
----------
130,350
----------
PETROLEUM SERVICES-2.8%
2,200 Ultramar Corp. 63,800
----------
Photography-2.7%
800 Eastman Kodak Co. 62,200
----------
Real Estate-5.3%
2,000 Developers Diversified Realty 63,750
1,700 Health Care Property Investments, Inc., 57,375
----------
121,125
----------
See accompanying notes to financial statements.
<PAGE>
COMMON STOCK - CONTINUED
SHARES DESCRIPTION VALUE (A)
- --------------------------------------------------------------------------------
RETAIL-3.2%
1,500 Sears Roebuck & Co. $ 72,937
----------
TELEPHONE-8.4%
1,500 Bellsouth Corp. 63,563
1,900 Pacific Telesis Group 64,125
1,900 Telefonos de Mexico SA (ADR) (c) 63,650
----------
191,338
----------
TOBACCO-5.3%
600 Philip Morris Cos., Inc. 62,400
1,900 RJR Nabisco Holdings 58,900
----------
121,300
----------
TRUCKING & FREIGHT-2.8%
2,400 Teekay Shipping Corp. 63,300
----------
Total Common Stocks
(Identified Cost $2,022,502) 2,216,938
----------
SHORT-TERM INVESTMENTS -1.8%
FACE
AMOUNT
- --------------------------------------------------------------------------------
$41,729 Seven Seas U. S. Government
Money Market Fund 41,729
----------
Total Short-Term Investments
(Identified Cost $41,729) 41,729
----------
Total Investments - 99.4%
(Identified Cost $2,064,231) 2,258,667
Other assets less liabilities 12,155
----------
Total Net Assets - 100% $2,270,822
==========
See accompanying notes to financial statements.
<PAGE>
(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1996 the
net unrealized appreciation on investments based
on tax cost of $2,064,231 for federal income tax
purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost. $ 211,077
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (16,641)
----------
Net unrealized appreciation $ 194,436
==========
(c) An American Depository Receipt (ADR) is a
certificate issued by a U.S. bank representing
the right to receive securities of the foreign
issuer described. The value of ADRs are
significantly influenced by trading on exchanges
not located in the United States or Canada.
See accompanying notes to financial statements.
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
Statement of Assets & Liabilities
June 30, 1996
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value $2,258,667
Receivable for:
Dividends and interest 7,058
Foreign taxes 9
Due from investment advisor 25,882
Unamortized organization expenses 13,120
----------
LIABILITIES 2,304,736
Payable for:
Organization expenses $15,000
Withholding taxes 27
ACCRUED EXPENSES:
Management fees 7,580
Distribution fees 2,707
Other expenses 8,600
-------
33,914
----------
NET ASSETS $2,270,822
==========
Net Assets consist of:
Capital paid in $2,006,560
Undistributed net investment income 20,425
Accumulated net realized gains 49,401
Unrealized appreciation
on investments 194,436
----------
NET ASSETS $2,270,822
==========
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($2,270,822 divided by 160,510 shares of beneficial interest) $14.15
=======
Offering price per share (100/94.25 of $14.15) $15.01*
=======
Identified cost of investments $2,064,231
==========
* Based upon single purchases of less than $50,000.
Reduced sales charges apply for purchases in excess of this amount.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
Statement of Operations
Six Months Ended June 30, 1996
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 36,214(a)
Interest 571
--------
36,785
EXPENSES
Management fees $7,580
Service fees - Class A 2,707
Custodian 14,642
Transfer agent 1,513
Audit and tax services 6,500
Legal 100
Amortization of organization expenses 1,501
Miscellaneous 280
-------
TOTAL EXPENSES 34,823
Less expenses waived by the investment adviser
and distributor (18,490) 16,333
------- --------
NET INVESTMENT INCOME 20,452
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
Realized gain on:
Investments - net 49,401
-------
Total realized gain on investments 49,401
-------
Unrealized appreciation on:
Investments - net 136,523
-------
Total unrealized appreciation
on investments 136,523
-------
Net gain on investment transactions 185,924
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $206,376
========
(a) Net of foreign taxes of: $27
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
THE PERIOD
NOVEMBER 15, 1995(*) SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 6,533 $ 20,452
Net realized gain (loss) on investment
transactions 0 49,401
Unrealized appreciation (depreciation) on investments 57,913 136,523
---------- ----------
Increase (decrease) in net assets from operations 64,446 206,376
---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (6,560) 0
Net realized gain on investments 0 0
---------- ----------
(6,560) 0
---------- ----------
Proceeds from sale of shares 1,900,000 0
Net asset value of shares issued in connection with the reinvestment of:
Dividends from net investment income 6,560 0
Distributions from net realized gain 0 0
---------- ----------
1,906,560 0
Cost of shares redeemed 0 0
---------- ----------
Increase (decrease) in net assets derived from capital share transactions 1,906,560 0
---------- ----------
Total increase (decrease) in net assets 1,964,446 206,376
NET ASSETS
Beginning of the period 100,000 2,064,446
---------- ----------
End of the period $2,064,446 $2,270,822
========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period $0 ($27)
========== ==========
End of the period ($27) $ 20,425
========== ==========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares 152,000 0
Issued in connection with the reinvestment of:
Dividends from net investment income 510 0
Distributions from net realized gain 0 0
---------- ----------
152,510 0
Redeemed 0 0
---------- ----------
Net change 152,510 0
========== ==========
(*) Commencement of Operations
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
Financial Highlights
(unaudited)
<TABLE>
<CAPTION>
Class A
THE PERIOD
NOVEMBER 15, 1995(A) SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Net Asset Value, Beginning of Period $12.50 $12.86
------ ------
Income From Investment Operations -
Net Investment Income 0.04 0.13
Net Realized and Unrealized Gain
(Loss) on Investments 0.36 1.16
------ ------
Total From Investment Operations 0.40 1.29
------ ------
Less Distributions -
Dividends From Net Investment Income (0.04) 0.00
Distributions From Net Realized Capital Gains 0.00 0.00
Distributions From Paid-in Capital 0.00 0.00
------ ------
Total Distributions (0.04) 0.00
------ ------
Net Asset Value, End of Period $12.86 $14.15
====== ======
Total Return (%) 3.2(c) 10.0(c)
Ratio of Operating Expenses to Average Net Assets (%) 1.50(b)(d) 1.50(b)
Ratio of Net Investment Income to Average Net Assets (%) 3.58(b) 1.88(b)
Portfolio Turnover Rate (%) 0(b) 28.51(b)
Net Assets, End of Period (000) $2,064 $2,271
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving effect to this expense limitation
would have been 5.97% and 3.22% (annualized) for the periods ended December 31, 1995 and
June 30, 1996, respectively.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW ENGLAND EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 - (unaudited)
1. The Fund is a Series of New England Funds Trust III, a Massachusetts
business trust (the "Trust"), and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Declaration of Trust permits the Trustees to issue
an unlimited number of shares of the Trust in multiple series (each such
series of shares a "Fund").
The Fund commenced operations on November 15, 1995. Previously, the Fund had
no transactions other than those relating to organizational matters and the
sale of 8,000 shares of the Fund for $100,000.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
a. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or,
if no sale was reported and in the case of over-the-counter securities not
so listed, the last reported bid price. Short-term obligations with a
remaining maturity of less than sixty days are stated at amortized cost,
which approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (the date the buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Interest income for the Fund is increased by
the accretion of discount. In determining net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
c. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized
capital gains, at least annually. Accordingly, no provision for federal
income tax has been made.
d. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. The timing and characterization of
certain income and capital gains distributions are determined in accordance
with federal tax regulations which may differ from generally accepted
accounting principles. Permanent book and tax basis differences will result
in reclassification to the capital accounts.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
e. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to
100% of the repurchase price. The Fund's sub-adviser is responsible for
determining that the value of the collateral is at all times at least equal
to the repurchase price. Repurchase agreements could involve certain risks
in the event of default or insolvency of the other party including possible
delays or restrictions upon the Fund's ability to dispose of the underlying
securities.
f. ORGANIZATION EXPENSE. Costs incurred in fiscal 1995 in connection with the
Fund's organization and registration, amounting to approximately $15,000 in
the aggregate, will be paid by the Fund and are being amortized by the Fund
over 60 months.
In the event that at any time during the five-year period beginning with the
date of the commencement of operations, the initial shares acquired by the
Advisor prior to such date are redeemed by any holder thereof, the
redemption proceeds payable in respect of such shares will be reduced by the
prorata share (based on the proportionate share of the original shares
redeemed to the total number of original shares outstanding at the time of
redemption) of the then unamortized deferred organizational expenses as of
the date of such redemption.
2. PURCHASES AND SALES OF SECURITIES (excluding short-term investments) for the
Fund for the period December 31, 1995 through June 30, 1996, were $306,230
and $332,940 respectively.
3a. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays
management fees to its adviser, New England Funds Management, L.P. ("NEFM")
at the annual rate of 0.70% of the first $200 million of the Fund's average
daily net assets, 0.65% of the next $300 million of such assets and 0.60% of
such assets in excess of $500 million. NEFM pays Loomis Sayles for providing
sub- advisory services to the Fund at the annual rate of 0.40% of the first
$200 million of the average daily net assets of the Fund, 0.325% of the next
$300 million of such assets and 0.275% of such assets in excess of $500
million. Certain officers and directors of NEFM and Loomis Sayles are also
officers or trustees of the Fund. NEFM and Loomis Sayles are wholly owned
subsidiaries of New England Investment Companies, L.P., which is a majority
owned subsidiary of New England Mutual Life Insurance Company.
Fees earned by NEFM and Loomis Sayles under the management agreement in
effect during the period December 31, 1995 through June 30, 1996, are as
follows:
FEES EARNED(A)
$3,249 New England Funds Management, L.P.
4,331 Loomis, Sayles & Company, L.P.
(a) Before reduction pursuant to voluntary expense limitation. See Note 4.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
b. SERVICE FEES. Pursuant to Rule 12b-1 under the 1940 Act, the Trust has
adopted a Service Plan relating to the Fund (the "Plan"). Under the Plan,
the Fund pays New England Funds a monthly service fee at the annual rate of
up to 0.25% of the average daily net assets of the Fund, as reimbursement
for expenses (including certain payments to securities dealers, who may be
affiliated with New England Funds) incurred by New England Funds in
providing personal services to investors in the Fund and/or the maintenance
of shareholder accounts. For the six months ended June 30, 1996, New England
Funds waived its entire fee of $2,707 under the Plan.
4. EXPENSE LIMITATIONS. Effective November 15, 1995, Loomis Sayles and New
England Funds have voluntarily agreed to reduce their fees and, if
necessary, to assume expenses of the Fund in order to limit the Fund's
expenses to an annual rate of 1.50% of the Fund's average daily net assets.
As a result of the Fund's expenses exceeding the voluntary expense
limitation during the six months ended June 30, 1996, NEFM & Loomis Sayles
waived their entire management fee of $7,580 and New England Funds waived
its entire service fee of $2,707 and assumed additional expenses of $8,203.
5. BENEFICIAL INTEREST. At June 30, 1996 all outstanding shares of the Fund
were held by the Loomis Sayles Funded Pension Plan.
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