<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1998
Securities Act File No. 2-10685
Investment Company Act File No. 811-214
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 84 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [X]
(Check Appropriate Box or Boxes)
SENTINEL GROUP FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
National Life Drive
Montpelier, Vermont 05604
(Address of Principal Executive Offices) (Zip Code)
(802) 229-3900
(Registrant's Telephone Number, including Area Code)
--------------------
D. Russell Morgan, Esq. Copy to:
c/o Sentinel Group Funds, Inc. John A. MacKinnon, Esq.
National Life Drive Brown & Wood LLP
Montpelier, Vermont 05604 One World Trade Center
(Name and Address of Agent for Service) New York, New York 10048-0557
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) or Rule 485.
If appropriate check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common Stock, par value $.01 per
share.
- --------------------------------------------------------------------------------
<PAGE>
THE SENTINEL FUNDS
CLASS D SHARES OF SENTINEL BALANCED FUND
PROSPECTUS SUPPLEMENT DATED JANUARY 4, 1999 TO
PROSPECTUS DATED MAY 4, 1998
On January 4, 1999, Sentinel Group Funds, Inc. (the "Company") began offering
Class D shares of Sentinel Balanced Fund (the "Balanced Fund"). This
Supplement, which is to be used in conjunction with the Prospectus for the
Sentinel Funds dated May 4, 1998 (the "Prospectus"), describes the features of
the Class D shares of the Balanced Fund. With the addition of the Class D
shares, the Balanced Fund will offer investors a choice of four classes of
shares, described under "Purchase Options", below. The investment objective of
the Balanced Fund is to seek a conservative combination of stability, income and
long term growth of capital through investments in both stocks and bonds, with
at least 25% of its net assets in fixed-income securities.
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of the offering price)
Class D Shares of Sentinel Balanced Fund:
Sales Charge Imposed on Purchases ....................... None
Sales Charge Imposed on Reinvested Dividends ............ None
Contingent Deferred Sales Charge ("CDSC") ............... 6.00% maximum/1/
- ------------
/1/The maximum CDSC is imposed on shares redeemed in the first two years after
purchase. For shares held longer than two years, the CDSC declines according to
the schedules and other terms set forth under "Contingent Deferred Sales Charge"
below.
ANNUAL FUND OPERATING EXPENSES
The following table sets forth the anticipated annual operating expenses of the
Class D shares of the Balanced Fund for the remainder of the fiscal year ending
November 30, 1999, as a percentage of average assets in the Class D shares. All
of the following expenses are based on estimated amounts for the current fiscal
year.
Management Fees 0.63%
Rule 12b-1 Fees (includes service fee & distribution fee) 0.75%
Other Expenses:
Accounting and Administrative Costs 0.04%
Other .24%
Total Other Expenses .28%
Total Fund Operating Expenses 1.66%
The following examples illustrate the expenses that an investor would pay on a
$1,000 investment in the Class D shares of the Balanced Fund over 1 and 3 year
periods assuming the operating expense ratio as set forth in the table above and
a 5% annual rate of return.
<PAGE>
1 YEAR 3 YEARS
------ -------
Assuming redemption $ 77 $ 102
Assuming no redemption $ 17 $ 52
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, AND THE 5%
ANNUAL RATE USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE OF RETURN. The purpose
of the foregoing examples is to assist the investor in understanding the various
expenses that an investor in the Class D shares of the Balanced Fund will bear
directly or indirectly.
PURCHASE OPTIONS
With the addition of the Class D shares, the Balanced Fund will offer four
classes of shares. Investors in the Balanced Fund may choose among Class A
shares, Class B shares, Class C shares or Class D shares. Class A shares
generally are subject to an initial sales charge and a distribution fee of up to
0.30% per year. Class B shares are subject to a contingent deferred sales
charge ("CDSC") of up to 4%, a CSDC period of as much as six years, and a
distribution fee of 1.00% per year. Class B shares convert to Class A shares
automatically at the end of the applicable CDSC period, which is at most six
years. Class C shares are subject to a 1.00% CDSC in the first year after
purchase only, and a distribution fee of 1.00% per year. Class C shares in
general have operating expense ratios similar to those of the Class B shares,
but do not convert to Class A shares. The Class D shares are subject to a CDSC
which is 6% in the first two years after purchase, a CDSC period of seven years,
and a distribution fee of 0.75% per year. The Class D shares convert to Class A
shares after ten years. The table below outlines the differences among the four
classes of shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TOTAL 12B-1 FEE,
Class Sales Charge/(1)/ SERVICE FEE INCLUDING SERVICE FEE CONVERSION FEATURE
- ------- -------------------- ------------ ---------------------- ------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.00% Maximum of Maximum of 0.30% No
initial sales 0.20%
charge(2)
- ----------------------------------------------------------------------------------------------------
B CDSC of up to 0.25% 1.00% Class B Shares
4.00% for a convert to Class
maximum of A Shares
six years(3)(4) automatically
after the
applicable CDSC
period/(5)/
- ----------------------------------------------------------------------------------------------------
C CDSC of 1.00% 0.25% 1.00% No
for the first year
only(4)
- ----------------------------------------------------------------------------------------------------
D CDSC of up to None 0.75% Class D Shares convert to
6% for seven Class A Shares automatically
years(4) at the end of the tenth year
after purchase(5)
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. CDSCs are imposed if the redemption occurs within the
applicable CDSC time period. The CDSC will be assessed on an amount equal to
the lesser of the current net asset value or cost of the shares being
redeemed. See "How to Purchase Shares -- Class A Shares -- Sales Charges",
on page 34 of the Prospectus, "How to Redeem Shares -- Class B Shares --
CDSC", on page 40 of the Prospectus, and "How to Redeem Shares -- Class C
Shares -- CDSC" on page 41 of the Prospectus.
(2) Reduced for purchases of more than $100,000 and waived for purchases of
Class A shares by certain investors. Class A share purchases of $1,000,000
or more are not subject to an initial sales charge but, if the initial sales
charge is waived, will be subject to a 1.0% CDSC and 0.5% CDSC for the first
and second year, respectively, after the purchase. Following the second year
after purchase, no CDSC will apply. See "How to Purchase Shares -- Class A
Shares -- Sales Charges" on page 34 of the Prospectus, and "How to Redeem
Shares -- Class A Shares Purchased in Amounts over $1,000,000 -- CDSC" on
page 42 of the Prospectus.
(3) The applicable CDSC period is reduced to 5 years for aggregate purchases
from $250,001 to $500,000 and to 4 years for aggregate purchases of $500,001
to $999,999. Investors with aggregate purchases in excess of $1,000,000 are
only offered Class A shares. The CDSC may be waived in certain
circumstances. See "How to Redeem Shares -- Class B Shares -- CDSC" on page
40 of the Prospectus and "How to Redeem Shares -- Class B Shares -- Waiver
or Reduction of the CDSC" on page 41 of the Prospectus.
(4) The CDSC may be waived in certain circumstances. See "How to Redeem Shares
-- Waiver or Reduction of the CDSC" on page 41 of the Prospectus, for the
waivers of the CDSC applicable to Class A (for purchase amounts in excess of
$1,000,000), Class B and Class C shares. The CDSC will be waived with
respect to the Class D shares in the same circumstances, except that the
waiver for all redemptions in amounts up to 10% annually of the account's
then current net asset value for the Class A , Class B and Class C shares
shall be available for Class D shares only in amounts up to 8% annually of
the account's then current net asset value.
(5) The conversion and holding periods for dividend reinvestment shares are
the same as those for the initial shares to which they relate.
These alternative purchase arrangements are designed to enable the investor to
choose the method of purchasing Balanced Fund shares that is most beneficial to
the investor based on all factors to be considered. Generally, when making an
investment decision, investors should consider the anticipated life of an
intended investment in the Funds, the accumulated distribution fees plus CDSCs
on Class B, Class C and Class D shares, the different times for automatic
conversion of Class B and Class D shares to Class A shares, and the initial
sales charge, if any, plus accumulated distribution fees on Class A shares.
Investors should consider whether in their circumstances it is likely that the
anticipated higher return on Class A shares due to the lower ongoing
distribution charges will offset the initial sales charge paid on such shares.
In comparing the Class D shares to the Class B shares, investors should consider
whether in their circumstances it is likely that the anticipated higher return
on the Class D shares due to the lower ongoing distribution charges will offset
the higher CDSC amount and the longer CDSC period, and the later conversion to
Class A shares.
In considering the Class C shares, an investor should consider whether the
advantage, as compared with Class B shares and Class D shares, of the investment
not being subject to a CDSC after the first year, and the significantly lower
CDSC in the first year, outweighs the disadvantage, as compared to the Class B
shares, of remaining subject to higher distribution fees for the entire holding
period of the investment, or the disadvantages, as compared with the Class D
shares, of being subject to a distribution charge of 0.25% higher for the first
ten years, and not converting to Class A shares at the end of the tenth year.
In comparing Class C shares with Class
<PAGE>
A shares, investors should consider whether in their circumstances the advantage
of not being subject to an initial sales charge outweighs the higher
distribution fees.
Another factor to consider is that exchange privileges into other Funds in the
Sentinel Family of Funds are more limited for classes other than Class A shares,
and in the case of the Class D shares of the Balanced Fund, are limited to
exchanges into the Class A shares of the Money Market Fund, and back to the
Class D shares of the Balanced Fund. See "Exchange Privilege", below.
In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a CDSC is
available. See generally "Class A Shares -- Reduced Sales Charges" on page 36 of
the Prospectus, "How to Redeem Shares -- Waiver or Reduction of the CDSC", on
page 41 of the Prospectus, and with respect to the Class D shares, "Waiver or
Reduction of the CDSC", below.
The maximum purchase of Class D shares accepted is $250,000. The maximum
purchase of Class B shares or Class C shares accepted is $1,000,000. There is no
size limit on purchases of Class A shares. The Funds may refuse any order to
purchase shares.
CONTINGENT DEFERRED SALES CHARGE
If you redeem Class D shares of the Balanced Fund, a CDSC may be imposed.
Whether a CDSC is imposed and the amount of the CDSC depends on the number of
years since you made the purchase from which an amount is being redeemed.
Partial redemption requests will be increased by the amount of CDSC due. CDSC
balances due for full redemptions will be deducted from the redemption proceeds.
Purchases are subject to the CDSC according to the following schedule:
YEAR SINCE PURCHASE
Payment Was Made CDSC Percentage
- ------- --- ---- ---- ----------
First.........................................6%
Second........................................6%
Third.........................................5%
Fourth........................................4%
Fifth.........................................4%
Sixth.........................................3%
Seventh.......................................2%
The above schedule is higher than the schedules of CDSCs for Class B shares,
which start at maximums of 4% and extend for a maximum of six years. The
schedules of CDSCs for Class B shares can be found on page 40 of the Prospectus.
In determining whether a CDSC is payable, redemptions are taken first from any
shares acquired through reinvestment of distributions, or any other shares as to
which a waiver of the CDSC is applicable. The purchase payment from which a
redemption is made is the earliest purchase payment from which a redemption or
exchange has not already been fully effected. The amount of the CDSC will be
equal to the applicable CDSC percentage multiplied by the lower of the purchase
price or the net asset value of the shares being redeemed. Any CDSC imposed on a
<PAGE>
redemption of Class D shares is paid to Sentinel Financial Services Company (the
"Distributor"), which serves as national distributor of shares of the Sentinel
Funds.
If an investor exchanges Class D shares for Class A shares of the Money Market
Fund, any redemption of the Money Market Fund shares will be subject to a CDSC
at the rate, if any, that would have applied to a redemption of the Class D
shares of the Balanced Fund on the date such shares were exchanged for the Money
Market Fund shares, regardless of how long the Money Market Fund shares are
held. If the Money Market Fund shares are exchanged back into the Class D
shares of the Balanced Fund, the holding period of the Class D shares will be
aggregated with any holding periods of the Class D shares prior to the exchange,
and when such holding periods in Class D shares aggregate more than seven years,
the investment will no longer be subject to the CDSC.
WAIVER OR REDUCTION OF THE CDSC
Any applicable CDSC on Class D shares may be waived in the following situations
when the Fund has been notified at the time of redemption:
1. Redemptions of shares acquired from the reinvestment of income
distributions and/or capital gains distributions;
2. Redemptions from the account of a shareholder (including one who owns the
shares as joint tenant with his or her spouse) following his or her death
or from the account of a trust whose primary income beneficiary has died,
provided the redemption is requested within one year of the shareholder's
or beneficiary's death;
3. Redemptions from qualified retirement accounts taken in equal or
substantially equal periodic payments not to exceed life, or joint life
expectency and not otherwise subject to the 10% penalty tax for early
withdrawal of Code section 72(t);
4. Redemptions that occur as a result of a loan taken from an account
established as a retirement plan account for an employee of a tax-exempt
organization under section 403(b)(7) of the Code; and
5. Redemptions in amounts up to 8% annually of the account's then current net
asset value.
These waivers or reductions are the same as available for the Class A shares
purchased in amounts exceeding $1,000,000, Class B shares and Class C shares,
except that the waiver for all redemptions in amounts up to 8% annually of the
account's then current net asset value for the Class D shares is available for
the other classes of shares in amounts up to 10% annually of the account's then
current net asset value. A listing of those waivers for the other classes of
the Sentinel Funds can be found on page 41 of the Prospectus.
DISTRIBUTION PLAN
The Class D shares of the Balanced Fund participate in the Company's Class D
Distribution Plan, which became effective as of January 4, 1999. This Plan
provides for a fee to the Distributor of the Sentinel Funds at a maximum annual
rate of 0.75% of average daily net assets
<PAGE>
of the Class D shares of the Balanced Fund. The distribution fee provides for
the recovery of the initial sales commissions paid by the Distributor at the
time of sales of Class D shares, together with the cost of financing such
payments, and for the other types of distribution, sales and marketing
expenditures set forth on page 32 of the Prospectus for the distribution plans
applicable to the Class A and Class B shares. The Class D Distribution Plan is
similar in its operation to the Class B Distribution Plan described on pages 31-
33 of the Prospectus, except that there is no service fee of up to 0.25%, and no
asset-based service fee payable to dealers.
The distribution fee rate of up to 0.75% for the Class D shares of the Balanced
Fund is higher than the maximum distribution fee rate of 0.30% for the Class A
shares of the Balanced Fund, but is lower than the distribution fee rates of up
to 1.00% on the Class B and Class C shares of the Balanced Fund.
CONVERSION TO CLASS A SHARES
Class D shares of the Balanced Fund automatically convert to Class A shares of
the Balanced Fund at the end of the tenth year after the date of purchase.
After this conversion to Class A shares, the investment is no longer subject to
distribution fees of up to 0.75% of average daily net assets, but rather will be
subject to distribution fees at the lower rate of up to 0.30% of such assets
applicable to the Class A shares of the Balanced Fund.
EXCHANGE PRIVILEGES
Investors who purchase classes of shares other than Class A will have less broad
exchange privileges to other Funds in the Sentinel Family of Funds than
investors who purchase Class A shares. The Sentinel Funds offer Class A shares
of thirteen Funds, as described in the Prospectus. Class B shares are available
for seven Funds, the Common Stock, Growth, Small Company, World, High Yield,
Bond, and Money Market Funds, as well as the Balanced Fund, and purchasers of
Class B shares of the Balanced Fund may exchange only into these Funds. Class C
shares of the Balanced Fund have the ability to exchange at net asset value only
for the Class C shares of other Funds which offer Class C shares (the Common
Stock, World and High Yield Funds), except that investors in Class C shares may
also exchange into Class A shares of the Money Market Fund.
The Balanced Fund is the only Sentinel Fund which offers Class D shares, and as
a result no exchanges into other Sentinel Funds are possible, except that
investors in Class D shares of the Balanced Fund may exchange into Class A
shares of the Money Market Fund. However, if an investor exchanges Class D
shares into Money Market Fund Class A shares when a CDSC would have applied to a
redemption of such shares, a commensurate CDSC will apply to a subsequent
redemption of the Money Market Fund shares. The time that an investment is in
the Money Market Fund Class A shares as a result of an exchange from the Class D
shares of the Balanced Fund will not count toward the time necessary to reduce
or eliminate any applicable CDSC, or to convert the Class D shares to Class A
shares. An investor who has exchanged Class D shares into Money Market Fund
Class A shares may exchange back into Class D shares of the Balanced Fund at any
time, but may not exchange at net asset value into Class A shares, Class B
shares or Class C shares of any other Fund.
<PAGE>
PAYMENTS TO DEALERS
For sales of Class D shares of the Balanced Fund, the Distributor intends to
make payments to selling broker-dealers, at the time an investor purchases such
Class D shares, of amounts equal to 6% of the purchase amount. Dealers will not
receive any asset-based service fees or other compensation with respect to Class
D shares of the Balanced Fund.
FINANCIAL HIGHLIGHTS (for a share outstanding throughout the period). The
following information for the six-month period ended May 31, 1998 is unaudited.
This information should be read in conjunction with the financial statements and
notes incorporated by reference in the Statement of Additional Information. The
Annual Report and Semi-Annual Report of the Funds may be obtained by
shareholders without charge by calling the Funds at (800) 282-3863.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS Sentinel Common Sentinel Common Sentinel Common
Stock Fund- Class A Stock Fund - Class B Stock Fund - Class C
Shares Shares Shares (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Six Months
Ended 5/31/98 Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period -----------------------------------------------------------------------------------
$ 44.09 $ 44.03 $ 45.23
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.03 0.07
Net realized and unrealized gain (loss)
on investments 4.79 4.80 (1.15)
Total from investment operations -----------------------------------------------------------------------------------
5.00 4.83 (1.08)
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.24 0.09 -
Distributions from realized gains on investments 4.69 4.69 -
-----------------------------------------------------------------------------------
Total Distributions 4.93 4.78 -
-----------------------------------------------------------------------------------
Net asset value at end of period $ 44.16 $ 44.08 $ 44.15
===================================================================================
Total Return (%)* 12.7 ++ 12.3 ++ (2.4)++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.02 + 1.80 + 1.80 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.03 + 1.81 + 1.80 +
Ratio of net investment income to average net 0.97 + 0.19 + 0.19 +
assets (%)
Portfolio turnover rate (%) 17 17 17
Average commission rate paid per share $ 0.0600 $ 0.0600 $ 0.0600
Net assets at end of period (000 omitted) $1,640,493 $112,733 $ 683
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS Sentinel Balanced
Sentinel Balanced Sentinel Balanced Fund - Class C
Fund - Class A Shares Fund - Class B Shares Shares (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Six Months
Ended 5/31/98 Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Net asset value at beginning of period $ 20.29 $ 20.32 $ 20.87
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.18 0.05
Net realized and unrealized gain (loss)
on investments 1.50 1.52 (0.29)
----------------------------------------------------------------------------------
Total from investment operations 1.77 1.70 (0.24)
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.27 0.21 -
Distributions from realized gains on investments 1.16 1.16 -
-----------------------------------------------------------------------------------
Total Distributions 1.43 1.37 -
-----------------------------------------------------------------------------------
Net asset value at end of period $ 20.63 $ 20.65 $ 20.63
===================================================================================
Total Return (%)* 9.3 ++ 8.9 ++ (1.2)++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.12 + 1.90 + 1.89 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.14 + 1.91 + 1.89 +
Ratio of net investment income to average net 2.67 + 1.89 + 1.90 +
assets (%)
Portfolio turnover rate (%) 38 38 38
Average commission rate paid per share $ 0.0600 $0.0600 $ 0.0600
Net assets at end of period (000 omitted) $333,819 $36,504 $ 70
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS Sentinel Growth Fund - Sentinel Growth Fund - Class B
Class A Shares Shares
- --------------------------------------------------------------------------------------------------------------------
Six Months Five Months
Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited)
<S> <C> <C>
-------------------------------------------------------------------
Net asset value at beginning of period $ 18.73 $ 13.08
-------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.01) (0.08)
Net realized and unrealized gain (loss)
on investments 0.93 1.48
-------------------------------------------------------------------
Total from investment operations 0.92 1.40
-------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income - -
Distributions from realized gains on investments 5.13 -
-------------------------------------------------------------------
Total Distributions 5.13 -
-------------------------------------------------------------------
Net asset value at end of period $ 14.52 $ 14.48
===================================================================
Total Return (%)* 7.4 ++ 10.7 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.30 + 2.10 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.32 + 2.11 +
Ratio of net investment income to average net (0.19)+ (0.99)+
assets (%)
Portfolio turnover rate (%) 50 50
Average commission rate paid per share $ 0.0600 $ 0.0600
Net assets at end of period (000 omitted) $ 98,168 $ 2,145
===================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel Small Company Sentinel Small Company
Fund - Class A Shares Fund - Class B Shares
- --------------------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited)
<S> <C> <C>
-------------------------------------------------------------------
Net asset value at beginning of period $ 6.30 $ 6.18
-------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income - (0.01)
Net realized and unrealized gain (loss)
on investments 0.48 0.45
-------------------------------------------------------------------
Total from investment operations 0.48 0.44
-------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.02 -
Distributions from realized gains on investments 0.75 0.75
-------------------------------------------------------------------
Total Distributions 0.77 0.75
-------------------------------------------------------------------
Net asset value at end of period $ 6.01 $ 5.87
===================================================================
Total Return (%)* 8.8 ++ 8.3 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.35+ 2.22 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.37 + 2.24 +
Ratio of net investment income to average net (0.15) + (1.03)
assets (%)
Portfolio turnover rate (%) 21 21
Average commission rate paid per share $ 0.0600 $ 0.0600
Net assets at end of period (000 omitted) $ 120,429 $ 11,005
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights Senteniel World Fund - Senteniel World Fund - Senteniel World Fund
Class A Shares Class B Shares - Class C Shares (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Period
Ended 5/31/98 Ended 5/31/98 May 4 thru
(Unaudited) (Unaudited) May 31, 1998
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.25 $ 17.05 $ 19.57
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.10 0.06 0.02
Net realized and unrealized gain (loss)
on investments 2.35 2.28 (0.70)
-----------------------------------------------------------------------------------
Total from investment operations 2.45 2.34 (0.68)
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.12 - -
Distributions from realized gains on investments 0.64 0.64 -
-----------------------------------------------------------------------------------
Total Distributions 0.76 0.64 -
-----------------------------------------------------------------------------------
Net asset value at end of period $ 18.94 $ 18.75 $ 18.89
===================================================================================
Total Return (%)* 14.9 ++ 14.3 ++ (3.5) ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.27 + 2.17 + 2.18 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.30 + 2.20 + 2.18 +
Ratio of net investment income to average net 1.39 + 0.49 0.49 +
assets (%)
Portfolio turnover rate (%) 5 5 5
Average commission rate paid per share $ 0.0392 $ 0.0392 $ 0.0392
Net assets at end of period (000 omitted) $108,378 $ 15,718 $ 110
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel High Yield Sentinel High Yield Sentinel High Yield
Bond Fund - Class A Bond Fund - Class B Bond Fund - Class C
Shares Shares Shares (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Period
Ended 5/31/98 Ended 5/31/98 May 4 thru
(Unaudited) (Unaudited) May 31, 1998
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.41 $ 10.40 $ 10.70
----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.44 0.43 0.03
Net realized and unrealized gain (loss)
on investments 0.31 0.31 (0.04)
-----------------------------------------------------------------------------------
Total from investment operations 0.75 0.74 (0.01)
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.44 0.43 0.06
Distributions from realized gains on investments 0.09 0.09 -
----------------------------------------------------------------------------------
Net asset value at end of period 0.53 0.52 0.06
-----------------------------------------------------------------------------------
10.63 $ 10.62 $ 10.63
===================================================================================
Total Return (%)* 7.3 ++ 7.2 ++ (0.1) ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 1.24 + 1.41 + 2.06 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.28 + 1.45 + 2.06 +
Ratio of net investment income to average net 8.22 + 8.05 7.40 +
assets (%)
Portfolio turnover rate (%) 83 83 83
Net assets at end of period (000 omitted) $26,708 $48,115 $ 131
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel Bond Fund - Class Sentinel Bond Fund - Class
A Shares B Shares
- --------------------------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited)
<S> <C> <C>
--------------------------------------------------------------------
Net asset value at beginning of period $ 6.36 $ 6.38
--------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.20 0.17
Net realized and unrealized gain (loss) on investment 0.06 0.05
-------------------------------------------------------------------
Total from investment operations 0.26 0.22
--------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.20 0.17
Distributions from realized gains on investments - -
--------------------------------------------------------------------
Total Distributions 0.20 0.17
--------------------------------------------------------------------
Net asset value at end of period $ 6.42 $ 6.43
====================================================================
Total Return (%)* 4.1 ++ 3.5 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 0.87 + 1.72 +
Ratio of expenses to average net assets before
expense reductions (%)** 0.97 + 1.86 +
Ratio of net investment income to average net assets 6.21 + 5.35
(%)
Ratio of net investment income to average net assets
before 6.13 + 5.23 +
voluntary expense reimbursements (%)
Portfolio turnover rate (%) 74 74
Net assets at end of period (000 omitted) $88,767 $10,626
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel Short Maturity
Sentinel Government Securities Government Securities Fund
Fund - Class A Shares - Class A Shares
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited)
-------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period $ 10.09 $ 9.82
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.31 0.28
Net realized and unrealized gain (loss) on investments 0.09 0.07
-------------------------------------------------------------
Total from investment operations 0.40 0.35
-------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.31 0.28
Distributions from realized gains on investments - -
-------------------------------------------------------------
Total Distributions 0.31 0.28
-------------------------------------------------------------
Net asset value at end of period $ 10.18 $ 9.89
=============================================================
Total Return (%)* 4.0 ++ 3.6 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 0.94 + 0.90 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.00 + 1.14 +
Ratio of net investment income to average net assets (%) 6.15 + 5.96
Ratio of net investment income to average net assets
before voluntary expense reimbursement (%) 6.10 + 5.74
Portfolio turnover rate (%) 159 85
Net assets at end of period (000 omitted) $ 72,516 $ 60,534
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel U. S. Treasury Money Sentinel U. S. Treasury Money
Market Fund - Class A Shares Market Fund - Class B Shares
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited)
-------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.02
Net realized and unrealized gain (loss) on investments - -
-------------------------------------------------------------
Total from investment operations 0.02 0.02
-------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.02 0.02
Distributions from realized gains on investments - -
-------------------------------------------------------------
Total Distributions 0.02 0.02
-------------------------------------------------------------
Net asset value at end of period $ 1.00 $ 1.00
=============================================================
Total Return (%)** 2.3 ++ 2.3 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 0.74 + 0.73 +
Ratio of expenses to average net assets before
expense reductions (%)*** 0.74 + 0.74 +
Ratio of net investment income to average net assets (%) 4.49 + 4.49 +
Net assets at end of period (000 omitted) $ 87,925 $ 3,895
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights Sentinel Tax-free Sentinel New York Sentinel Pennsylvania
Income - Class A Tax-free Income Tax-free Trust - Class
Shares Fund - Class A Shares A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Six Months Six Months
Ended 5/31/98 Ended 5/31/98 Ended 5/31/98
(Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 13.64 $ 11.88 $ 13.34
--------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.33 0.32 0.31
Net realized and unrealized gain (loss)
on investments 0.16 0.17 0.14
--------------------------------------------------------------------------------
Total from investment operations 0.49 0.49 0.45
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income 0.33 0.32 0.31
Distributions from realized gains on investments 0.19 0.03 0.12
--------------------------------------------------------------------------------
Total Distributions 0.52 0.35 0.43
--------------------------------------------------------------------------------
Net asset value at end of period $ 13.61 $ 12.02 $ 13.36
================================================================================
Total Return (%)* 3.6 ++ 4.1 ++ 3.4 ++
RATIOS/SUPPLEMENTAL DATA
Ratio of net expenses to average net assets (%) 0.75 + - 0.83 +
Ratio of expenses to average net assets before
expense reductions (%)** 0.92 + 1.02 + 1.32 +
Ratio of net investment income to average net assets (%) 4.81 + 5.28 + 4.62 +
Ratio of net investment income to average net assets
before voluntary expense reimbursement (%) 4.65 + 4.29 + 4.16 +
Portfolio turnover rate (%) 11 3 28
Net assets at end of period (000 omitted) $ 89,398 $ 8,672 $ 34,475
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Commenced operations May 4, 1998.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include, effective 1995, the earning credits as described in Notes (2)
and (1)(H) to the Financial Statements incorporated by reference in the
Statement of Additional Information of the Funds.
<PAGE>
...............................................................................
[LOGO OF SENTINEL FUNDS APPEARS HERE]
THE SENTINEL FUNDS
National Life Drive Prospectus
Montpelier, Vermont 05604 Dated May 4, 1998
800-282-3863
...............................................................................
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Expenses.................. 3
Annual Fund Operating Expenses. 4
Financial Highlights........... 8
Purchase Options............... 14
The Funds...................... 16
Investment Objectives and Poli-
cies.......................... 16
Further Information Relative to
the Investment Practices of
the Funds..................... 23
Management of the Funds........ 27
Custodian...................... 31
The Distributor................ 31
</TABLE>
<TABLE>
<S> <C>
Distribution Plans............. 31
How to Purchase Shares......... 33
How To Redeem Shares........... 39
Tax Deferred Retirement Plans.. 44
Determination of Net Asset Val-
ue............................ 44
Dividends and Capital Gains
Distributions................. 45
Taxes.......................... 45
Shareholder Services........... 49
Performance Data............... 50
Organization of the Funds...... 52
Appendix A--Description of Bond
Ratings....................... 53
Applications
</TABLE>
...............................................................................
EACH OF THE THIRTEEN FUNDS IN THE SENTINEL FAMILY OF FUNDS
(INDIVIDUALLY, A "FUND", AND COLLECTIVELY, THE "FUNDS") HAS A
SEPARATE INVESTMENT OBJECTIVE AND POLICIES. THE INVESTMENT
OBJECTIVES OF THE FUNDS ARE AS FOLLOWS:
.SENTINEL U.S. TREASURY MONEY MARKET FUND (the "Money Market
Fund") -- seeks as high a level of current income as is
consistent with the safety of principal and the maintenance
of liquidity, by investing solely in short-term direct
obligations of the U.S. Treasury. AN INVESTMENT IN THE MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE MONEY MARKET FUND SEEKS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE; HOWEVER, THERE CAN
BE NO ASSURANCE THAT THE MONEY MARKET FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
.SENTINEL HIGH YIELD BOND FUND (the "High Yield Fund") --
seeks high current income and total return by investing
primarily in lower rated corporate debt securities. THE HIGH
YIELD FUND MAY INVEST WITHOUT LIMITATION IN LOWER QUALITY
DEBT SECURITIES, SOMETIMES CALLED "JUNK BONDS". INVESTORS IN
THIS FUND SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER
RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT
SECURITIES. PLEASE REFER TO PAGES 24-25 FOR FURTHER
INFORMATION ON THE RISKS OF INVESTING IN THESE SECURITIES.
...............................................................................
This Prospectus sets forth concisely the information about the Funds (as de-
fined herein) that a prospective investor should know before investing. This
Prospectus should be read carefully and retained for future reference. Addi-
tional information about the Funds is contained in the Statement of Additional
Information, dated May 4, 1998 (the "Statement of Additional Information"),
which has been filed with the Securities and Exchange Commission. The State-
ment of Additional Information is available upon request and without charge
from Sentinel Group Funds, Inc. (the "Company") at the address or telephone
number shown above. The Statement of Additional Information is incorporated by
reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 1
Prospectus
<PAGE>
...............................................................................
.SENTINEL COMMON STOCK FUND (the "Common Stock Fund") --
seeks a combination of long-term growth of capital and
income, current return and relatively low risk through
investment in common stocks of many well-established
companies.
.SENTINEL BALANCED FUND (the "Balanced Fund") -- seeks a
conservative combination of stability, income and long-term
growth of capital through investments in both stocks and
bonds, with at least 25% of its net assets in fixed-income
senior securities.
.SENTINEL GROWTH FUND (the "Growth Fund") -- seeks long-term
growth of capital through equity participation in companies
having growth potential believed by Sentinel Advisors Company
(the "Advisor") to be more favorable than that of the U.S.
economy as a whole, with a focus on relatively well-
established companies.
.SENTINEL SMALL COMPANY FUND (the "Small Company Fund") --
seeks long-term capital appreciation. Assets normally will
be invested primarily in common stocks of small and medium-
sized corporations believed by the Advisor to have superior
growth potential.
.SENTINEL WORLD FUND (the "World Fund") -- seeks long-term
growth of capital principally through investments in a
diversified portfolio of marketable equity securities of
established non-U.S. companies.
.SENTINEL BOND FUND (the "Bond Fund") -- seeks as high a
level of continuing income as is consistent with the
preservation of capital through investments primarily in
investment grade fixed-income securities.
.SENTINEL GOVERNMENT SECURITIES FUND (the "Government
Securities Fund") -- seeks as high a level of current income
as is consistent with safety of principal through investments
primarily in securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
.SENTINEL SHORT MATURITY GOVERNMENT FUND (the "Short Maturity
Government Fund") -- seeks as high a level of current income
as is consistent with safety of principal through investments
primarily in securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. The Fund
will invest at least 65% of its assets in such government
securities which have an average maturity from 2 to 5 years.
.SENTINEL TAX-FREE INCOME FUND (the "Tax-Free Income
Fund") -- seeks as high a level of current income exempt from
federal income taxes as is consistent with the preservation
of capital through investments primarily in a diversified
portfolio of investment grade municipal bonds.
.SENTINEL NEW YORK TAX-FREE INCOME FUND (the "New York
Fund") -- seeks as high a level of current interest income
exempt from federal and New York State and City personal
income taxes as is consistent with liquidity and capital
preservation.
.SENTINEL PENNSYLVANIA TAX-FREE TRUST (the "Pennsylvania
Fund") -- seeks as high a level of current interest income
exempt from federal and Pennsylvania personal income taxes as
is consistent with liquidity and capital preservation.
2 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder of the
Funds may expect to incur:
SHAREHOLDER TRANSACTION EXPENSES (as a percentage of offering price)
CLASS A SHARES:
Sales Charge Imposed on Purchases --
<TABLE>
<S> <C>
Common Stock, Balanced, Growth, Small Company and World Funds.... 5.00% maximum
High Yield, Bond, Government Securities, Tax-Free Income, New
York and Pennsylvania Funds..................................... 4.00% maximum
Short Maturity Government Fund................................... 1.00%
Money Market Fund................................................ None
Sales Charge Imposed on Reinvested Dividends..................... None
Redemption Fees.................................................. None/1/
Exchange Fees.................................................... None/2/
</TABLE>
- ---------
/1/ If a shareholder chooses to redeem by means of a wire transfer, a wire
charge not normally in excess of $25.00 will be assessed. In addition, a
deferred sales charge of up to 1% is assessed on certain redemptions of
Class A shares made within two years of purchase, if they were purchased
without an initial sales charge as part of an investment of $1,000,000 or
more. See "How to Purchase Shares -- Class A Shares -- Sales Charges",
below.
/2/ If a shareholder exchanges Class A shares of the Money Market Fund for Class
A shares of another Fund, and such Money Market Fund shares were not
acquired in an exchange from another Fund's Class A shares, then a fee equal
to the sales charge imposed on purchases of the new Fund will be assessed.
CLASS B SHARES (available for the Common Stock, Balanced, Growth, Small
Company, World, High Yield, Bond and Money Market Funds):
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases.............................. None
Sales Charge Imposed on Reinvested Dividends................... None
Contingent Deferred Sales Charge ("CDSC")...................... 4.00% maximum/3/
Exchange Fees.................................................. None/4/
</TABLE>
- ---------
/3/ The maximum CDSC is imposed on shares redeemed in the first year after
purchase. For shares held longer than one year, the CDSC declines according
to the schedules set forth under "How to Redeem Shares -- Class B Shares --
CDSC", below.
/4/ Class B shares may be exchanged only for Class B shares of the other Funds
that offer Class B shares as of the date of the exchange.
CLASS C SHARES (available for the Common Stock, Balanced, World and High Yield
Funds):
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases.............................. None
Sales Charge Imposed on Reinvested Dividends................... None
CDSC........................................................... 1.00% for one year after purchase
Exchange Fees.................................................. None/5/
</TABLE>
- ---------
/5/ Class C shares may be exchanged only for Class C shares of the other Funds
that offer Class C shares as of the date of the exchange, and for Class A
shares of the Money Market Fund.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 3
Prospectus
<PAGE>
................................................................................
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
CLASS A:
<TABLE>
<CAPTION>
COMMON SMALL
STOCK BALANCED GROWTH COMPANY WORLD
FUND FUND FUND FUND FUND
------ -------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Management Fees........................... .55% .63% .63% .63% .63%
Rule 12b-1 Fees (includes service fee
and distribution fee)(a)................. .29 .30 .30 .30 .30
Other Expenses:
Accounting and Administrative Costs..... .04 .04 .04 .04 .04
Other................................... .17 .20 .35 .39 .35
Total Other Expenses...................... .21 .24 .39 .43 .39
---- ---- ---- ---- ----
Total Fund Operating Expenses Before
Expense Offset........................... 1.05% 1.17% 1.32% 1.36% 1.32%
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
HIGH GOVERNMENT SHORT MATURITY
YIELD BOND SECURITIES GOVERNMENT
FUND FUND FUND FUND
----- ---- ---------- --------------
<S> <C> <C> <C> <C>
Management Fees....................... 0.75% .24 % .42% .12%
Rule 12b-1 Fees (includes service fee
and distribution fee)(a)............. 0.20 .20 .20 .35
Other Expenses:
Accounting and Administrative
Costs............................... 0.04 .04 .04 .04
Other............................... 0.27 .22 .22 .26
Total Other Expenses.................. 0.31 .26 .26 .30
---- ---- --- ---
Total Fund Operating Expenses Before
Expense Offset....................... 1.26% .70%(b) .88%(b) .77%(b)
==== ==== === ===
</TABLE>
<TABLE>
<CAPTION>
MONEY TAX FREE
MARKET INCOME NEW YORK PENNSYLVANIA
FUND FUND FUND FUND
------ -------- -------- ------------
<S> <C> <C> <C> <C>
Management Fees........................ .40% .34% .00% .00%
Rule 12b-1 Fees (includes service fee
and distribution fee)(a).............. None .20 .00 .20
Other Expenses:
Accounting and Administrative
Costs................................ .04 .04 .00 .00
Other................................ .33 .18 .06 .54
Total Other Expenses................... .37 .22 .06 .54
---- --- --- ---
Total Fund Operating Expenses Before
Expense Offset........................ .77% .76%(b) .06%(b) .74%(b)
==== === === ===
</TABLE>
4 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
CLASS B:
<TABLE>
<CAPTION>
COMMON SMALL
STOCK BALANCED COMPANY GROWTH
FUND FUND FUND FUND
------ -------- ------- ------
<S> <C> <C> <C> <C>
Management Fees............................... .55% .63% .63% .63%
Rule 12b-1 Fees (includes service fee and
distribution fee)(a)......................... 1.00 1.00 1.00 1.00
Other Expenses:
Accounting and Administrative
Costs....................................... .04 .04 .04 .04
Other....................................... .21 .22 .69 .46
Total Other Expenses.......................... .25 .26 .73 .50
---- ---- ---- ----
Total Fund Operating Expenses Before Expense
Offset....................................... 1.80% 1.89% 2.36% 2.13%
==== ==== ==== ====
<CAPTION>
HIGH MONEY
WORLD YIELD BOND MARKET
FUND FUND FUND FUND
------ -------- ------- ------
<S> <C> <C> <C> <C>
Management Fees............................... .63% .75% .24% .40%
Rule 12b-1 Fees (includes service fee and
distribution fee)(a)......................... 1.00 .28 1.00 None
Other Expenses:
Accounting and Administrative
Costs....................................... .04 .04 .04 .04
Other....................................... .51 .27 .33 .29
Total Other Expenses.......................... .55 .31 .37 .33
---- ---- ---- ----
Total Fund Operating Expenses Before Expense
Offset....................................... 2.18% 1.34% 1.61%(b) .73%
==== ==== ==== ====
CLASS C:
<CAPTION>
COMMON HIGH
STOCK BALANCED WORLD YIELD
FUND FUND FUND FUND
------ -------- ------- ------
<S> <C> <C> <C> <C>
Management Fees............................... .55% .63% .63% .75%
Rule 12b-1 Fees (includes service fee and
distribution fee)(a)......................... 1.00 1.00 1.00 1.00
Other Expenses:
Accounting and Administrative
Costs....................................... .04 .04 .04 .04
Other....................................... .21 .22 .51 .27
Total Other Expenses.......................... .25 .26 .55 .31
---- ---- ---- ----
Total Fund Operating Expenses Before Expense
Offset....................................... 1.80% 1.89% 2.18% 2.06%
==== ==== ==== ====
</TABLE>
- ---------
(a) The maximum annual Rule 12b-1 fee for Common Stock Fund Class A shares,
Balanced Fund Class A shares, Growth Fund Class A shares, Small Company
Fund Class A shares and World Fund Class A shares is .30% of average daily
net assets of each such Fund, of which the service fee portion could be as
much as .20%; the maximum annual Rule 12b-1 fee for the High Yield Fund
Class A shares, Bond Fund Class A shares, Government Securities Fund Class
A shares, Tax-Free Income Fund Class A shares, New York Fund Class A shares
and Pennsylvania Fund Class A shares is .20% of average daily net assets of
each such Fund, of which the service fee portion could be as much as .10%;
and the maximum annual Rule 12b-1 fee for the Short Maturity Government
Fund Class A shares is .35% of average daily net assets, of which the
service fee portion will be .25%.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 5
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
(b) Effective March 30, 1998, the Advisor has voluntarily agreed for a period
until at least November 30, 1998 to an advisory fee reimbursement program
described on page 28 of this Prospectus, which is expected to limit the
overall expense ratios, before expense offset, of the Bond, Government
Securities, Short Maturity Government, Tax-Free Income, New York and
Pennsylvania Funds to approximately the restated amounts shown in the
above table. See page 28 for a more complete description of this
reimbursement program. This reimbursement program may be changed or
terminated at any time after November 30, 1998. In the absence of any
reimbursement arrangements, these Funds' Management Fees, Rule 12b-1 Fees,
Accounting and Administrative Costs, Other Expenses, Total Other Expenses
and Total Fund Operating Expenses would be as follows:
<TABLE>
<CAPTION>
TOTAL
RULE ACCOUNTING TOTAL FUND
MANAGEMENT 12B-1 AND ADMINISTRATIVE OTHER OTHER OPERATING
FEES FEES COSTS EXPENSES EXPENSES EXPENSES
---------- ----- ------------------ -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bond Fund Class A
shares................. .53 .20 .04 .22 .26 .99
Bond Fund Class B
shares................, .53 1.00 .04 .33 .37 1.90
Government Securities
Fund Class A shares.... .53 .20 .04 .22 .26 .99
Short Maturity Govern-
ment Fund Class A
shares................. .53 .35 .04 .26 .30 1.18
Tax-Free Income Fund
Class A shares......... .53 .20 .04 .18 .22 .95
Pennsylvania Fund Class
A shares............... .55 .20 .24 .35 .59 1.34
New York Fund Class A
shares................. .53 .20 .04 .32 .36 1.09
</TABLE>
- -------------------
Shareholders who hold their shares for an extended period of time may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the
maximum front-end sales charges permitted under the Conduct Rules of the Na-
tional Association of Securities Dealers, Inc.
The following examples illustrate the expenses that an investor would pay on
a $1,000 investment in each of the Funds over various time periods assuming
the operating expense ratio as set forth in the tables above for each class
of shares of each Fund and a 5% annual rate of return.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A: ------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock Fund.......................... $60 $ 81 $105 $171
Balanced Fund.............................. 61 85 111 184
Growth Fund................................ 62 89 117 198
Small Company Fund......................... 63 90 120 203
World Fund................................. 62 89 117 198
High Yield Fund............................ 52 77
Bond Fund.................................. 47 61 76 121
Government Securities Fund................. 49 67 86 143
Short Maturity Government Fund............. 18 34 51 102
Money Market Fund.......................... 8 24 42 94
Tax-Free Income Fund....................... 47 62 78 126
New York Fund.............................. 40 40 40 40
Pennsylvania Fund.......................... 47 61 77 124
<CAPTION>
CLASS B (assuming redemption at the end of
the 1 YEAR 3 YEARS 5 YEARS 10 YEARS
period): ------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock Fund.......................... $58 $ 86 $117 $173
Balanced Fund.............................. 59 89 122 184
Growth Fund................................ 61 96 133 203
Small Company Fund......................... 64 103 146 220
World Fund................................. 62 98 136 207
High Yield Fund............................ 53 71
Bond Fund.................................. 56 80 106 141
Money Market Fund.......................... 47 53 61 92
</TABLE>
6 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
<TABLE>
<CAPTION>
CLASS B (assuming no redemption at the end
of the 1 YEAR 3 YEARS 5 YEARS 10 YEARS
period): ------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock Fund......................... $18 $56 $ 97 $173
Balanced Fund............................. 19 59 102 184
Growth Fund............................... 21 66 113 203
Small Company Fund........................ 24 73 126 220
World Fund................................ 22 68 116 207
High Yield Fund........................... 13 41
Bond Fund................................. 16 50 86 141
Money Market Fund......................... 7 23 41 92
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS C:. ------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock Fund......................... $28 $56 $ 97 $211
Balanced Fund............................. 29 59 102 220
World Fund................................ 32 68 116 249
High Yield Fund........................... 30 63
<CAPTION>
CLASS C (assuming no redemption at end of 1 YEAR 3 YEARS 5 YEARS 10 YEARS
period): ------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock Fund......................... $18 $56 $ 97 $211
Balanced Fund............................. 19 59 102 220
World Fund................................ 22 68 116 249
High Yield Fund........................... 20 63
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RATE USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE OF RETURN.
The purpose of the foregoing tables is to assist the investor in understand-
ing the various expenses that an investor in the Funds will bear directly or
indirectly. The expense ratios set forth above, in the case of the Class A
and Class B shares, are based on costs actually borne by the Funds in the
fiscal year ended November 30, 1997, using average net assets of each Fund
for the fiscal year ended November 30, 1997, except for the Bond Fund Class
A shares, Bond Fund Class B shares, Government Securities Fund Class A
shares, Short Maturity Government Fund Class A shares, Tax-Free Income Fund
Class A shares and the Pennsylvania Fund Class A shares, which take into ac-
count a reimbursement policy adopted March 30, 1998, the New York Fund Class
A shares, which take into account changes in reimbursement policy effective
March 31, 1997, and the High Yield Fund, for which the expense ratios of the
Class A and Class B shares are based on annualized costs for the period from
June 20, 1997 (commencement of operations) to November 30, 1997. In the case
of the Class C shares, the expense ratios are based on estimates of
annualized costs anticipated to be borne by the Class C shares of the Funds
during the period from May 4, 1998 (commencement of offering of Class C
shares) to November 30, 1998. In general, all of the Funds share expenses
that are not specifically incurred by particular Funds in proportion to the
net assets of each Fund, except that expenses which vary by the number of
accounts, such as transfer agent costs and shareholder reports and mailing
costs, are allocated in proportion to the number of accounts in each Fund.
The Rule 12b-1 fees shown in the foregoing tables include both service fee
and distribution fee components. See "Distribution Plans" on page 31 for
more information on these fees.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 7
Prospectus
<PAGE>
...............................................................................
FINANCIAL HIGHLIGHTS (for a share outstanding throughout each of the periods).
The following information, insofar as it relates to the five fiscal years in
the period ended November 30, 1997, has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto incorporated by reference in the Statement of Additional
Information. No information is presented for the Class B shares of the Growth
Fund or any of the Class C shares of the Funds because none of them had
commenced operations as of November 30, 1997. The Annual Report of the Funds
may be obtained by shareholders without charge by calling the Company at (800)
282-3863.
<TABLE>
<CAPTION>
- ----------------------- -------------------------------------------- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
- ----------------------- -------------------------------------------- --------------------------------------
NET REALIZED
AND DISTRIBUTIONS
FISCAL NET ASSET NET UNREALIZED DIVIDENDS FROM
YEAR VALUE AT INVESTMENT GAIN TOTAL FROM FROM NET REALIZED
(PERIOD BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT GAINS ON TOTAL
FUND ENDED) OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS DISTRIBUTIONS
- ----------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common 11/30/88 $ 21.49 $ 0.85 $ 3.17 $ 4.02 $ 0.83 $ 1.55 $ 2.38
Stock -- A 11/30/89 23.13 0.91 4.60 5.51 0.99 1.20 2.19
11/30/90 26.45 0.93 (1.50) (0.57) 1.00 1.27 2.27
11/30/91 23.61 0.90 3.90 4.80 0.93 0.70 1.63
11/30/92 26.78 0.90 3.44 4.34 0.91 0.50 1.41
11/30/93 29.71 0.79 1.66 2.45 0.82 1.71 2.53
11/30/94 29.63 0.83 (1.35) (0.52) 0.80 0.06 0.86
11/30/95 28.25 0.72 8.09 8.81 0.74 1.11 1.85
11/30/96 35.21 0.59 8.18 8.77 0.61 2.77 3.38
11/30/97 40.60 0.57 7.03 7.60 0.57 3.54 4.11
<CAPTION>
- ----------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced -- A 11/30/88 $ 11.32 $ 0.71 $ 0.91 $ 1.62 $ 0.72 $ -- $ 0.72
11/30/89 12.22 0.80 1.33 2.13 0.78 0.04 0.82
11/30/90 13.53 0.79 (0.56) 0.23 0.83 0.35 1.18
11/30/91 12.58 0.77 1.37 2.14 0.78 0.05 0.83
11/30/92 13.89 0.70 0.97 1.67 0.71 0.03 0.74
11/30/93 14.82 0.59 0.80 1.39 0.58 0.36 0.94
11/30/94 15.27 0.58 (1.12) (0.54) 0.56 0.09 0.65
11/30/95 14.08 0.58 2.78 3.36 0.59 0.01 0.60
11/30/96 16.84 0.54 2.13 2.67 0.54 0.42 0.96
11/30/97 18.55 0.56 2.18 2.74 0.55 0.45 1.00
<CAPTION>
- ----------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth -- A 11/30/88 $ 13.35 $ 0.17 $ 1.36 $ 1.53 $ 0.25 $ 3.18 $ 3.43
11/30/89 11.45 0.16 2.99 3.15 0.18 -- 0.18
11/30/90 14.42 0.18 (0.37) (0.19) 0.17 -- 0.17
11/30/91 14.06 0.20 1.93 2.13 0.20 -- 0.20
11/30/92 15.99 0.11 3.07 3.18 0.16 0.45 0.61
11/30/93 18.56 0.04 (0.28) (0.24) 0.04 0.77 0.81
11/30/94 17.51 0.05 (0.92) (0.87) 0.03 0.46 0.49
11/30/95 16.15 0.07 3.33 3.40 0.05 2.57 2.62
11/30/96 16.93 0.03 3.23 3.26 0.07 2.55 2.62
11/30/97 17.57 (0.02) 4.00 3.98 0.02 2.80 2.82
<CAPTION>
- ----------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small 9 Mo. to
Company -- A 11/30/93(A) $ 6.49 $(0.06) $ 0.44 $ 0.38 $ -- $ -- $ --
11/30/94 6.87 (0.04) 0.18 0.14 -- 1.48 1.48
11/30/95 5.53 0.02 0.56 0.58 -- 0.91 0.91
11/30/96 5.20 0.01 0.95 0.96 0.03 0.96 0.99
11/30/97 5.17 0.02 1.16 1.18 0.01 0.04 0.05
<CAPTION>
- ----------------------- -------------------------------------------- --------------------------------------
</TABLE>
8 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
<TABLE>
<CAPTION>
- ------------------ -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------ -----------------------------------------------------------------------------
RATIO OF
EXPENSES TO RATIO OF NET
NET ASSET RATIO OF AVERAGE NET INVESTMENT AVERAGE NET ASSETS
VALUE AT TOTAL NET EXPENSES ASSETS BEFORE INCOME TO PORTFOLIO COMMISSION AT END
END OF RETURN* TO AVERAGE EXPENSE AVG. NET TURNOVER RATE PAID OF PERIOD
PERIOD (%) NET ASSETS (%) REDUCTION**(%) ASSETS (%) RATE (%) PER SHARE (000 OMITTED)
- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$23.13 19.8 0.87 0.87 3.75 7 N/A $ 490,168
26.45 25.6 0.80 0.80 3.69 11 N/A 591,136
23.61 (2.4) 0.76 0.76 3.82 6 N/A 543,047
26.78 21.1 0.74 0.74 3.41 9 N/A 620,179
29.71 16.7 0.72 0.72 3.13 5 N/A 688,309
29.63 8.8 0.93 0.93 2.68 9 N/A 897,836
28.25 (1.8) 1.02 1.02 2.82 15 N/A 839,335
35.21 32.8 1.09 1.10 2.29 22 N/A 1,057,944
40.60 27.2 1.06 1.07 1.64 22 .0600 1,306,592
44.09 20.9 1.04 1.05 1.41 24 $.0600 1,509,999
<CAPTION>
- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$12.22 14.6 0.97 0.97 5.74 52 N/A $ 67,019
13.53 18.1 0.96 0.96 6.16 71 N/A 74,417
12.58 1.8 0.91 0.91 6.17 40 N/A 74,808
13.89 17.5 0.85 0.85 5.70 32 N/A 90,580
14.82 12.4 0.81 0.81 4.86 38 N/A 120,700
15.27 9.7 1.14 1.14 3.88 72 N/A 229,632
14.08 (3.6) 1.21 1.21 3.97 66 N/A 226,328
16.84 24.4 1.27 1.29 3.77 110 N/A 267,103
18.55 16.6 1.20 1.22 3.13 83 .0600 297,288
20.29 15.4 1.16 1.17 2.93 63 $.0600 314,948
<CAPTION>
- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.45 11.7 1.12 1.12 1.44 69 N/A $ 47,350
14.42 27.7 1.24 1.24 1.18 24 N/A 51,665
14.06 (1.4) 1.20 1.20 1.22 15 N/A 49,580
15.99 15.2 1.08 1.08 1.22 25 N/A 55,598
18.56 20.5 1.05 1.05 0.63 28 N/A 63,664
17.51 (1.3) 1.31 1.31 0.22 12 N/A 57,833
16.15 (5.1) 1.43 1.43 0.30 58 N/A 50,447
16.93 24.9 1.50 1.54 0.42 84 N/A 60,446
17.57 22.6 1.40 1.43 0.16 98 .0600 69,816
18.73 27.3 1.29 1.32 (0.15) 161 $.0600 88,184
<CAPTION>
- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6.87 5.9# 1.52+ 1.52+ (1.01)+ 61 N/A $ 105,176
5.53 2.0 1.58 1.58 (0.74) 46 N/A 88,420
5.20 12.2 1.56 1.60 0.26 79 N/A 89,321
5.17 22.0 1.47 1.51 0.23 60 .0600 99,393
6.30 23.0 1.34 1.36 0.38 45 $.0600 115,532
<CAPTION>
- ------------------ -----------------------------------------------------------------------------
</TABLE>
(footnotes on following pages)
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 9
Prospectus
<PAGE>
................................................................................
<TABLE>
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
- ---------------------------- -------------------------------------------- --------------------------------------
NET REALIZED
AND DISTRIBUTIONS
NET ASSET NET UNREALIZED DIVIDENDS FROM
FISCAL YEAR VALUE AT INVESTMENT GAIN TOTAL FROM FROM NET REALIZED
(PERIOD BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT GAINS ON TOTAL
FUND ENDED) OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS DISTRIBUTIONS
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
World -- A 9 Mo. to
11/30/93(A) $ 9.56 $0.02 $ 2.28 $ 2.30 $ -- $ -- $ --
11/30/94 11.86 0.08 0.89 0.97 0.03 0.06 0.09
11/30/95 12.74 0.14 1.14 1.28 0.09 0.15 0.24
11/30/96 13.78 0.12 1.99 2.11 0.13 0.07 0.20
11/30/97 15.69 0.11 1.80 1.91 0.11 0.24 0.35
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield 5 Mo. to
Fund -- A 11/30/97(E) $10.00 $0.32 $ 0.41 $ 0.73 $0.32 $ -- $0.32
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond -- A 11/30/88 $ 5.99 $0.55 $ 0.03 $ 0.58 $0.55 $ -- $0.55
11/30/89 6.02 0.56 0.18 0.74 0.55 -- 0.55
11/30/90 6.21 0.52 (0.18) 0.34 0.52 -- 0.52
11/30/91 6.03 0.50 0.40 0.90 0.50 -- 0.50
11/30/92 6.43 0.46 0.13 0.59 0.46 -- 0.46
11/30/93 6.56 0.41 0.46 0.87 0.41 0.12 0.53
11/30/94 6.90 0.39 (0.70) (0.31) 0.39 0.35 0.74
11/30/95 5.85 0.42 0.64 1.06 0.42 -- 0.42
11/30/96 6.49 0.41 (0.14) 0.27 0.41 -- 0.41
11/30/97 6.35 0.40 0.01 0.41 0.40 -- 0.40
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government 11/30/88 $ 9.35 $0.78 $(0.03) $ 0.75 $0.79 $ -- $0.79
Securities -- A 11/30/89 9.31 0.81 0.26 1.07 0.81 -- 0.81
11/30/90 9.57 0.78 (0.03) 0.75 0.78 -- 0.78
11/30/91 9.54 0.74 0.50 1.24 0.74 -- 0.74
11/30/92 10.04 0.70 0.14 0.84 0.70 -- 0.70
11/30/93 10.18 0.62 0.42 1.04 0.60 0.17 0.77
11/30/94 10.45 0.59 (1.04) (0.45) 0.58 0.11 0.69
11/30/95 9.31 0.63 0.99 1.62 0.63 -- 0.63
11/30/96 10.30 0.61 (0.30) 0.31 0.61 -- 0.61
11/30/97 10.00 0.59 0.09 0.68 0.59 -- 0.59
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short 8 Mo. to
Maturity 11/30/95(B) $ 9.64 $0.40 $ 0.20 $ 0.60 $0.40 $ -- $0.40
Gov't. -- A 11/30/96 9.84 0.57 (0.03) 0.54 0.57 -- 0.57
11/30/97 9.81 0.56 0.01 0.57 0.56 -- 0.56
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury -- A 9 Mo. to
11/30/93(A) $ 1.00 $0.02 $ 0.00 $ 0.02 $0.02 $ -- $0.02
11/30/94 1.00 0.03 0.00 0.03 0.03 -- 0.03
11/30/95 1.00 0.05 0.00 0.05 0.05 -- 0.05
11/30/96 1.00 0.04 0.00 0.04 0.04 -- 0.04
11/30/97 1.00 0.04 -- 0.04 0.04 -- 0.04
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free -- A 2 Mo. to
11/30/90(C) $12.00 $0.10 $ 0.26 $ 0.36 $0.10 $ -- $0.10
11/30/91 12.26 0.79 0.42 1.21 0.79 -- 0.79
11/30/92 12.68 0.76 0.47 1.23 0.76 0.02 0.78
11/30/93 13.13 0.73 0.79 1.52 0.73 0.11 0.84
11/30/94 13.81 0.68 (1.34) (0.66) 0.68 0.12 0.80
11/30/95 12.35 0.67 1.27 1.94 0.67 -- 0.67
11/30/96 13.62 0.65 (0.09) 0.56 0.65 -- 0.65
11/30/97 13.53 0.65 0.24 0.89 0.65 0.13 0.78
<CAPTION>
- ---------------------------- -------------------------------------------- --------------------------------------
</TABLE>
10 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
<TABLE>
<CAPTION>
.................................................................................................
- ------------------ ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------ ------------------------------------------------------------------------------
RATIO OF
EXPENSES TO RATIO OF NET
NET ASSET RATIO OF AVERAGE NET INVESTMENT PORTFOLIO AVERAGE NET ASSETS
VALUE AT TOTAL NET EXPENSES ASSETS BEFORE INCOME TO TURNOVER COMMISSION AT END
END OF RETURN* TO AVERAGE EXPENSE AVG. NET RATE RATE PAID OF PERIOD
PERIOD (%) NET ASSETS (%) REDUCTION**(%) ASSETS (%) (%) PER SHARE (000 OMITTED)
- ------------------ ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$11.86 24.1# 2.00+ 2.12+ 0.41(1)+ 66 N/A $ 16,872
12.74 8.2 1.58 1.58 0.62 30 N/A 41,970
13.78 10.2 1.56 1.63 0.79 32 N/A 47,702
15.69 15.5 1.43 1.48 0.94 14 .0455 71,458
17.25 12.5 1.29 1.32 1.14 21 $.0411 89,740
- ------------------ ------------------------------------------------------------------------------
$10.41 7.3* 1.20+ 1.26+ 7.80+ 133 N/A $ 11,084
- ------------------ ------------------------------------------------------------------------------
$ 6.02 10.0 0.92 0.92 8.97 133 N/A $ 27,858
6.21 12.9 0.87 0.87 9.07 165 N/A 31,668
6.03 5.8 0.83 0.83 8.55 108 N/A 35,389
6.43 15.6 0.81 0.81 8.06 77 N/A 43,447
6.56 9.5 0.78 0.78 7.03 83 N/A 58,106
6.90 13.7 0.92 0.92 5.98 147 N/A 83,387
5.85 (4.9) 0.98 0.98 6.34 133 N/A 80,487
6.49 18.8 0.99 1.03 6.81 237 N/A 108,755
6.35 4.5 0.98 1.00 6.46 176 N/A 99,408
6.36 6.7 0.97 0.99 6.37 130 N/A 88,756
- ------------------ ------------------------------------------------------------------------------
$ 9.31 8.2 0.90 0.90 8.20 41 N/A $ 31,007
9.57 12.1 0.82 0.82 8.59 25 N/A 34,644
9.54 8.3 0.78 0.78 8.25 22 N/A 41,134
10.04 13.5 0.77 0.77 7.52 14 N/A 45,734
10.18 8.6 0.76 0.76 6.90 79 N/A 68,293
10.45 10.6 0.98 0.98 6.06 97 N/A 134,749
9.31 (4.5) 1.00 1.00 5.95 149 N/A 104,457
10.30 17.9 1.03 1.04 6.50 367 N/A 108,100
10.00 3.2 1.00 1.01 6.18 614 N/A 92,299
10.09 7.2 0.98 0.99 6.15 249 N/A 75,810
- ------------------ ------------------------------------------------------------------------------
$ 9.84 6.3# 1.00+ 1.38+ 6.07(6)+ 58 N/A $ 28,417
9.81 5.6 1.00 1.20 6.09(6) 120 N/A 36,474
9.82 6.0 1.00 1.18 6.20(6) 61 N/A 45,044
- ------------------ ------------------------------------------------------------------------------
$ 1.00 1.7# 0.85+ 0.87+ 2.20(7) -- N/A $ 72,252
1.00 3.1 0.81 0.81 3.01 -- N/A 75,301
1.00 5.0 0.81 0.82 4.83 -- N/A 80,664
1.00 4.6 0.78 0.78 4.38 -- N/A 80,804
1.00 4.6 0.76 0.77 4.46 -- N/A 85,911
- ------------------ ------------------------------------------------------------------------------
$12.26 3.0# 0.00 0.52+ 4.98(5)+ -- N/A $ 13,824
12.68 10.2 0.38 0.73 6.37(5) 29 N/A 35,277
13.13 10.0 0.50 0.72 5.93(5) 48 N/A 55,538
13.81 11.9 0.64 0.90 5.41(5) 39 N/A 111,968
12.35 (5.1) 0.75 0.94 5.11(5) 92 N/A 99,935
13.62 16.0 0.90 0.99 5.06(5) 112 N/A 110,506
13.53 4.3 0.94 0.97 4.86 112 N/A 99,967
13.64 6.9 0.91 0.95 4.84 47 N/A 87,935
- ------------------ ------------------------------------------------------------------------------
</TABLE>
(footnotes on following pages)
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 11
Prospectus
<PAGE>
<TABLE>
<CAPTION>
...............................................................................................................
- ------------------------ -------------------------------------------- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
- ------------------------ -------------------------------------------- --------------------------------------
NET REALIZED
NET AND DISTRIBUTIONS
FISCAL ASSET NET UNREALIZED TOTAL DIVIDENDS FROM
YEAR VALUE AT INVESTMENT GAIN FROM FROM NET REALIZED
(PERIOD BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT GAINS ON TOTAL
FUND ENDED) OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS DISTRIBUTIONS
- ------------------------ -------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New York 8 Mo. to
Fund -- A 11/30/95(B) $11.19 $ 0.36 $ 0.53 $ 0.89 $0.36 $ -- $0.36
11/30/96 11.72 0.53 -- 0.53 0.53 -- 0.53
11/30/97 11.72 0.60 0.25 0.85 0.60 0.09 0.69
- ------------------------ -------------------------------------------- --------------------------------------
Pennsylvania
Fund -- A 12/31/88(3) $11.49 $ 0.82 $ 0.58 $ 1.40 $0.82 $ -- $0.82
12/31/89 12.07 0.66 0.33 0.99 0.72 -- 0.72
12/31/90 12.34 0.72 (0.03) 0.69 0.78 -- 0.78
12/31/91 12.25 0.71 0.52 1.23 0.74 -- 0.74
12/31/92 12.74 0.73 0.43 1.16 0.75 -- 0.75
11 Mo. to
11/30/93 13.15 0.69 0.42 1.11 0.69 -- 0.69
11/30/94 13.57 0.64 (1.28) (0.64) 0.64 -- 0.64
11/30/95 12.29 0.66 1.11 1.77 0.66 -- 0.66
11/30/96 13.40 0.66 (0.03) 0.63 0.66 0.08 0.74
11/30/97 13.29 0.64 0.13 0.77 0.64 0.08 0.72
- ------------------------ -------------------------------------------- --------------------------------------
Common 8 Mo. to
Stock -- B 11/30/96(D) $35.43 $ 0.22 $ 5.05 $ 5.27 $0.13 $ -- $0.13
11/30/97 40.57 0.27 6.99 7.26 0.26 3.54 3.80
- ------------------------ -------------------------------------------- --------------------------------------
Balanced -- B 8 Mo. to
11/30/96(D) $17.09 $ 0.26 $ 1.37 $ 1.63 $0.14 $ -- $0.14
11/30/97 18.58 0.42 2.18 2.60 0.41 0.45 0.86
- ------------------------ -------------------------------------------- --------------------------------------
Small 8 Mo. to
Company -- B 11/30/96(D) $ 4.82 $(0.03) $ 0.33 $ 0.30 $ -- $ -- $ --
11/30/97 5.12 (0.03) 1.13 1.10 -- 0.04 0.04
- ------------------------ -------------------------------------------- --------------------------------------
World -- B 8 Mo. to $
11/30/96(D) $14.49 $(0.08) $ 1.17 $ 1.09 $ -- $ -- $ --
11/30/97 15.58 0.01 1.74 1.75 0.04 0.24 0.28
- ------------------------ -------------------------------------------- --------------------------------------
High Yield 5 Mo. to
Fund -- B 11/30/97(E) $10.00 $ 0.32 $ 0.39 $ 0.71 $0.31 -- $0.31
- ------------------------ -------------------------------------------- --------------------------------------
Bond -- B 8 Mo. to
11/30/96(D) $ 6.30 $ 0.21 $ 0.06 $ 0.27 $0.21 $ -- $0.21
11/30/97 6.36 0.34 0.02 0.36 0.34 -- 0.34
- ------------------------ -------------------------------------------- --------------------------------------
Treasury -- B 8 Mo. to
11/30/96(D) $ 1.00 $ 0.03 $ 0.00 $ 0.03 $0.03 $ -- $0.03
11/30/97 1.00 0.05 -- 0.05 0.05 -- 0.05
- ------------------------ -------------------------------------------- --------------------------------------
</TABLE>
(A) Commenced operations March 1, 1993.
(B) Commenced operations March 27, 1995.
(C) Commenced operations October 1, 1990.
(D) Commenced operations April 1, 1996.
(E) Commenced operations June 23, 1997.
+ Annualized.
# Not annualized.
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of (i) voluntary expense reimbursements,
in the cases of the World Fund and the Money Market Fund in fiscal 1993,
the Short Maturity Government Fund in all fiscal years shown, the Tax-Free
Income Fund in fiscal years 1990 to 1995, the Pennsylania Fund in the
periods ended December 31, 1986, 1987 and 1988, and November 30, 1995, 1996
and 1997, and the New York Fund for fiscal 1997, (ii) for all Funds in
operation during fiscal 1995, 1996 and 1997 only, credits received from the
custodian and dividend paying agent on cash balances.
12 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
<TABLE>
<CAPTION>
................................................................................................
- ------------------ -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------ -----------------------------------------------------------------------------
RATIO OF
EXPENSES TO RATIO OF NET
NET ASSET RATIO OF AVERAGE NET INVESTMENT PORTFOLIO AVERAGE NET ASSETS
VALUE AT TOTAL NET EXPENSES ASSETS BEFORE INCOME TO TURNOVER COMMISSION AT END
END OF RETURN* TO AVERAGE EXPENSE AVG. NET RATE RATE PAID OF PERIOD
PERIOD (%) NET ASSETS (%) REDUCTION**(%) ASSETS (%) (%) PER SHARE (000 OMITTED)
- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$11.72 8.1# 1.22+ 1.29+ 4.60+ 32 N/A $ 5,332
11.72 4.8 1.04 1.10 4.65 48 N/A 5,749
11.88 7.7 0.30 1.09 5.31(8) 21 N/A 7,704
- ------------------ -----------------------------------------------------------------------------
$ 2.07 12.5 0.86(2) 1.44(2) 6.93(4) 48 N/A $29,611
12.34 8.5 1.16 1.16 6.43 50 N/A 29,435
12.25 5.9 1.34 1.34 5.90 27 N/A 30,536
12.74 10.3 1.27 1.27 5.71 8 N/A 32,667
13.15 9.4 1.16 1.16 5.62 1 N/A 33,669
13.57 8.1# 1.24+ 1.24+ 5.07+ 23 N/A 34,448
12.29 (4.9) 1.30 1.30 4.84 56 N/A 31,172
13.40 14.8 0.97 1.36 5.14(4) 80 N/A 34,975
13.29 5.0 0.75 1.37 5.07(4) 56 N/A 35,545
13.34 6.1 0.85 1.34 4.86(4) 28 N/A 34,844
- ------------------ -----------------------------------------------------------------------------
$40.57 14.9# 1.91+ 1.92+ 0.80+ 22 $.0600 $27,257
44.03 19.9 1.79 1.80 0.66 24 .0600 77,299
- ------------------ -----------------------------------------------------------------------------
$18.58 9.6# 2.12+ 2.13+ 2.21+ 83 $.0600 $10,948
20.32 14.6 1.88 1.89 2.21 63 .0600 26.593
- ------------------ -----------------------------------------------------------------------------
$ 5.12 6.2# 2.62+ 2.64+ (0.91)+ 60 $.0600 $ 1,943
6.18 21.6 2.35 2.36 (0.62) 45 .0600 7,656
- ------------------ -----------------------------------------------------------------------------
$15.58 7.5# 2.56+ 2.59+ (0.19)+ 14 $.0455 $ 3,188
17.05 11.5 2.16 2.18 0.23 21 .0411 10,121
- ------------------ -----------------------------------------------------------------------------
10.40 7.2# 1.30+ 1.34+ 7.70+ 133 N/A 33,808
- ------------------ -----------------------------------------------------------------------------
$ 6.36 4.5# 2.16+ 2.18+ 5.28+ 176 N/A $ 4,714
6.38 5.9 1.87 1.90 5.46 130 N/A 8,115
- ------------------ -----------------------------------------------------------------------------
$ 1.00 3.0# 0.76+ 0.77+ 4.40+ -- N/A $ 3,160
1.00 4.7 0.73 0.73 4.50 -- N/A 3,434
- ------------------ -----------------------------------------------------------------------------
</TABLE>
(1) Ratio of net investment income to average net assets would have been .29%
in fiscal 1993, in the absence of a voluntary expense reimbursement.
(2) Prior to March 1, 1993, the Pennsylvania Fund's investment advisor was
ProvidentMutual Management Co., Inc. ("PMMC") and the distributor was
ProvidentMutual Financial Services ("PMFS"). For the years ended December
31, 1988, PMMC waived advisory fees of $97,538, and PMFS waived
distribution fees of $72,170. Had such fees not been waived, the ratio of
expenses to average net assets for the fiscal year ended December 31, 1988
would have been 1.44%.
(3) The Pennsylvania Fund changed investment advisors from The Meritor
Investment Company to PMMC on December 28, 1988, and entered into its
current Investment Advisory Agreement with the Advisor on March 1, 1993.
(4) Ratio of net investment income to average net assets would have been 4.41%
fiscal 1997, 4.48% in fiscal 1996, 4.78% in fiscal 1995, 6.35% in 1988 and
6.14% in 1987, in the absence of a voluntary expense reimbursement.
(5) Ratio of net investment income to average net assets would have been 5.00%
in fiscal 1995, 4.92% in fiscal 1994, 5.14% in fiscal 1993, 5.71% in
fiscal 1992, 6.02% in fiscal 1991 and 4.46% in fiscal 1990, in the absence
of a voluntary expense reimbursement.
(6) Ratio of net investment income to average net assets would have been 6.14%
fiscal 1997, 5.93% in fiscal 1996 and 5.76% in fiscal 1995, in the absence
of a voluntary expense reimbursement.
(7) Ratio of net investment income to average net assets would have been 2.18%
in fiscal 1993, in the absence of a voluntary expense reimbursement.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 13
Prospectus
<PAGE>
...............................................................................
PURCHASE OPTIONS
The Common Stock, Balanced, World and High Yield Funds currently offer three
classes of shares. Investors in these Funds may choose Class A shares, which
generally are sold subject to an initial sales charge and a distribution fee
of up to 0.30% per year, Class B shares, which are sold subject to a contin-
gent deferred sales charge ("CDSC") and a distribution fee of 1.00% per year,
or Class C shares, which are sold subject to a 1.00% CDSC in the first year
after purchase only, and a distribution fee of 1.00% per year. Class C shares
in general have operating expense ratios similar to those of the Class B
shares, but do not convert to Class A shares. The table below outlines the
differences between the three classes of shares.
<TABLE>
<CAPTION>
TOTAL 12B-1 FEE,
CLASS SALES CHARGE(1) SERVICE FEE INCLUDING SERVICE FEECONVERSION FEATURE
----- --------------- ------------------ --------------------- ------------------
<C> <C> <C> <C> <S>
A Maximum 5.00% Maximum of Maximum of No
initial sales 0.20%(3) 0.30%(4)
charge (4.00%
for High Yield
Fund)(2)
- ------------------------------------------------------------------------------------
B CDSC of up to 0.25% 1.00% Class B Shares
4.00% for a convert to
maximum of 6 Class A Shares
years(5) automatically
after the
applicable
CDSC
period(5)(6)
- ------------------------------------------------------------------------------------
C CDSC of 1.00% 0.25% 1.00% No
for the first
year only(7)
</TABLE>
- ---------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs are imposed if the redemption occurs within
the applicable CDSC time period. The charge will be assessed on an amount
equal to the lesser of the current net asset value or cost of the shares
being redeemed. See "How to Purchase Shares -- Class A Shares -- Sales
Charges", "How to Redeem Shares -- Class B Shares -- CDSC", and "How to
Redeem Shares -- Class C Shares -- CDSC".
(2) Reduced for purchases of more than $100,000 and waived for purchases of
Class A shares by certain investors. Class A share purchases of $1,000,000
or more are not subject to an initial sales charge but, if the initial
sales charge is waived, will be subject to a 1.0% CDSC and 0.5% CDSC for
the first and second year, respectively, after the purchase. Following the
second year after purchase, no CDSC will apply. See "How to Purchase
Shares -- Class A Shares -- Sales Charges" and "How to Redeem Shares --
Class A Shares Purchased in Amounts over $1,000,000 -- CDSC".
(3) The maximum service fee for Class A shares of the High Yield Fund is
0.10%.
(4) The maximum distribution fee for Class A shares of the High Yield Fund is
0.20%.
(5) The applicable CDSC period is reduced to 5 years for aggregate purchases
from $250,001 to $500,000 and to 4 years for aggregate purchases of
$500,001 to $999,999. Investors with aggregate purchases in excess of
$1,000,000 are only offered Class A shares. The CDSC may be waived in
certain circumstances. See "How to Redeem Shares -- Class B Shares --
CDSC" and "How to Redeem Shares -- Class B Shares -- Waiver or Reduction
of the CDSC".
(6) The conversion and holding periods for dividend reinvestment shares are
the same as those for the initial shares to which they relate.
(7) The CDSC may be waived in certain circumstances. See "How to Redeem
Shares -- Waiver or Reduction of the CDSC".
14 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
The Growth, Small Company and, Bond Funds currently offer two classes of
shares. Investors in these Funds may choose Class A shares, which are generally
sold subject to an initial sales charge, or Class B shares, which are sold sub-
ject to a CDSC as described below.
<TABLE>
<CAPTION>
TOTAL 12B-1 FEE,
CLASS SALES CHARGE(1) SERVICE FEE INCLUDING SERVICE FEECONVERSION FEATURE
----- --------------- ------------------ --------------------- ------------------
<C> <C> <C> <C> <S>
A Maximum 5.00% Maximum of Maximum of No
initial sales 0.20%(3) 0.30%(4)
charge (4.00%
for Bond
Fund)(2)
- ------------------------------------------------------------------------------------
B CDSC of up to 0.25% 1.00% Class B Shares
4.00% for a convert to
maximum of 6 Class A Shares
years(5) automatically
after the
applicable
CDSC
period(5)(6)
</TABLE>
- ---------
(1) See footnote (1) to the preceding chart.
(2) See footnote (2) to the preceding chart.
(3) The maximum service fee for Class A shares of the Bond Fund is 0.10%.
(4) The maximum distribution fee for Class A shares of the Bond Fund is 0.20%.
(5) See footnote (5) to the preceding chart.
(6) See footnote (6) to the preceding chart.
The Government Securities, Tax-Free Income, New York and Pennsylvania Funds
currently only offer Class A Shares as described below.
<TABLE>
<CAPTION>
TOTAL 12B-1 FEE,
CLASS SALES CHARGE(1) SERVICE FEE INCLUDING SERVICE FEECONVERSION FEATURE
----- --------------- ------------------ --------------------- ------------------
<C> <C> <C> <C> <S>
A Maximum 4.00% Maximum of 0.10% Maximum of 0.20% None
initial sales
charge(2)
</TABLE>
- ---------
(1) See footnote (1) to the first chart in this section.
(2) See footnote (2) to the first chart in this section.
The Short Maturity Government Fund currently only offers Class A Shares as de-
scribed below.
<TABLE>
<CAPTION>
TOTAL 12B-1 FEE,
CLASS SALES CHARGE(1) SERVICE FEE INCLUDING SERVICE FEECONVERSION FEATURE
----- --------------- ------------------ --------------------- ------------------
<C> <C> <C> <C> <S>
A Maximum 1.00% Maximum of 0.25% Maximum of 0.35% None
initial sales
charge(2)
</TABLE>
- ---------
(1) See footnote (1) to first chart in this section.
(2) Purchases of such shares of up to $999,999 are subject to a 1.0% initial
sales charge, while purchases of $1,000,000 or more are not subject to an
initial sales charge. If the initial sales charge is waived because a
purchase is of $1,000,000 or more, the shares will be subject to a 1.0%
CDSC and 0.5% CDSC for the first and second year, respectively, after the
purchase. Following the second year after purchase, no CDSC will apply. See
"How to Purchase Shares -- Class A Shares -- Sales Charges" and "How to
Redeem Shares -- Class A Shares Purchased in Amounts over $1,000,000 --
CDSC".
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 15
Prospectus
<PAGE>
...............................................................................
The Money Market Fund offers Class A and Class B Shares. Ini-
tial purchases of Class A Shares of the Money Market Fund are
not subject to any initial sales charge, CDSC or Rule 12b-1
fees. Class B Shares of the Money Market Fund may not be pur-
chased directly (except in connection with the plans de-
scribed on page 34) or acquired in exchange for shares of the
Growth, Government Securities, Short Maturity Government, New
York and Pennsylvania Funds. Except as provided on page 34,
they may be acquired only in exchange for Class B Shares of
another Fund. The period of time that shares are held in
Class B Shares of the Money Market Fund, however, will not
count toward satisfaction of the holding or conversion peri-
ods for reduction of any CDSC imposed on such shares or the
conversion of Class B Shares to Class A Shares, respectively.
See "How to Purchase Shares -- Class B Shares".
..............................................................
THE FUNDS
Sentinel Group Funds, Inc. (the "Company") is a managed,
open-end investment company that consists of twelve separate
series funds, each of which continuously offers shares to in-
vestors. All of the Funds in Sentinel Group Funds, Inc., ex-
cept the New York Fund, are diversified. The New York Fund is
a non-diversified series of the Company. The Pennsylvania
Fund is a separate open-end, non-diversified, managed invest-
ment company.
Sentinel Advisors Company (the "Advisor") serves as the in-
vestment advisor to all of the Funds and Sentinel Financial
Services Company (the "Distributor") serves as the distribu-
tor for all of the Funds. See "Management of the Funds" and
"The Distributor".
..............................................................
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds has distinct investment objectives and pol-
icies. Investment objectives are fundamental policies of each
Fund that may only be changed by a majority vote of the out-
standing shares of that Fund. There can be no assurance that
these objectives will be achieved.
Set forth below is a description of each Fund's investment
objectives and policies.
THE FUND .THE COMMON STOCK FUND seeks a combination of long-term
INVESTS FOR growth of capital and income, current return and relatively
GROWTH OF low risk by investing in the common stocks of a diversified
CAPITAL AND group of well-established companies. The Advisor will select
INCOME WITH securities based on the issuing companies' quality and its
RELATIVELY LOW appraisal of a stock's price in relation to its value. When
RISK appropriate, the Fund may also invest in preferred stocks or
debentures convertible into common stocks.
THE FUND .THE BALANCED FUND seeks a conservative combination of sta-
INVESTS FOR bility, income and long-term growth of capital by investing
STABILITY, in a diversified portfolio of stocks and bonds. The percent-
INCOME AND age invested in each type of security will depend on whether
GROWTH the Advisor believes stocks or bonds offer a better value at
the time of allocation. A greater proportion invested in
bonds ordinarily provides greater price stability, and a
greater proportion in common stocks usually provides enhanced
potential for growth of income and principal. The Fund will
invest at least 25% of its total assets in fixed-income secu-
rities. When determining this percentage, convertible bonds
and/or preferred stocks will be considered common stocks, un-
less these securities are held primarily for income. The bond
portion of the Balanced Fund will be invested in accordance
with the same investment policies as set forth below for the
Bond Fund. As of November 30, 1997, the portfolio securities
in the bond portion of the Balanced Fund had an average rat-
ing of Aa2; the average effective portfolio maturity for the
bond portion of the Fund was 9.1 years.
THE FUND .THE GROWTH FUND seeks to achieve long-term growth of capital
INVESTS IN by investing primarily in common stocks of companies which
STOCKS OF the Advisor believes have more growth potential than the U.S.
GROWING economy as a whole. The Growth Fund will focus on securities
COMPANIES, of well-established companies. Such companies will have, in
WITH A FOCUS the Advisor's judgment, favorable growth potential and expe-
ON WELL- rienced managements. Normally, the Fund will be fully in-
ESTABLISHED vested in common stocks and other securities convertible into
COMPANIES common stocks; however, the Fund may temporarily retain cash
or invest in fixed-income securities, if deemed appropriate
by the Advisor. Income is not a factor in selecting invest-
ments.
16 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
The Growth Fund emphasizes securities believed to have supe-
rior potential for growth rather than wide diversification.
Up to 25% of the value of the Growth Fund's assets may be in-
vested in securities of companies within a single industry.
.THE SMALL COMPANY FUND seeks long-term capital appreciation THE FUND
by investing primarily in a diversified portfolio of common INVESTS IN
stocks, or securities convertible into common stock, issued STOCKS OF
by small and medium-sized companies. The Fund may also invest GROWING
in larger, more established companies. Companies selected for COMPANIES,
the Fund are believed to have superior growth potential and WITH A FOCUS
are judged to represent attractive relative values. Income is ON SMALL AND
not a factor in selecting investments. MID-SIZED
COMPANIES
The median market capitalization of the Fund's portfolio com-
panies generally will not exceed $1 billion and at least 65%
of the Fund's assets will be invested in companies with mar-
ket capitalizations not exceeding $2 billion. Up to 25% of
the Fund's assets may be invested in securities within a sin-
gle industry. The Fund may temporarily retain cash or invest
in fixed-income securities, if deemed appropriate by the Ad-
visor.
The Fund's policy is to avoid short-term trading. However,
the Advisor may sell a security without regard to holding pe-
riod if the Advisor believes it is in the Fund's best inter-
est to do so.
The Fund's turnover rate is not expected to exceed 100% annu-
ally. The Fund is intended for long-term investors willing to
accept a higher-than-average level of volatility in order to
seek above-average gains.
.THE WORLD FUND seeks long-term growth of capital by invest- THE FUND
ing primarily in a diversified portfolio of marketable equity INVESTS
securities of established non-U.S. companies. Normally, at PRIMARILY IN
least 75% of the Fund's total assets will be invested in se- STOCKS OF NON-
curities of non-U.S. issuers selected by INVESCO Capital Man- U.S. COMPANIES
agement, Inc. (the "World Fund Sub-advisor") primarily for
long-term capital growth. The remaining 25% may be invested
in companies organized in the United States that have their
principal activities and interests (i.e., 50% of assets
and/or 50% of revenues) outside the United States. The Fund
may also invest in convertible or debt securities rated Baa
or higher by Moody's Investors Service, Inc. ("Moody's") or
BBB or higher by Standard & Poor's Ratings Services ("Stan-
dard & Poor's").
The Fund generally will not invest more than 25% of its total
assets in any one country; however, the Fund may invest up to
40% of its assets in any one country if in the judgment of
the World Fund Sub-advisor, economic and business conditions
make it appropriate to do so.
It is anticipated that the majority of the Fund's portfolio
transactions will be executed on established stock exchanges
or in the over-the-counter markets in the countries in which
portfolio investments are being made. The Fund also expects
to purchase American Depositary Receipts ("ADRs"), and Euro-
pean Depositary Receipts in bearer form, which are designed
for use in European securities markets. ADRs represent for-
eign securities traded on U.S. exchanges or in the over-the-
counter markets. To expedite settlement of portfolio transac-
tions and minimize currency value fluctuations, the Fund may
purchase foreign currencies and/or engage in forward foreign
currency transactions. You can obtain more information about
these strategies by reading the section entitled, "Investment
Objectives and Policies -- Considerations Applicable to the
World Fund -- Foreign Currency Transactions" in the Statement
of Additional Information. Normally, however, the Fund does
not hedge its foreign currency exposure.
Under abnormal economic or market conditions abroad, the Fund
may assume a temporary defensive posture by investing all, or
a major portion, of its assets in U.S. government obligations
or investment-grade fixed income securities of companies or-
ganized in the United States.
Investors should note that investing in foreign securities
involves certain special risk considerations which normally
are not associated with investing in U.S. securities, includ-
ing, but not necessarily limited to, those described on page
24 below.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 17
Prospectus
<PAGE>
...............................................................................
THE FUND SEEKS .THE HIGH YIELD FUND seeks high current income and total re-
HIGH CURRENT turn by investing primarily in lower rated corporate debt se-
INCOME AND curities. The High Yield Fund will normally invest at least
TOTAL RETURN 80% of its total assets in lower rated debt securities. These
BY INVESTING are debt securities which, because of the greater possibility
PRIMARILY IN that the issuers will default, are not investment grade
LOWER RATED (i.e., are rated below BBB by Standard & Poor's or below Baa
CORPORATE DEBT by Moody's, or are unrated but considered by the High Yield
SECURITIES. Fund Sub-advisor to be of comparable credit quality). The
High Yield Fund may invest in debt securities of any maturi-
ty. No more than 25% of the High Yield Fund's assets will be
invested in a single industry and no more than 5% of assets
in a single issuer. Lower rated debt securities are described
in more detail, and the risks inherent in investing in such
securities are discussed, under "Information Relevant to the
Fixed-Income Funds" on pages 24-25 below. For more informa-
tion about ratings of debt securities, see "Appendix A -- De-
scription of Bond Ratings" to this Prospectus.
The High Yield Fund may also invest up to 20% of total assets
in common stocks, usually as a result of warrants associated
with debt instruments purchased by the High Yield Fund, but
also, under certain circumstances, to seek capital apprecia-
tion. The Fund may also invest in debt securities convertible
into common stock. If this percentage restriction is met at
the time of investment, a later increase or decrease in per-
centage resulting from a change in values of portfolio secu-
rities or total amount of assets is not considered a viola-
tion of the above 20% restriction. If the Fund receives
common stock in respect of its debt securities in a corporate
reorganization, the Fund will treat such common stock as a
new investment as of the time of its receipt for purposes of
this test, and if such investment would not be permitted un-
der this restriction, then common stock in an amount at least
equal to the amount of such new investment that would not be
permitted under this restriction will be promptly sold.
The High Yield Fund, when aggregated with the holdings of
other mutual funds advised by Keystone Investment Management
Company ("the High Yield Fund Sub-advisor"), will not own
more than 20% of the outstanding debt securities of any issu-
er.
The High Yield Fund may invest in corporate loans made by
banks or other financial institutions either at origination
or by acquiring participations in, or assignments of or nova-
tions of corporate loans. Certain corporate loans may not be
readily marketable and may be subject to restrictions on re-
sale; to the extent corporate loans are not readily market-
able or subject to such restrictions, those loans would be
subject to the High Yield Fund's limitation on illiquid secu-
rities.
The corporate loans in which the High Yield Fund may invest
typically are originated, negotiated and structured by a syn-
dicate of co-lenders, one or more of whom administers the
loan on behalf of the syndicate. The value of a corporate
loan will depend primarily on the creditworthiness of the
borrower. The High Yield Fund will invest in a corporate loan
only if, in the High Yield Fund Sub-advisor's judgment, the
borrower can meet the debt service on such a loan; however,
the High Yield Fund Sub-advisor has no set minimum credit
rating criteria regarding the borrowers with respect to in-
vestments in corporate loans by the High Yield Fund. Although
the High Yield Fund Sub-advisor will continue to monitor the
creditworthiness of the borrowers of corporate loans in which
the High Yield Fund invests, there can be no assurance that
such analysis will disclose factors that will impair the
value of a corporate loan.
The High Yield Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities are not readily mar-
ketable and include some securities that are restricted as to
disposition under the federal securities laws or otherwise.
If registration of such securities under the Securities Act
of 1933, as amended (the "Securities Act"), is required, such
registration may not be readily accomplished, and if such se-
curities may be sold without registration, such resale may be
permissible only in limited quantities. In either event, the
inability to sell securities at the most opportune time may
negatively affect the net asset value of the High Yield Fund.
The High Yield Fund may invest up to 25% of net assets in the
securities of foreign issuers, provided that all such securi-
ties are denominated in U.S. dollars and are purchased and
held by the High Yield Fund in the United States. Investors
should note that investing in foreign securities involves
certain special risk considerations which normally are not
associated with investing in U.S. securities, including, but
not necessarily limited to, those described on page 24 below.
Temporarily available cash may be invested in short term se-
curities such as certificates of deposit, bankers' accept-
ances, commercial paper, Treasury bills, repurchase agree-
ments and U.S. Government Securities, as defined on page 20
below. Some or all of the High Yield Fund's assets also may
be temporarily invested in such investments, or in longer
term more highly rated debt securities during periods of unu-
sual market conditions.
18 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
The High Yield Fund does not expect to invest in futures and
options, or other derivatives contracts during the coming
year. However, if and when derivative securities are devel-
oped which permit effective hedging of a lower quality bond
portfolio, the High Yield Fund may, for hedging purposes on-
ly, buy or sell derivative securities contracts which in the
opinion of the High Yield Fund Sub-advisor will hedge speci-
fied risks relating to the High Yield Fund's portfolio of
lower quality bonds. The total market value of such contracts
at the time of the transaction initiating the position will
not exceed 5% of the High Yield Fund's net assets.
.THE BOND FUND seeks as high a level of continuing income as THE FUND
is consistent with capital preservation. The Fund will invest INVESTS FOR
its assets exclusively in fixed-income securities. At least CONTINUING
80% of the Fund's assets, exclusive of cash items such as INCOME
commercial paper, certificates of deposit and banker's ac- CONSISTENT
ceptances, will be invested in one or more of the following WITH CAPITAL
types of securities: PRESERVATION
1. Debt securities which at the time of purchase are rated
within the four highest rating categories of Moody's,
Standard & Poor's or any other nationally recognized
statistical rating organization;
2. Debt securities issued or guaranteed by the U.S. govern-
ment, its agencies or instrumentalities ("U.S. Govern-
ment Securities");
3. Debt securities (payable in U.S. dollars) issued or
guaranteed by the government of Canada or of a province
of Canada, or any instrumentality or subdivision there-
of; and
4. Debt obligations of, or guaranteed by, domestic banks or
bank holding companies, even though not rated by Moody's
or Standard & Poor's, if the Advisor believes they have
investment qualities comparable to securities which may
be purchased under (1) above.
The remainder of the Fund's assets may be invested in other
fixed-income investments not described above, such as
straight or convertible debt securities and straight or con-
vertible preferred stocks.
The Fund will invest no more than 20% of its total assets in
either (i) securities rated lower than BBB by Standard &
Poor's or Baa by Moody's, or (ii) unrated securities whose
credit quality, in the Advisor's opinion, is below the credit
quality of securities rated BBB by Standard & Poor's or Baa
by Moody's. See "Appendix A -- Description of Bond Ratings"
in this Prospectus for more information concerning ratings of
debt securities. See the description of these lower rated se-
curities and discussion of the risks inherent in such securi-
ties under "Information Relevant to the Fixed-Income Funds"
on pages 24-25 below.
As of November 30, 1997, the portfolio securities in the Bond
Fund had an average credit quality of AA3; the average effec-
tive portfolio maturity for the Fund was 9.8 years. The Bond
Fund may not invest more than 25% of its total assets in any
one industry, except for U.S. Government Securities. In ap-
plying this limitation, utility companies will be divided ac-
cording to their services, and financial services companies
will be classified according to the end users of their serv-
ices. For example, gas, gas transmission, electric, electric
and gas, and telephone will each be considered a separate in-
dustry, as will auto finance, bank finance, and diversified
finance.
.THE GOVERNMENT SECURITIES FUND seeks as high a level of cur- THE FUND
rent income as is consistent with safety of principal by in- INVESTS
vesting primarily in U.S. Government Securities. To a limited PRIMARILY IN
extent, the Fund may also invest in repurchase agreements U.S.
with respect to these securities. In addition, the Fund may GOVERNMENT
invest up to 20% of its net assets in high quality money mar- SECURITIES
ket instruments which are not issued or guaranteed by the
U.S. government or its agencies or instrumentalities. These
include bank money market instruments, commercial paper or
other short-term corporate obligations listed in the highest
rating categories by nationally recognized statistical rating
organizations. Money market instruments may be used as a
means of making short-term investments.
The Fund may also use repurchase agreements as a means of
making short-term investments, and will invest only in repur-
chase agreements with durations of seven days or less, only
where the collateral securities are U.S. Government Securi-
ties, and in aggregate amounts of not more than 25% of the
Fund's net assets. Further information concerning repurchase
agreements is set forth on page 23 below.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 19
Prospectus
<PAGE>
...............................................................................
U.S. Government Securities include the following:
U. S. 1. U.S. TREASURY BILLS, NOTES AND BONDS. These are obliga-
GOVERNMENT tions issued directly by the U.S. Treasury and have ma-
SECURITIES turities of less than one year for Bills, one to ten
INCLUDE A WIDE years for Notes, and ten to thirty years for Bonds.
ARRAY OF
INVESTMENTS 2. OBLIGATIONS GUARANTEED BY THE U. S. GOVERNMENT. These
include securities issued or guaranteed by certain agen-
cies and instrumentalities of the U.S. government as to
which the U.S. government guarantees repayment of prin-
cipal and payment of interest. These securities include
fully modified pass-through mortgage-backed certificates
whose principal and interest are guaranteed by the Gov-
ernment National Mortgage Association ("GNMA Certifi-
cates").
3. OBLIGATIONS OF U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. These include obligations issued or
guaranteed by U.S. government agencies and
instrumentalities, supported by any of the following:
(i) the right of the issuer to borrow an amount limited
to a specific line of credit from the U.S. Treasury;
(ii) discretionary authority of the U.S. government to
purchase certain obligations of the agency or
instrumentality; or (iii) the full faith and credit of
the agency or instrumentality.
The Fund is not required to maintain a set amount in any of
the various types of U.S. Government Securities described
above. The types of U.S. Government Securities selected for
purchase will depend on market conditions and the Advisor's
outlook for interest rates and the economy. As of November
30, 1997, the Fund's average effective portfolio maturity was
9.8 years.
THE FUND MAY At times, the Fund may make investments in GNMA Certificates
INVEST and other mortgaged-backed U.S. Government Securities ("Mort-
SUBSTANTIALLY gage-Backed Securities"). Each GNMA Certificate is backed by
IN MORTGAGE- a pool of mortgage loans insured by the Federal Housing Ad-
BACKED ministration and/or the Veterans Administration. GNMA Certif-
SECURITIES icates provide for the payment of fixed monthly installments
of principal and interest to the registered holder of the se-
curity. As noted above, timely repayment of principal and
payment of interest is guaranteed by the full faith and
credit of the U.S. government.
In addition to GNMA Certificates, the Fund may invest in
mortgage-backed securities issued by the Federal National
Mortgage Association ("FNMA") and by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA, a federally-chartered
and privately-owned corporation, issues pass-through securi-
ties and certificates representing an interest in a pool of
FNMA pass-through securities which are guaranteed as to the
repayment of principal and payment of interest by FNMA.
FHLMC, a corporate instrumentality of the United States, is-
sues participation certificates which represent an interest
in mortgages from FHLMC's portfolio and securities represent-
ing an interest in a pool of FHLMC participation certifi-
cates. FHLMC guarantees the timely payment of interest and
the ultimate collection of principal. As is the case with
GNMA Certificates, the actual maturity of and realized yield
on particular FNMA and FHLMC mortgage-backed securities will
vary based on the prepayment experience of the underlying
pool of mortgages. Securities guaranteed by FNMA and FHLMC
are not backed by the full faith and credit of the United
States.
While the maximum life of a Mortgage-Backed Security is typi-
cally 30 years, its average life varies with the maturities
of the underlying mortgage instruments. Average life is
likely to be substantially less than the original maturity of
the mortgage pools underlying the Mortgage-Backed Security,
due to prepayments, refinancing or foreclosure of these mort-
gage loans. Prepayments are passed through to the registered
holder along with regularly scheduled repayments of principal
and payments of interest.
In general, if prevailing interest rates are significantly
below the rates on mortgages underlying the Mortgage-Backed
Securities, the Mortgage-Backed Securities are likely to have
higher prepayment rates than if prevailing rates are at or
above the interest rates on the underlying mortgages. Prepay-
ment possibilities reduce the potential of Mortgage-Backed
Securities to appreciate in market value during periods of
falling interest rates, while the risk of decline in market
value during periods of rising interest rates may be compara-
ble to other debt securities of similar maturities.
The Fund does not intend to enter into options or futures
transactions with respect to U.S. Government Securities, lend
its securities to others, or enter into reverse repurchase
agreements (but see page 26 for a
20 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
description of "dollar roll" transactions in which the Fund
may engage). With respect to repurchase agreements, the Fund
might incur time delays or losses in the event of the failure
of the other party to the agreement to repurchase the securi-
ties.
.THE SHORT MATURITY GOVERNMENT FUND seeks as high a level of THE FUND
current income as is consistent with safety of principal by INVESTS
investing primarily in U.S. Government Securities. This Fund PRIMARILY IN
will invest at least 65% of its assets in U.S. Government Se- U.S.
curities with average maturities of from 2 to 5 years. The GOVERNMENT
remainder of the Fund's assets may be invested in U.S. Gov- SECURITIES
ernment Securities with other maturities, and the Fund may WITH LIMITED
also invest to a limited extent in repurchase agreements with MATURITIES
respect to these securities. In addition, like the Government
Securities Fund, the Short Maturity Government Fund may in-
vest up to 20% of its net assets in high quality money market
instruments which are not issued or guaranteed by the U.S.
government or its agencies or instrumentalities. The Fund may
also use repurchase agreements as a means of making short-
term investments, in the same way as described for the Gov-
ernment Securities Fund above.
U.S. Government Securities include the types of securities
described above under "The Government Securities Fund".
The Fund is not required to maintain a set amount in any of
the various types of U.S. Government Securities. The types of
U.S. Government Securities selected for purchase will depend
on market conditions and the Advisor's outlook for interest
rates and the economy. At times, the Fund may make invest-
ments in Mortgage-Backed Securities, as described above under
"The Government Securities Fund". As of November 30, 1997,
the Fund's average effective portfolio maturity was
2.9 years.
The Fund does not intend to enter into options or futures
transactions with respect to U.S. Government Securities, lend
its securities to others, or enter into reverse repurchase
agreements (but see page 26 for a description of "dollar
roll" transactions in which the Fund may engage). With re-
spect to repurchase agreements, the Fund might incur time de-
lays or losses in the event of the failure of the other party
to the agreement to repurchase the securities.
The Fund is not guaranteed or insured by the U.S. Government,
and the value of the Fund's shares will fluctuate.
.THE MONEY MARKET FUND seeks as high a level of current in- THE FUND
come as is consistent with safety of principal and the main- INVESTS SOLELY
tenance of liquidity by investing solely in short-term obli- IN SHORT-TERM
gations of the U.S. Treasury. Such obligations include U. S. U.S. TREASURY
Treasury Bills, U. S. Treasury Notes and U. S. Treasury Bonds SECURITIES
with remaining maturities of 397 days or less. Securities
that comprise the Fund may earn less income than longer term
securities or lower quality securities that have less liquid-
ity, greater market risk and greater market value fluctua-
tions.
The Fund will seek to maintain a net asset value of $1.00 per
share, by using the amortized cost method of valuing its se-
curities. In accordance with rules adopted by the Commission,
the Fund is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less and to purchase only
instruments having remaining maturities of 397 days or less.
For more information about the amortized cost method, see
"Determination of Net Asset Value" herein and in the State-
ment of Additional Information.
In many states, the Fund's income dividends may be exempt INCOME MAY BE
from state and local income taxes, but subject to federal in- EXEMPT FROM
come taxes. For more information on state and local tax ex- STATE AND
emption, see "Taxes" herein. LOCAL TAXES
.THE TAX-FREE INCOME FUND seeks as high a level of current THE FUND
income, exempt from federal income taxes, as is consistent INVESTS FOR
with capital preservation, by investing primarily in a diver- CURRENT INCOME
sified portfolio of municipal bonds. These investments may EXEMPT FROM
include obligations of states, territories and possessions of FEDERAL INCOME
the United States and their political subdivisions, agencies, TAXES
authorities and instrumentalities. The payments from these
investments, in the opinion of the issuer's bond counsel, are
exempt in their entirety from federal income tax.
At least 80% of the total assets of the Tax-Free Income Fund
will, at all times, be invested in municipal bonds rated
within the four highest rating categories, or obligations of
issuers having an issue of outstanding municipal bonds rated
within the four highest rating categories of either Moody's
or Standard & Poor's, except to the extent the Fund is in-
vested in defensive investments, as described below. See
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 21
Prospectus
<PAGE>
...............................................................................
"Appendix A -- Description of Bond Ratings" in this Prospec-
tus for more information regarding ratings of debt securi-
ties.
The Fund also may invest in unrated municipal bonds if the
Advisor believes the credit characteristics are at least
equivalent to those of municipal bonds ranked in the fourth
highest rating category of either Moody's or Standard &
Poor's. Although this is not a fundamental policy, no more
than 5% of the Fund's total assets may be invested in securi-
ties rated below investment-grade or unrated securities that
the Advisor believes are not equivalent in credit quality to
municipal bonds in the fourth highest rating category. As of
November 30, 1997, the portfolio securities of the Tax-Free
Income Fund had an average rating of A1; the average effec-
tive portfolio maturity of the Fund was 10.9 years.
.THE NEW YORK FUND seeks as high a level of current interest
THE FUND SEEKS income exempt from federal income taxes and New York State
HIGH CURRENT and New York City personal income taxes as is consistent with
INCOME EXEMPT liquidity and capital preservation, by investing substan-
FROM FEDERAL tially all of its assets in obligations issued by or on be-
AND NEW YORK half of the State of New York and its political subdivisions,
STATE AND CITY agencies, authorities, and instrumentalities ("New York Obli-
INCOME TAXES gations"), the interest on which, in the opinion of the is-
suer's bond counsel, is exempt from federal income tax and
New York State and City personal income tax. The New York
Fund normally will invest substantially all of its net assets
in New York Obligations with maturities of more than one year
at the time of investment. The Fund may, however, invest up
to 20% of its net assets in short-term New York Obligations.
At least 80% of the total assets of the New York Fund will,
at all times, be invested in municipal bonds rated within the
four highest rating categories, or obligations of issuers
having an issue of outstanding municipal bonds rated within
the four highest rating categories, of either Moody's or
Standard & Poor's, except to the extent the New York Fund is
invested in defensive investments, as described below. See
"Appendix A -- Description of Bond Ratings" in this Prospec-
tus for more information regarding ratings of debt securi-
ties. The New York Fund also may invest in unrated municipal
bonds if the Advisor believes the credit characteristics are
at least equivalent to those of municipal bonds ranked in the
fourth highest rating category of either Moody's or Standard
& Poor's. Although this is not a fundamental policy, no more
than 5% of the New York Fund's total assets may be invested
in securities rated below investment-grade or unrated securi-
ties that the Advisor believes are not equivalent in credit
quality to municipal bonds in the fourth highest rating cate-
gory. As of November 30, 1997, the portfolio securities of
the New York Fund had an average rating of A2; the average
effective maturity of the Fund was 10.6 years.
Due to the New York Fund's concentration in New York Obliga-
tions, the Fund is more susceptible to factors adversely af-
fecting issuers of New York Obligations than a municipal bond
fund which invests nationally. Because the Fund invests at
least 80% of its assets in New York Obligations, its net as-
set value is particularly sensitive to changes in the eco-
nomic condition and governmental policies of the State of New
York. For example, the economic condition of a significant
industry within New York may have a corresponding effect on
specific issuers within New York or on anticipated revenue to
the State. New York City's financial health is particularly
related to the financial services sector. Other factors that
may negatively affect economic conditions in New York include
adverse changes in employment rates, federal revenue sharing
or laws with respect to tax-exempt financing.
The Advisor does not believe that the current economic condi-
tions in New York State or New York City, or other factors
described above, will have a significant adverse effect on
the Fund's ability to invest in investment grade New York Ob-
ligations. Because the Fund's portfolio will be comprised
primarily of investment grade securities, the Fund is ex-
pected to be less subject to market and credit risks than a
Fund which invests primarily in lower quality New York Obli-
gations. For additional information pertinent to investment
in New York Obligations, see "Appendix A -- Economic Condi-
tions in New York" to the Statement of Additional Informa-
tion.
THE FUND SEEKS .THE PENNSYLVANIA FUND seeks as high a level of current in-
HIGH CURRENT terest income exempt from federal income taxes and Pennsylva-
INCOME EXEMPT nia personal income taxes as is consistent with liquidity and
FROM FEDERAL capital preservation, by investing substantially all of its
AND assets in obligations issued by or on behalf of the Common-
PENNSYLVANIA wealth of Pennsylvania (the "Commonwealth" or "Pennsylvania")
INCOME TAXES and its political subdivisions, agencies, authorities and in-
strumentalities ("Pennsylvania Obligations"), the interest on
which, in the opinion of the issuer's bond counsel, is exempt
from federal income tax and Pennsylvania personal income tax.
A general discussion of municipal bonds is contained in the
description of the New York Fund, above.
22 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
The Pennsylvania Fund normally will invest substantially all
of its net assets in Pennsylvania Obligations with maturities
of more than one year. The Fund may, however, invest up to
20% of its net assets in short-term Pennsylvania Obligations.
All of the Pennsylvania Obligations in which the Pennsylvania
Fund invests will be rated in the top four rating categories
by Moody's or Standard & Poor's or, if unrated, possess
equivalent investment characteristics, as determined by the
Advisor. See "Appendix A -- Description of Bond Ratings" in
this Prospectus for more information regarding ratings of
debt securities. As of November 30, 1997, the portfolio secu-
rities of the Pennsylvania Fund had an average rating of Aa1;
the average effective portfolio maturity for the Fund was
10.8 years.
At least 75% of the Pennsylvania Fund's assets will be in-
vested in (a) municipal obligations rated "A" or higher by
Moody's or by Standard & Poor's or, if not rated, that, in
the opinion of the Advisor, possess equivalent investment
characteristics; (b) municipal notes rated "SP-1" or higher
by Standard & Poor's or "MIG-2" or higher by Moody's or, if
not rated, that, in the opinion of the Advisor, possess
equivalent investment characteristics; and (c) tax-exempt
commercial paper rated "A-1" or higher by Standard & Poor's
or "Prime-1" by Moody's or, if not rated, that, in the opin-
ion of the Advisor, possess equivalent investment character-
istics. The Pennsylvania Fund cannot invest in municipal ob-
ligations or notes rated lower than "BBB" by Standard &
Poor's or "Baa" by Moody's or unrated securities that possess
investment characteristics equivalent to these securities, in
the opinion of the Advisor.
Due to the Pennsylvania Fund's concentration in Pennsylvania
Obligations, the Fund is more susceptible to factors ad-
versely affecting issuers of Pennsylvania Obligations than a
municipal bond fund which invests nationally. Because the
Fund invests at least 80% of its assets in Pennsylvania Obli-
gations, its net asset value is particularly sensitive to
changes in the economic condition and governmental policies
of Pennsylvania. For example, the economic condition of a
significant industry within Pennsylvania may have a corre-
sponding effect on specific issuers within Pennsylvania or on
anticipated revenue to Pennsylvania. Other factors that may
negatively affect economic conditions in Pennsylvania include
adverse changes in employment rates, federal revenue sharing
or laws with respect to tax-exempt financing.
The Advisor does not believe that the current economic condi-
tions in Pennsylvania or other factors described above will
have a significant adverse effect on the Fund's ability to
invest in investment grade Pennsylvania Obligations. Because
the Fund's portfolio will be comprised primarily of invest-
ment grade securities, the Fund is expected to be less sub-
ject to market and credit risks than a Fund which invests
primarily in lower quality Pennsylvania Obligations. For ad-
ditional information pertinent to investment in Pennsylvania
Obligations, see "Appendix B -- Economic Conditions in Penn-
sylvania" to the Statement of Additional Information.
..............................................................
FURTHER INFORMATION RELEVANT TO THE INVESTMENT PRACTICES OF
THE FUNDS AND ASSOCIATED RISKS
INFORMATION RELEVANT TO ALL FUNDS
Depending upon the Advisor's appraisal of the availability of PERIODICALLY
attractive securities and upon its judgment with respect to THE FUNDS MAY
market conditions, a Fund may be less than fully invested. BE LESS THAN
FULLY INVESTED
There can be no assurance that a Fund's objective will be at-
tained.
None of the Funds, except the High Yield Fund as described
above, may invest in illiquid securities, and none of the
Funds may engage in short sales of securities.
All of the Funds, except the Money Market Fund, may also in-
vest in repurchase agreements, provided the counterparty
maintains the value of the underlying securities at a value
not less than the repurchase price stated in the agreement.
Under a repurchase agreement, a Fund purchases fixed-income
securities and simultaneously agrees to resell these holdings
to the counterparty at a prearranged time and specific price.
If the counterparty defaults on its repurchase obligation,
the Fund would suffer a loss to the extent that the proceeds
from a sale of the underlying securities would be less than
the repurchase price stated in the agreement. Bankruptcy or
insolvency of such a defaulting counterparty may cause a Fund
to delay or limit its rights concerning these securities. For
more information about repurchase agreements, please refer to
the Statement of Additional Information.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 23
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
INVESTING IN FOREIGN SECURITIES
The Common Stock, Balanced, Growth, Small Company, High Yield
and Bond Funds may invest in securities of foreign issuers,
although only where such securities are trading in the United
States (or in the case of the High Yield and Bond Funds, on
the Eurodollar market), and only where trading is denominated
in U.S. dollars. The World Fund invests in securities traded
in foreign markets and denominated in foreign currencies.
Investing in foreign securities involves certain special risk
considerations which normally are not associated with invest-
ing in U.S. securities, including, but not necessarily lim-
ited to, those listed below. The Funds may be affected favor-
ably or unfavorably by changes in currency rates or exchange
control regulations. Markets in securities of foreign issuers
may be less liquid and more volatile than those in the United
States, for example because of substantially lower trading
volume. Such lower volume could result in the Funds obtaining
lower sales prices in the event of forced liquidation of se-
curities to meet unanticipated cash requirements. Fixed com-
missions on foreign stock exchanges are generally higher than
negotiated commissions on U.S. stock exchanges, and there is
less supervision and regulation of such exchanges. Foreign
companies generally release less financial information than
comparable U.S. companies. Furthermore, foreign companies
generally are not subject to uniform accounting, auditing and
financial reporting requirements. When investing in foreign
countries, there is the possibility of expropriation of as-
sets, confiscatory taxation, difficulty with the execution of
judgments against foreign issuers, imposition of the with-
holding of taxes prior to payment of dividends or other dis-
tributions, political or social instability, or diplomatic
developments that could affect U.S. investments in those
countries.
INFORMATION RELEVANT TO THE EQUITY FUNDS
Investments in equity securities of small and medium-sized
companies typically involve more risk than investments in eq-
uity securities of larger companies, because they generally
have limited financial resources and narrower product lines
and may have less seasoned managers. In addition, their secu-
rities may trade less frequently and in lower share volumes,
making them subject to wider price fluctuations.
INFORMATION RELEVANT TO THE FIXED-INCOME FUNDS
The market prices of debt securities, including those issued
by the U.S. government, are inversely affected by interest
rate changes. As a result, the net asset value of the shares
of Funds holding debt securities will fluctuate with condi-
tions in the debt securities market. Debt securities with
longer maturities and longer effective durations (a measure
of an instrument's sensitivity to changes in interest rates)
generally have higher yields and are subject to greater price
fluctuation due to interest rate changes than debt securities
with shorter maturities or shorter effective durations.
The Bond, New York and Tax-Free Income Funds, and the bond
portion of the Balanced Fund, may invest without limitation
in debt securities in the fourth highest rating category of
Moody's and Standard & Poor's. The Pennsylvania Fund may in-
vest up to 25% of its assets in such debt securities. While
considered "investment-grade", these securities may have more
speculative characteristics and may be more likely to be
downgraded than securities rated in the three highest rating
categories. If a debt security in any of the Funds is down-
graded below investment-grade, the Advisor will determine
whether selling the security is in the shareholders' best in-
terest. To arrive at this decision, the Advisor will consider
several factors, including price, credit risk, market condi-
tions and the prospective trend in interest rates.
The High Yield Fund may invest without limitation, and the
Bond Fund and the bond portion of the Balanced Fund may in-
vest up to 20% of total assets in lower rated debt securities
(commonly referred to as junk bonds). The Tax-Free Income and
New York Funds may invest up to 5% of total assets in such
lower rated debt securities. Because of the increased risk of
default, these securities generally have higher nominal or
effective interest rates than higher quality securities. The
Funds may purchase bonds in the lowest rating categories (D
for S&P and C for Moody's) and comparable unrated securities.
However, the Funds will only purchase securities rated lower
than B- by S&P or B3 or lower by Moody's if the Advisor or
the High Yield Fund Sub-advisor believes the quality of such
securities is higher than indicated by the rating.
These lower rated debt securities may pay interest at fixed,
floating or adjustable rates. To the extent the Funds invest
in adjustable or floating rate securities, the value of such
securities is less likely to be adversely affected by inter-
est rate changes than fixed rate securities. However, reduc-
tions in interest rates
24 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
also may translate into lower ordinary income distributions
paid by the Funds. The High Yield and Bond Funds, and the
bond portion of the Balanced Fund, also may invest in debt
securities (i) that do not pay interest but, instead, are is-
sued at a significant discount to their maturity values (re-
ferred to as zero coupon securities), (ii) that pay interest,
at the issuer's option, in additional securities instead of
cash (referred to as pay-in-kind securities) or (iii) pay in-
terest at predetermined rates that increase over time (re-
ferred to as step coupon bonds). Although zero coupon securi-
ties, pay-in-kind securities and step coupon bonds may not
pay interest, the High Yield, Bond and Balanced Funds never-
theless must under existing tax law accrue and distribute the
income deemed to be earned on a current basis, and therefore
may have to sell other investments to raise the cash needed
to make income distributions.
Lower rated bonds are generally considered significantly more RISK FACTORS
speculative and likely to default than higher quality bonds. RELATING TO
Relative to other debt securities, junk bond values tend to LOWER RATED
be more volatile because: (i) an economic downturn may affect FIXED-INCOME
the ability of issuers to pay interest and repay principal; SECURITIES
and (ii) the secondary market for such securities may at
times be less liquid or their prices may respond more ad-
versely to negative publicity or investor perceptions, making
it more difficult to value or dispose of the securities. If
the market for lower rated bonds becomes illiquid, the Funds
may experience problems in valuing these securities. The
likelihood that these securities will help the Funds achieve
their investment objectives is more dependent on the Advi-
sor's or the High Yield Fund Sub-advisor's own credit analy-
sis than on ratings. Lower rated bonds are also more sensi-
tive than other debt securities to adverse issuer-specific
developments. The risk of loss due to default by the issuer
of a junk bond is significantly greater for the holders of
junk bonds than for holders of higher rated securities be-
cause such securities may be unsecured and may be subordi-
nated to other creditors of the issuer. In the event of a de-
fault, the Funds may incur additional expenses to the extent
it is required to seek recovery or participate in the re-
structuring of the obligation. Junk bonds also may have call
or redemption features that permit the issuer to repurchase
the securities from the Funds. If a call is exercised by the
issuer during a period of declining interest rates, the af-
fected Fund would likely be required to replace such called
securities with lower yielding securities, thus decreasing
net investment income to the Fund.
The High Yield, Bond and bond portion of the Balanced Funds
may purchase certain restricted securities ("Rule 144A Secu-
rities") for which there is a secondary market of qualified
institutional buyers as defined by Rule 144A under the Secu-
rities Act. Rule 144A Securities that are determined to be
liquid securities, either by the Advisor or the High Yield
Fund Sub-advisor pursuant to guidelines approved by the
Company's Board of Directors or by the Board, will not be
subject to the High Yield Fund's limitation on illiquid secu-
rities, or the prohibition on illiquid securities for the
Bond Fund and bond portion of the Balanced Fund. Such liquid
Rule 144A Securities may become illiquid if qualified insti-
tutional buyers are unavailable. See "Investment Objectives
and Policies -- Considerations Applicable to the Fixed Income
Funds" in the Statement of Additional Information for addi-
tional information regarding liquidity determinations with
respect to Rule 144A Securities and corporate loans.
In the fiscal year ended November 30, 1997, the Government
Fund had portfolio turnover of 249%, the High Yield Fund had
portfolio turnover of 133% (not annualized), the Bond Fund
had portfolio turnover of 130%, the Tax-Free Income Fund had
portfolio turnover of 47%, the Balanced Fund had portfolio
turnover of 63% (in the case of the Balanced Fund, this port-
folio turnover results from portfolio turnover of 22% for the
equity portion, and 135% for the bond portion), and the Short
Maturity Government Fund had portfolio turnover of 61%. These
Funds are actively managed, and their portfolios are con-
stantly monitored and adjusted in an attempt to increase in-
come, protect the income stream or improve the quality of the
portfolios. This investment policy results in portfolio turn-
over that is considered high, but this need not adversely af-
fect performance, because the Funds generally do not pay com-
missions; they deal directly with dealers acting as
principals when buying or selling. Although the price of the
securities may include a profit to the dealer, the Funds will
only execute these transactions when the Advisor or High
Yield Fund Sub-advisor believes it will help the Funds to
achieve their investment objectives. High portfolio turnover
(i.e., greater than 100% per year) may result in earlier rec-
ognition of capital gains or capital losses for tax purposes
than would otherwise be the case.
The assets of the High Yield, Bond, New York, Pennsylvania,
Tax-Free Income, Government Securities and Short Maturity
Government Funds and the bond portion of the Balanced Fund
may include securities that have been purchased on a when-is-
sued or delayed-delivery basis. Delivery of and payment for
these
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 25
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
securities could take place a month or more after the date of
the transaction. During this time, the value of the purchase
commitment will fluctuate with the market for comparable se-
curities. However, when the Fund makes a commitment to pur-
chase the securities, the payment and interest terms of these
issues are fixed. A Fund will make these commitments only
with the intention of acquiring the securities, but may sell
those holdings before settlement date if, in the Advisor's
opinion, such action would benefit shareholders. When a Fund
purchases securities on a when- issued or delayed-delivery
basis, it will provide its custodian with enough assets to
pay the purchase price of these securities upon delivery.
Payment would be in the form of cash, cash equivalents, or
short-term, high grade, fixed-income securities. This policy
ensures that the use of when-issued or delayed-delivery pur-
chases does not have the effect of leveraging the portfolio.
The Bond, Government Securities, Short Maturity Government
and Balanced Funds may also enter into "dollar rolls". A dol-
lar roll occurs when a Fund sells mortgage-backed or U.S.
Treasury securities for delivery in the current month and si-
multaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified
future date. During the roll period, a Fund foregoes princi-
pal and interest paid on the mortgage-backed or U.S. Treasury
securities. A Fund is compensated by the difference between
the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as
by the interest earned on the cash proceeds of the initial
sale. A "covered roll" is a specific type of dollar roll in
which the proceeds of a dollar roll are held in a segregated
account with liquid, short-term, high grade debt securities.
Dollar rolls in which the Funds may invest will be limited to
covered rolls. The use of dollar rolls tends to increase the
portfolio turnover of the Funds, and increases portfolio in-
come without increasing the risk levels of the Funds.
INFORMATION RELEVANT TO THE TAX-EXEMPT FUNDS
Interest income on certain "private activity" bonds is a
preference item for shareholders subject to the alternative
minimum tax ("AMT"). Municipal bonds whose interest is a
preference item for AMT purposes will comprise less than 20%
of each of the Tax-Free Income and New York Funds' total as-
sets. From their inceptions through May 4, 1998, the Tax-Free
Income and New York Funds did not hold private activity
bonds. However, past investment strategies are not necessar-
ily indicative of the Funds' future investment program. The
Pennsylvania Fund does not presently intend to purchase bonds
subject to the AMT. For more information on private activity
bonds, refer to the section entitled "Taxes" below.
In general, any gain or loss from the sale of a tax-exempt
security will be treated for federal income tax purposes as
either a short-term or long-term capital gain or loss for the
Fund, depending on the holding period. Capital gains distri-
butions are fully taxable. Recent legislation creates new
categories of capital gains taxable at different rates which
a Fund may pass through to shareholders. See "Taxes" below.
STRATEGIES TO Should the Advisor anticipate a rise in interest rates, and a
PROTECT corresponding decline in value of long-term municipal bonds,
SHAREHOLDER the Tax-Free Income, New York and Pennsylvania Funds may in-
CAPITAL IN vest temporarily in short-term debt obligations, including
TIMES OF taxable investments, to help protect shareholder capital.
MARKET Such investments may include notes issued by or on behalf of
WEAKNESS municipal issuers, U.S. Government Securities, instruments of
domestic banks, repurchase agreements, domestic commercial
paper, and other cash-type investments.
Under these conditions, the Pennsylvania Fund will limit its
investments in securities other than Pennsylvania obligations
to 20% of its assets. With respect to non-governmental is-
suers, the Pennsylvania Fund will limit these investments to
obligations of issuers whose quality rating at the time of
purchase is within the two highest categories of either Stan-
dard & Poor's or Moody's.
The interest on municipal obligations issued by states other
than New York or Pennsylvania, for the New York and Pennsyl-
vania Funds, respectively, is exempt only from federal income
tax. Interest on certain qualifying U.S. Government Securi-
ties, but not all such securities, is exempt only from state
personal income tax. Interest on instruments of domestic
banks, repurchase agreements, domestic commercial paper, and
other cash-type investments are generally fully subject to
both federal and any applicable state income taxes.
The New York and Pennsylvania Funds are subject to the risks
relating to concentration in New York Obligations or Pennsyl-
vania Obligations, as described on pages 22 and 23 above.
26 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
The New York, Pennsylvania and Tax-Free Income Funds may pur-
chase and sell certain exchange-traded financial futures con-
tracts and related options for the following reasons:
. to hedge against adverse changes in interest rates;
. to protect against depreciation of municipal bond investments; or
. to hedge against increases in the cost of prospective
municipal bond investments.
None of the New York, Pennsylvania or Tax-Free Income Funds
will purchase and sell financial futures contracts or related
options if, immediately after purchase, the sum of the amount
of initial margin on existing futures positions and premiums
paid for outstanding options exceeds 5% of the Fund's total
assets.
RISKS ASSOCIATED WITH THESE OPTIONS AND FUTURES TRANSACTIONS.
Options and futures transactions involve certain risks; how-
ever, the Advisor believes that since the New York, Pennsyl-
vania and Tax-Free Income Funds will engage in these transac-
tions for hedging purposes only, these portfolio strategies
will not subject these Funds to the risks frequently associ-
ated with the speculative use of options and futures transac-
tions. However, there are certain risks related to futures
transactions used for hedging purposes that you should under-
stand. These include: (i) incorrect forecasts of interest
rates by the Advisor, which may result in the hedge being in-
effective; (ii) possible lack of a liquid secondary market
for a financial futures contract, which may result if the
particular market exceeds its daily price fluctuation limit,
or for other reasons, in which case the New York, Pennsylva-
nia or Tax-Free Income Fund may be adversely affected by its
inability to close out its futures position; and (iii) imper-
fect correlation between the change in the market value of a
Fund's municipal bonds and the prices paid for futures con-
tracts, which may result in the hedge being ineffective. From
their inceptions through May 4, 1998, none of the New York,
Pennsylvania or Tax-Free Income Funds has engaged in any of
the hedging transactions described above. For further infor-
mation on financial futures contracts and options, please re-
fer to "Investment Objectives and Policies" in the Statement
of Additional Information.
..............................................................
MANAGEMENT OF THE FUNDS
BOARD OF DIRECTORS -- BOARD OF TRUSTEES
The Board of Directors of the Company and the Board of Trust-
ees of the Pennsylvania Fund (together, the "Boards") consist
of thirteen individuals, three of whom are "interested per-
sons" of the Funds as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). The Boards are respon-
sible for the overall supervision of the operations of the
Funds and perform the various duties imposed on the directors
of investment companies by the 1940 Act.
INVESTMENT ADVISOR
The Advisor is a Vermont general partnership whose general THE ADVISOR'S
partners are affiliates of three of the nation's major insur- INDIRECT
ance companies, with aggregate assets of over $24 billion. OWNERS ARE
The partners are: MAJOR
INSURANCE
. Sentinel Advisors, Inc., an indirect wholly-owned COMPANIES WITH
subsidiary of National Life Insurance Company ("National COMBINED
Life"), ASSETS OF OVER
$24 BILLION
. ProvidentMutual Management Co., Inc., an affiliate of
Provident Mutual Life Insurance Company ("Provident
Mutual"),
. HTK of Delaware, Inc., an affiliate of The Penn Mutual Life
Insurance Company ("Penn Mutual"), and
. Sentinel Management Company, a Vermont general partnership
whose general partners are affiliates of National Life,
Provident Mutual and Penn Mutual.
The principal business address of the Advisor is National
Life Drive, Montpelier, Vermont 05604. Subject to the direc-
tion and control of the Boards, the Advisor makes the invest-
ment decisions for the Funds and provides certain administra-
tive and related services. For these services to the Funds,
the Advisor receives a fee, based on the aggregate average
daily value of net assets of the Funds at the following an-
nual rates:
(1) With respect to the Small Company, Growth, World and
Balanced Funds:
0.70% per annum on the first $200 million of average
daily net assets of such Funds in the aggregate;
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 27
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
0.65% per annum on the next $100 million of such
assets;
0.60% per annum on the next $100 million of such
assets; and
0.55% per annum on such assets in excess of $400
million.
(2) With respect to the Common Stock Fund:
0.55% per annum on the average daily net assets of the
Fund.
(3) With respect to the Bond, New York, Tax-Free Income,
Government Securities and Short Maturity Government
Funds:
0.55% per annum on the first $200 million of average
daily net assets of such funds in the aggregate;
0.50% per annum on the next $200 million of such
assets; and
0.45% per annum on such assets in excess of $400
million.
(4) With respect to the High Yield Fund:
0.75% per annum on the first $100 million of average
daily net assets of the Fund:
0.70% per annum on the next $100 million of such
assets;
0.65% per annum on the next $100 million of such
assets; and
0.60% per annum on such assets in excess of $300
million.
(5) With respect to the Pennsylvania Fund:
0.55% per annum on the first $50 million of average
daily net assets of such funds in the aggregate;
0.50% per annum on the next $50 million of such
assets; and
0.45% per annum on such assets in excess of $100
million.
(6) With respect to the Money Market Fund:
0.40% per annum on the first $300 million of average
daily net assets of the Fund; and
0.35% per annum on such assets in excess of $300
million.
Effective March 30, 1998, the Advisor has voluntarily agreed
for at least until November 30, 1998 to reimburse the follow-
ing Funds for advisory fees or other expenses necessary to
limit these Funds' overall expense ratios, after expense off-
set, (i.e., net of certain credits against Fund expenses) to
the amounts shown below:
Bond Fund Class A shares...................................... 0.68%
Government Securities Fund Class A shares..................... 0.87%
Short Maturity Government Fund Class A shares................. 0.75%
Tax-Free Income Fund Class A shares........................... 0.72%
Pennsylvania Fund Class A shares.............................. 0.70%
New York Fund Class A shares.................................. 0.00%
It is expected that the above reimbursement policy will re-
sult in overall expense ratios, before expense offset, of ap-
proximately the amounts shown in the table beginning on page
4 of this Prospectus. In the case of the Bond Fund, the reim-
bursement of advisory fees will also benefit the Class B
shares of the Bond Fund, which will experience the same re-
duced effective advisory fee rate as the Class A shares of
the Bond Fund. The Advisor currently intends to reset the
above expense caps annually to amounts approximately equal to
90% of the average expense ratios of the Class A shares of
such Funds' peer groups (except that in the case of the Short
Maturity Government Fund, the expense cap is expected to be
increased by approximately 0.15% to take that Fund's higher
Rule 12b-1 fee into account). However, these arrangements may
be changed or terminated at any time after November 30, 1998.
No reimbursement arrangements were in effect during fiscal
1997 for the Bond, Government Securities and Tax-Free Income
Funds. For the Short Maturity Government Fund Class A shares,
which were reimbursed by Sentinel Administrative Service Com-
pany ("Sentinel Service") down to an expense ratio after ex-
pense offset of 1.00% in fiscal 1997, a reimbursement of
$68,091 was paid in fiscal 1997. For the Pennsylvania Fund
Class A shares, which were reimbursed by Sentinel Service
down to an expense ratio after expense offset of 0.75% from
December 1, 1996 through March 30, 1997, and 0.90% from March
31, 1997 to November 30, 1997, a reimbursement of $152,810
was paid in fiscal 1997. For the New
28 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
York Fund, the policy of reimbursing all expenses, after ex-
pense offset, was initiated by Sentinel Service on March 31,
1997, and a reimbursement of $47,242 was paid in fiscal 1997.
In addition to the above reimbursement program, the Advisor
has a policy of reimbursing advisory fees to the extent, if
any, necessary to maintain the aggregate expense ratios of
the Class A shares of all the Funds, except for the World
Fund, to 1.30%. In the event that a reimbursement were re-
quired under this policy, the aggregate expense ratios of the
Class B and Class C shares of the Funds, except for the World
Fund, would be reduced proportionately. Although the Advisor
has no present intention to do so, this arrangement may be
terminated at any time. The aggregate expense ratio of the
Class A shares of the Funds was less than 1.30% during fiscal
1997, and no reimbursement was required under this policy.
PORTFOLIO MANAGERS
The Advisor employs a team approach in managing the Funds.
The management teams are comprised of a lead portfolio manag-
er, other portfolio managers and research analysts. Each team
includes members with one or more areas of expertise and
shares the responsibility for providing ideas, information
and knowledge in managing the Funds. Rodney A. Buck, the
Chief Executive Officer of the Advisor, is also Chairman and
Chief Executive Officer of National Life Investment Manage-
ment Company, Inc., and Senior Vice President and Chief In-
vestment Officer of National Life. Mr. Buck has been employed
by the Advisor or its affiliates since 1972. There are three
investment management teams: an Equity Value Team, headed by
Richard A. Pender, Senior Vice President of the Advisor; an
Equity Growth Team, headed by Robert L. Lee, Senior Vice
President of the Advisor; and a Fixed Income Team, headed by
David M. Brownlee, Senior Vice President of the Advisor.
Each of Messrs. Buck, Pender, Lee and Brownlee is a Chartered
Financial Analyst. Mr. Pender has been associated with the
Advisor or its affiliates since 1986. Mr. Lee joined the Ad-
visor in 1993. Prior to that time he was a Vice President at
Shawmut National Corporation. Mr. Brownlee also joined the
Advisor in 1993; prior to that he was a Managing Director at
Aetna Life and Casualty.
The Common Stock Fund is managed by Mr. Pender and Daniel J.
Manion, Vice President of the Advisor. Mr. Pender and Mr.
Manion have been members of the Common Stock Fund management
team since 1994. Mr. Manion, a Chartered Financial Analyst,
has been associated with the Advisor since 1993; prior to
that he was associated with Wright Investors' Service.
Mr. Lee has been the portfolio manager for the Growth Fund
since November, 1993.
The Small Company Fund is managed by Scott T. Brayman, Vice
President of the Advisor, and Mr. Lee. Mr. Brayman is a
Chartered Financial Analyst, and has been with the Advisor
since 1995. He has been involved with the Small Company Fund
since he joined the Advisor. Prior to joining the Advisor, he
was associated with Argyle Capital Management, Inc.
The Balanced Fund is managed by a team consisting of Mr.
Buck, Mr. Pender and Richard D. Temple, Vice President of the
Advisor. Mr. Buck has been the Fund's lead portfolio manager
since 1982. Mr. Temple is a fixed-income portfolio manager
who has been employed by the Advisor or its affiliates since
1969.
The portfolio managers for the Bond Fund are Mr. Temple and
William C. Kane, Vice President of the Advisor. Mr. Temple
has been the lead portfolio manager for the Bond Fund since
1985. Mr. Kane is a Chartered Financial Analyst, and has been
employed by the Advisor or its affiliates since 1992. Prior
to joining the Advisor, Mr. Kane was employed by Chase Man-
hattan Bank.
The portfolio manager of the Government Securities and Short
Maturity Government Funds is Mr. Brownlee.
The portfolio manager of the Tax-Free Income, New York and
Pennsylvania Funds is Kenneth J. Hart, Vice President of the
Advisor. Mr. Hart has been with the Advisor since 1990, and
prior to that he was employed by Sentinel Administrative
Service Corporation and Shearson Lehman Brothers. The portfo-
lio managers of the Money Market Fund are Mr. Temple and
Darlene Coppola, Money Market Trader of the Advisor. Ms. Cop-
pola has been employed by the Advisor or its affiliates since
1974.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 29
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
SUB-ADVISORS
INVESCO With respect to the World Fund, the Advisor has entered into
CAPITAL a sub-advisory agreement with the World Fund Sub-advisor,
MANAGEMENT, INVESCO Capital Management, Inc. Pursuant to such agreement,
INC. SERVES AS the World Fund Sub-advisor provides the Advisor with a con-
SUB-ADVISOR TO tinuous investment program consistent with the World Fund's
THE WORLD FUND stated investment objectives and policies. The sub-advisory
agreement provides for a fee from the Advisor to the World
Fund Sub-advisor of the greater of (a) a monthly fee equal to
0.03125% (0.375% per annum) of the average daily net assets
of the Fund up to $500 million and 0.025% (0.30% per annum)
of such average net assets in excess of $500 million, or (b)
$20,000 per annum. INVESCO Capital Management, Inc. became
the World Fund Sub-advisor on April 1, 1996, and the present
sub-advisory agreement was approved by the shareholders of
the World Fund at a meeting held on February 28, 1997. The
effective fee rate paid by the Advisor to the World Fund Sub-
advisor for the fiscal year ended November 30, 1997 was
0.375% per annum.
The World Fund Sub-advisor is located at 1315 Peachtree
Street, Atlanta, Georgia 30309.
The World Fund's portfolio manager since June 1994 has been
Erik B. Granade, International Equity Portfolio Manager of
the World Fund Sub-advisor. Mr. Granade is a Chartered Finan-
cial Analyst. He was associated with Cashman Farrell and As-
sociates from June, 1994 to March 31, 1996, when he moved to
the World Fund Sub-advisor. Prior to June, 1994 he was an In-
ternational Portfolio Manager with Provident Capital Manage-
ment, Inc.
KEYSTONE With respect to the High Yield Fund, the Advisor has entered
INVESTMENT into a sub-advisory agreement with Keystone Investment Man-
MANAGEMENT agement Company, the High Yield Fund Sub-advisor. Pursuant to
COMPANY SERVES this agreement, the High Yield Fund Sub-advisor provides the
AS THE SUB- Advisor with a continuous investment program consistent with
ADVISOR TO THE the High Yield Fund's stated investment objective and poli-
HIGH YIELD cies. Under this arrangement, the High Yield Fund Sub-advisor
FUND works in cooperation with the Advisor's investment profes-
sionals but has full authority to manage the High Yield
Fund's portfolio on a day to day basis. The sub-advisory
agreement relating to the High Yield Fund provides for a fee
from the Advisor to the High Yield Fund Sub-advisor equal to
one half of the fee paid by the High Yield Fund to the Advi-
sor, provided that the fee paid by the Advisor to the High
Yield Fund Sub-advisor will always be at least 0.35% per an-
num of the average daily net assets of the High Yield Fund.
This agreement became effective June 20, 1997.
The High Yield Fund Sub-advisor is located at 200 Berkeley
Street, Boston, Massachusetts 02116 and is an indirect sub-
sidiary of First Union Corporation. First Union is headquar-
tered in Charlotte, North Carolina. First Union and its sub-
sidiaries provide a broad range of financial services to
individuals and businesses throughout the United States.
The portfolio manager for the High Yield Fund is Prescott B.
Crocker, Senior Vice President and Group Head of Corporate
Fixed Income at the High Yield Fund Sub-advisor. Mr. Crocker
is a Chartered Financial Analyst, and has been the High Yield
Fund's portfolio manager since its inception on June 20,
1997. Mr. Crocker joined Keystone in February, 1997. Prior to
that he was President of Boston Security Counselors, the in-
vestment management subsidiary of the brokerage firm Advest
Co. Inc. He had joined Boston Security Counselors in November
of 1993 as Senior Vice President-Fixed Income, where he man-
aged among others the Advest Advantage series High Yield
Trust. Upon the sale of the Advest Advantage funds to
Northstar Investment Management Co. in July of 1995, Mr.
Crocker joined that company as Fund Manager. He returned to
Boston Security Counselors in August of 1996 as President.
ADMINISTRATION
In accordance with Fund Services Agreements with the Funds,
Sentinel Service serves as the transfer agent for the Funds
and also provides the Funds with certain fund accounting, fi-
nancial administration and shareholder relations services. To
perform the transfer agency function, Sentinel Service util-
izes the computer system of DST Systems, Inc., ("DST") on a
remote basis through Investors Fiduciary Trust Company
("IFTC").
The Fund Services Agreements provide for the Company and the
Pennsylvania Fund to pay to Sentinel Service fixed fees of
$842,500 per year and $84,000 per year, respectively, for
fund accounting and financial administration services. They
also provide for annual fees payable by the Company and the
30 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
Pennsylvania Fund for transfer agency and shareholder rela-
tions services of $2,563,000 and $37,000, respectively, plus
an amount equal to an annual rate of $15 per shareholder ac-
count in excess of 106,500 and 1,500, respectively, as of the
last day of the month preceding the installment due date. The
fixed fees are subject to increase under inflation clauses
approved by the Boards. The Funds must pay for remote access
to the computer system of DST. Generally this is a fixed an-
nual charge per shareholder account, plus certain out-of-
pocket expenses, minus certain credits. The fees, as a per-
centage of net assets for transfer agency and shareholder
servicing are somewhat higher than industry norms. However,
the Boards believe that such fees are warranted in light of
the level of service provided.
Year 2000 Issues. Many computer systems were designed using
only two digits to designate years. These systems may not be
able to distinguish the year 2000 from the year 1900 (com-
monly known as the "Year 2000 Problem"). Like other invest-
ment companies and financial and business organizations, the
Funds could be adversely affected if the computer systems
used by the Advisor and Sentinel Service do not properly ad-
dress this problem prior to January 1, 2000. Sentinel Service
and its parent companies are currently analyzing these issues
and are in the process of implementing the systems modifica-
tions necessary to prepare for the year 2000. Currently nei-
ther Sentinel Service nor the Advisor expects that the tran-
sition to the 21st century will have any material impact on
its ability to continue to service the Funds at current lev-
els. In addition, Sentinel Service and the Advisor have
sought assurances from the Funds' other service providers
that they are taking all necessary steps to ensure that their
computer systems will accurately reflect the year 2000, and
Sentinel Service and the Advisor will continue to monitor the
situation. At this time, however, no assurance can be given
that the Funds' other service providers have anticipated ev-
ery step necessary to avoid any adverse effect on the Funds
attributable to the Year 2000 Problem.
Sentinel Service is also a Vermont general partnership of
which affiliates of National Life, Provident Mutual and Penn
Mutual are the general partners.
..............................................................
CUSTODIAN
IFTC serves as the Custodian and Dividend Paying Agent for
the Funds. IFTC is an affiliate of State Street Bank.
..............................................................
THE DISTRIBUTOR
The Distributor, Sentinel Financial Services Company, whose
address is National Life Drive, Montpelier, Vermont 05604,
serves as national distributor for the Funds under the terms
of agreements which became effective March 1, 1993. The Dis-
tributor has the exclusive right to distribute shares of the
Funds through broker-dealers with whom it has selling agree-
ments. The Distributor is a general partnership of which af-
filiates of National Life, Provident Mutual and Penn Mutual
are the general partners.
..............................................................
DISTRIBUTION PLANS
On March 1, 1993, each of the Funds, except for the Money
Market, Short Maturity Government and New York Funds, adopted
a distribution plan pursuant to Rule 12b-1 under the 1940
Act, applicable to their Class A shares. On March 27, 1995,
the Short Maturity Government Fund adopted a supplemental
distribution plan pursuant to Rule 12b-1 under the 1940 Act,
applicable only to it, and both the Short Maturity Government
Fund and the New York Fund became subject to the existing
distribution plan for all of the other Funds. Effective April
1, 1996, the Small Company, World, Common Stock, Balanced and
Bond Funds adopted a Class B Distribution Plan applicable
only to the Class B shares of these Funds. The High Yield
Fund became subject to the Class A and Class B distribution
plans on June 20, 1997. The Growth Fund commenced offering
Class B shares pursuant to the Class B Distribution Plan on
January 12, 1998. Effective May 1, 1998, the Common Stock,
Balanced, World and High Yield Funds adopted a Class C Dis-
tribution Plan, which applies only to the Class C shares of
these Funds. These distribution plans are herein referred to
as the "Plans". Neither the Class A nor the Class B shares of
the Money Market
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 31
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
Fund is a participant in the Plans and none of the fees paid
by the other Funds pursuant to the Plans will be used to re-
imburse the Distributor for expenses incurred in connection
with the distribution of Money Market Fund shares.
Under the Plans applicable to the Class A shares, each par-
ticipating Fund will pay to the Distributor a monthly fee at
the maximum annual rate of (a) .30% of average daily net as-
sets in the case of the Small Company, Growth, World, Common
Stock and Balanced Funds, (b) .20% of average daily net as-
sets in the case of the High Yield, Bond, New York, Pennsyl-
vania, Tax-Free Income and Government Securities Funds, or
(c) .35% of average daily net assets in the case of the Short
Maturity Government Fund. Such fees will be used to reimburse
the Distributor for expenses incurred in connection with dis-
tribution and promotion of the shares of each participating
Fund, including salaries and expenses of the Distributor's
wholesale sales force, home office management and marketing
personnel, expenses incurred by the Distributor for the occu-
pancy of its office space in Montpelier, Vermont, expenses
incurred by the Distributor with respect to equipment and
supplies, expenses incurred for the preparation, printing and
distribution of sales literature used in connection with the
offering of such shares to the public, expenses incurred in
advertising, promoting and selling shares of such Fund to the
public, expenses incurred for the preparation, printing and
distribution of the Prospectus and Statement of Additional
Information, and any supplement thereto used in connection
with the offering of such Fund's shares to the public, or any
reports and other communications for distribution to existing
shareholders, and service fees paid to securities dealers who
have executed a selling agreement with the Distributor.
Under the Plan applicable to the Class B shares, the Class B
shares of each of the Common Stock, Balanced, Growth, Small
Company, World, High Yield and Bond Funds will pay to the
Distributor a monthly fee at an annual rate of up to a total
of 1.00% of average daily net assets, of which up to 0.25%
shall be for service fees to broker-dealers, and the remain-
ing 0.75% shall be for the recovery of the initial sales com-
missions paid by the Distributor at the time of sales of
Class B shares, together with the cost of financing such pay-
ments, and for the other types of distribution, sales and
marketing expenditures detailed in the preceding paragraph
for the Plans applicable to the Class A shares. The High
Yield Fund Class B shares are not assessed a distribution fee
in respect of the seed money shares owned by National Life,
which will result in an overall Rule 12b-1 fee to the Class B
shares of the High Yield Fund of less than 1.00% for so long
as National Life maintains its investment.
Under the Plan applicable to the Class C shares, the Class C
shares of each of the Common Stock, Balanced, World and High
Yield Funds will pay to the Distributor a monthly fee at an
annual rate of up to a total of 1.00% of average daily net
assets. In the first year after the purchase this fee will be
applied to recover the initial sales commission of 1.00% paid
by the Distributor to the selling dealer. In subsequent
years, the entire 1.00% will be paid to the selling dealer as
additional commission and/or service fees.
These asset-based fees, excepting the service fee component,
are subject to aggregate limits imposed by the National Asso-
ciation of Securities Dealers, Inc.
32 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
To dealers, the Distributor pays, in the case of the Class A
shares of the Small Company, Growth, World, Common Stock and
Balanced Funds, .20% per annum of average net assets owned by
clients of the dealer who acquired such shares on or after
March 1, 1993; in the case of the Class A shares of the Bond,
New York, Pennsylvania, Tax-Free Income and Government Secu-
rities Funds, .10% per annum of the Funds' average net assets
owned by clients of the dealer who acquired such shares on or
after March 1, 1993, or, in each case, who acquired their
shares in the acquisitions of ProvidentMutual Fund or Inde-
pendence Capital Group of Funds assets by the Funds; and in
the case of the Short Maturity Government Fund, .25% per an-
num of the average net assets owned by clients of the dealer.
In the case of Class B shares of the Common Stock, Balanced,
Growth, Small Company, World, High Yield and Bond Funds, the
Distributor pays to dealers a service fee which varies based
on the total assets in Class B shares of such Funds for which
each registered representative of such dealer is the regis-
tered representative of record at the time commissions are
paid, as follows:
<TABLE>
<CAPTION>
ASSETS IN CLASS B SHARES OF THE FUNDS ANNUAL
FOR WHICH A PARTICULAR INDIVIDUAL IS THE BROKER-DEALER
REGISTERED REPRESENTATIVE OF RECORD SERVICE FEE
- ----------------------------------------------------- -------------
<S> <C>
$0 - $99,999......................................... -0-
$100,000 - $199,999.................................. 0.10%
$200,000 - $999,999.................................. 0.25%
$1,000,000 and over.................................. 0.50%
</TABLE>
A selling dealer may elect to be paid a service fee on such
Class B shares of 0.25% per annum, instead of the above ar-
rangement. In no case will the Class B shares of any Fund pay
service fees which total more than 0.25% per year. To the ex-
tent the above schedule requires a payment from the Distribu-
tor in an amount exceeding 0.25% of average daily assets of
the Class B shares of any Fund, then the Distributor will
make such payment and will not be entitled to recover the ex-
cess over 0.25% from the Funds under the Plans.
The Class B share service fee for the first year after a pur-
chase will be used to recover a portion of the cost of the
dealer concession paid by SFSC to the selling dealer, which
portion of the dealer concession is considered the service
fee for the first year. No service fee is paid on Class B
shares in house accounts, accounts in nominee name, or ac-
counts in dealer street name.
The portion of the distribution fee consisting of service
fees to dealers will be paid out of the general assets of the
related Fund and therefore affects all shareholders of each
such Fund equally, regardless of whether a service fee pay-
ment is made in respect to a particular shareholder's shares.
The degree to which each Fund is affected will depend on the
percentages of the shares of such Fund which are or are not
subject to service fee payments.
The Distributor will not be reimbursed for any unreimbursed
eligible expenses from any other Fund or class of shares of a
Fund, or in any future year for reimbursable expenses for any
Fund that exceed the applicable 0.35%, 0.30%, 0.20% or 1.00%
maximums.
..............................................................
HOW TO PURCHASE SHARES
You can purchase shares of the Funds through any securities OPENING AN
dealer who has a sales agreement with the Distributor. If you ACCOUNT IS
already have an account with Sentinel you can purchase shares EASY
by mailing your check directly to Sentinel Service.
ALTERNATIVE PURCHASE OPTIONS
The Common Stock, Balanced, World and High Yield Funds offer
prospective investors a choice of three classes of shares,
Class A, Class B and Class C, which incur sales charges in
different forms and amounts and which bear different levels
of expenses. These alternative purchase arrangements are de-
signed to enable the investor to choose the method of pur-
chasing Fund shares that is most beneficial to the investor
based on all factors to be considered, which may include: the
amount and intended length of the investment, the type of
Fund, and whether the investor intends to utilize the ex-
change privilege. Generally, when making an investment deci-
sion, investors should at least consider the anticipated life
of an intended
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 33
Prospectus
<PAGE>
...............................................................................
investment in the Funds, the accumulated distribution fees
plus CDSCs on Class B and Class C shares, the initial sales
charge, if any, plus accumulated distribution fees on Class A
shares, the possibility that the anticipated higher return on
Class A shares due to the lower ongoing charges will offset
the initial sales charge paid on such shares, and the auto-
matic conversion of Class B shares to Class A shares at cer-
tain specified times.
The Growth, Small Company and Bond Funds offer prospective
investors a choice of Class A shares or Class B shares. The
same factors as those listed in the preceding paragraph
should be considered in determining which method of purchas-
ing shares of these Funds is most beneficial to the investor.
In determining which class of shares to purchase, an investor
should always consider whether any waiver or reduction of a
sales charge or a CDSC is available. See generally "Class A
Shares -- Reduced Sales Charges" and "How to Redeem Shares --
Class B Shares -- Waiver or Reduction of the CDSC" below.
There is no size limit on purchases of Class A shares. The
maximum purchase of Class B shares or Class C shares accepted
is $1,000,000. The Funds may refuse any order to purchase
shares.
The Government Securities, Short Maturity Government, Tax-
Free Income, New York and Pennsylvania Funds offer only Class
A shares. Class B shares of the Money Market Fund are offered
only for exchanges from the Class B shares of other Funds,
and are not offered for initial purchase, except where the
investment is to be exchanged into Class B shares of other
Funds within 90 days, or in dollar-cost averaging programs
into Class B shares of other Funds where the initial invest-
ment is a minimum of $10,000, each dollar-cost averaging
transaction at least $1,000, and the program is completed
within 24 months. A CDSC will apply to Class B shares in the
Money Market Fund, and to Class A shares of the Money Market
Fund if such shares were acquired in exchange for Class C
shares acquired within one year of the date of such exchange.
See "Shareholder Services -- Exchange Privilege" below.
CLASS A SHARES
For all purchases of Class A shares, you pay the public of-
fering price, which equals the net asset value per share
(next computed following receipt of your order by Sentinel
Service), plus a sales charge (except that in the case of the
Money Market Fund, there is no sales charge).
The sales charge ranges from 5.0% to 0.0% of the offering
price (5.3% to 0.0% of the net amount invested). The size of
your purchase will determine the amount of your sales charge.
CLASS A SHARES -- SALES CHARGES
The table below shows the schedule of sales charges for the
Common Stock, Balanced, Growth, Small Company and World
Funds:
<TABLE>
<CAPTION>
SALES DEALER
SALE SIZE CHARGE REALLOWANCE
--------- ------ -----------
<S> <C> <C>
$0 to $99,999.................................... 5.00% 4.50%
$100,000 to $249,999............................. 4.00% 3.75%
$250,000 to $499,999............................. 2.50% 2.25%
$500,000 to $999,999............................. 2.00% 1.75%
$1,000,000 or more............................... -0- -0-
</TABLE>
The schedule of sales charges for the High Yield, Bond, Gov-
ernment Securities, Tax-Free Income, New York and Pennsylva-
nia Funds is set forth in the table below:
<TABLE>
<CAPTION>
SALES DEALER
SALE SIZE CHARGE REALLOWANCE
--------- ------ -----------
<S> <C> <C>
$0 to $99,999.................................... 4.00% 4.00%
$100,000 to $249,999............................. 3.50% 3.25%
$250,000 to $499,999............................. 2.50% 2.25%
$500,000 to $999,999............................. 2.00% 1.75%
$1,000,000 or more............................... -0- -0-
</TABLE>
For the Short Maturity Government Fund, the sales charge for
sales of up to $999,999 is 1.00%, with a dealer reallowance
of 0.75%. For sales of $1,000,000 and over, there is no ini-
tial sales charge. There is no sales charge on purchases of
shares of the Money Market Fund.
34 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
In cases in which there is no sales charge because the sale
is in an amount of $1,000,000 or more, the Distributor will
pay dealers compensation of 1.00% for sales of up to
$4,999,999, and in an individually negotiated amount for
sales of $5,000,000 and over. See "How to Redeem Shares --
Class A Shares Purchased in Amounts Over $1,000,000 --
CDSC", below.
Equity Services, Inc., 1717 Capital Management Company,
Janney Montgomery Scott, Inc., and Hornor, Townsend & Kent,
Inc., which are wholly-owned subsidiaries of the partners of
the Advisor, receive a dealer reallowance equal to the entire
sales charge on their sales of Fund shares. As a result, they
may be considered underwriters of such shares. Because the
Funds calculate the offering price per share by rounding to
the nearest whole cent, the entire sales charge may be
slightly more or less than the sales charge percentages set
forth above.
CLASS B SHARES
For all purchases of Class B shares, you pay the current net
asset value. There is no initial sales charge. A CDSC will be
imposed on Class B shares (including Class B shares of the
Money Market Fund), if you redeem shares during the applica-
ble CDSC period, and no waiver of the CDSC applies. See "How
to Redeem Shares -- Class B Shares -- CDSC" and "How to Re-
deem Shares -- Class B Shares -- Waiver or Reduction of the
CDSC", below.
Class B shares are subject to higher distribution fees than
Class A shares for a fixed period after their purchase. See
"Distribution Plans" above. After such period, the Class B
shares automatically convert to Class A shares and are no
longer subject to such higher distribution fees. The holding
period for Class B shares after which they automatically con-
vert to Class A shares varies depending on the amount of the
initial purchase payment. For purchase payments up to
$250,000, the automatic conversion occurs at the end of the
sixth year; for purchase payments from $250,001 to $500,000,
the automatic conversion occurs at the end of the fifth year;
and for purchase payments from $500,001 to $999,999, the au-
tomatic conversion occurs at the end of the fourth year. The
holding period for Class B shares will include the holding
period of Class B shares of another Fund from which they were
exchanged.
Because the CDSC may be lower and the conversion to Class A
shares may be faster for purchase amounts of over $250,000,
it may be advantageous for a shareholder to use a Right of
Accumulation ("ROA") or a Letter of Intent ("LOI") in connec-
tion with the purchase of Class B shares. These privileges
are described below under "How to Redeem Shares -- Waiver or
Reduction of the CDSC".
For sales of Class B shares made and services rendered to
Class B shareholders, the Distributor intends to make pay-
ments to selling broker-dealers, at the time a shareholder
purchases Class B shares, of amounts equal to the following
percentages of the aggregate purchase amount (including in-
vestments in Class A shares and Class C shares under the ROA
and/or LOI):
<TABLE>
<CAPTION>
BROKER-DEALER
AMOUNT OF PURCHASE PAYMENT PAYMENT
- -------------------------- -------------
<S> <C>
Up to $249,999..................................... 4.0%
$250,000 to $499,999............................... 2.5%
$500,000 to $999,999............................... 2.0%
</TABLE>
The Class B shares of the Money Market Fund are only avail-
able through exchange from the Class B shares of another Fund
or in connection with the program described on page 34. The
Class B shares of the Money Market Fund do not bear the
higher ongoing distribution expenses normally associated with
the Class B shares. However, time during which assets are in
the Class B shares of the Money Market Fund will not count
either toward the time that must elapse before Class B shares
are automatically converted to Class A shares of the same
Fund, or toward the time that results in a declining CDSC.
See "How to Redeem Shares -- Class B Shares -- CDSC", below.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 35
Prospectus
<PAGE>
...............................................................................
CLASS C SHARES
For all purchases of Class C shares, you pay the current net
asset value. There is no initial sales charge. A CDSC in the
amount of 1.00% of the purchase price will be imposed on
Class C shares (including Class A shares of the Money Market
Fund received in exchange for Class C shares, as described
below), if you redeem shares during the first year after
their purchase, and no waiver of the CDSC applies. See "How
to Redeem Shares -- Class C Shares -- CDSC" and "How to Re-
deem Shares -- Waiver or Reduction of the CDSC", below.
Similar to the Class B shares, Class C shares are subject to
higher distribution fees than Class A shares. See "Distribu-
tion Plans" above. However, since Class C shares never con-
vert to Class A shares, investments in Class C shares remain
subject to these higher distribution fees for the entire
holding period of the investment. An investor should consider
whether the advantage, as compared with Class B shares, of
the investment not being subject to a CDSC after the first
year, and the significantly lower CDSC in the first year,
outweighs the disadvantage of remaining subject to higher
distribution fees for the entire holding period of the in-
vestment, as well as whether the advantage, as compared with
Class A shares, of not being subject to an initial sales
charge outweighs the higher distribution fees.
Investors who purchase Class C shares have the ability to ex-
change at net asset value only for the Class C shares of
other Funds which offer Class C shares, except that investors
in Class C shares may also exchange into Class A shares of
the Money Market Fund. However, if an investor exchanges
Class C shares into Money Market Fund Class A shares within
one year of the purchase of the Class C shares, a CDSC may
apply to a subsequent redemption of the Money Market Fund
shares. See "Class C Shares --CDSC" on page 41 below. An in-
vestor who has exchanged Class C shares into Money Market
Fund Class A shares may exchange back into Class C shares of
any Fund which offers Class C shares at any time, but may not
exchange at net asset value into Class A shares or Class B
shares of any Fund.
CLASS A SHARES -- REDUCED SALES CHARGES
YOU CAN RIGHT OF ACCUMULATION. Quantity discounts begin with invest-
RECEIVE A ments in Class A shares in excess of $100,000. This applies
REDUCED SALES to purchases of Class A shares of one or more of the Funds at
CHARGE FOR A one time, or to purchases of either Class A shares, Class B
NUMBER OF shares or Class C shares combined over time by you, your
REASONS spouse and children under the applicable age of majority, a
trustee or other fiduciary account for these same persons.
Additionally, accounts for charitable, religious, educational
and similar corporations, associations, or foundations exempt
under Section 501(c)(3) or (13) of the Code, retirement plans
set up under the Self-Employed Individuals Tax Retirement Act
of 1962, and Individual Retirement Accounts ("IRAs") may be
linked to an individually owned account for this privilege.
However, individually registered accounts may not be linked
with a participant account in any plan which has multiple
linked accounts except as noted below in the AG&T Advantage
Program. Please note that, in order to take advantage of this
privilege, you must advise your representative at the time of
purchase that you are eligible for this privilege and must
provide the fund name(s), registration of account(s), and ac-
count number(s).
LETTER OF INTENT. The LOI lowers your costs on Class A share
investments of more than $100,000 or Class B share invest-
ments of more than $250,000 spread over 13 months or, in the
case of corporate qualified plans, spread over 30 months. The
LOI is not a binding commitment by you to purchase, or by the
Fund to sell additional shares. All purchases made for your
account within 13 months from the date of the LOI, or when
applicable 30 months will be made at the reduced sales charge
for the investment amount checked on the account application.
Any dividends and distributions will be reinvested without a
sales charge and will not be considered in determining
whether the LOI has been completed.
Any purchases of the Sentinel Family of Funds (except the
Money Market Fund) made by you within the 90 days preceding
the date of your LOI may be included under it but do not
qualify for the discount. You may also combine the value, at
the current offering price, of any shares you own of other
Sentinel Funds in order to determine the quantity discount
which would apply under the LOI. Two percent (2%) of the
shares purchased under the LOI will be held in escrow by Sen-
tinel Service and released at the end of the 13- or 30-month
period or upon completion of the LOI.
36 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
Upon expiration of the 13- or 30-month period a sales charge
may be due if total purchases are less than the LOI amount
indicated on the application. Sales charges are due within 20
days after notification to the account holder and may be paid
either by check payable to Sentinel Service or by redemption
of shares held in escrow to the extent necessary to pay such
amount due. Upon payment of the balance due any remaining es-
crow shares will be released and free from further sales
charges. The sale of shares for this purpose will be a tax-
able event.
GROUP INVESTMENTS. Any group of investors which notifies the
Distributor that it will act as a group in purchasing Fund
shares, in such a way as to result in reduced selling ex-
penses, will be entitled to be treated as if it were a single
entity for purposes of the reduced sales charges for quantity
purchases, the ROA and the LOI.
AG&T ADVANTAGE PROGRAM. Employers establishing either SIMPLE
IRA plans under the Small Business Protection Act of 1996 or
Section 403(b) plans for which American Guaranty & Trust Com-
pany ("AG&T") is the custodian may group participating em-
ployee accounts together in such a way as to result in re-
duced sales charges for quantity purchases under both the ROA
and the LOI. Quantity discounts under this program are based
upon amounts previously invested in the Funds. In addition,
personal accounts for the employee and members of his or her
immediate family, as defined above under "Right of Accumula-
tion", may be grouped with the employee's SIMPLE IRA or Sec-
tion 403(b) accounts for quantity purchases under both the
ROA and LOI.
NET ASSET VALUE PURCHASES. Certain investors, subject to lim-
itations, may purchase Class A shares of the Funds at net as-
set value. Such investors include current and former Direc-
tors of the Funds and predecessors to the Funds; certain
current and retired directors, officers, employees and retir-
ees of the general partners of the Advisor and their affili-
ates; directors, officers, employees and clients of the Sub-
advisors; members of the immediate families of, or survivors
of, all of the above-referenced individuals; registered rep-
resentatives of securities dealers that have entered into a
sales agreement with the Distributor, and who notify the Dis-
tributor of such status at the time of the purchase, and mem-
bers of their immediate families or their survivors; non-
profit organizations with which any of the above-referenced
persons are actively involved; investment advisors, financial
planners, bank trust departments or broker-dealers who place
trades for their own accounts or the accounts of their cli-
ents (such clients may include, without limitation, retire-
ment and deferred compensation plans and trusts used to fund
those plans including those defined in section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended (the
"Code") and "rabbi trusts"), and who charge a management,
consulting or other fee for their services; clients of such
investment advisors, financial planners, bank trust depart-
ments or broker dealers who place trades for their own ac-
counts, if such accounts are linked to the master account of
such investment advisor, financial planner or broker-dealer
on the books and records of the broker or agent; purchasers
who are investing section 403(b) loan principal repayments;
purchasers who notify the Distributor that the funds being
used for such purchase consist of redemption proceeds from
other mutual fund shares for which a sales charge or CDSC has
been paid, and such funds in fact come from such source; and
investments being transferred from individually managed trust
accounts at AG&T. AG&T may also invest short-term balances of
trust accounts in the Short Maturity Government Fund at net
asset value. If there is more than one person on an account
registration, all persons named in the account registration
must qualify. You must notify the Distributor at the time of
purchase if you qualify for a front-end sales charge waiver.
Please also note that investors may be charged a transaction
fee by a broker or agent if they effect transactions in Fund
shares through a broker or agent.
In addition, Class A shares of any Fund may be purchased at
net asset value, without payment of a sales charge, by pen-
sion, profit-sharing or other employee benefit plans created
pursuant to a plan qualified under Section 401 of the Code or
plans under Section 457of the Code, or employee benefit plans
created pursuant to Section 403(b) of the Code and sponsored
by nonprofit organizations defined under Section 501(c)(3) of
the Code. Such plans will qualify for purchases at net asset
value provided that (1) the total amount invested in the plan
is at least $1,000,000, (2) the sponsor signs a $1,000,000
LOI, or (3) such shares are purchased by an employer-spon-
sored plan with at least 100 eligible employees, and all of
the plan's transactions are executed through a single finan-
cial institution or service organization who has
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 37
Prospectus
<PAGE>
...............................................................................
entered into an agreement with the Distributor with respect
to their use of the Funds in connection with such accounts.
Please note that tax-exempt funds are not appropriate invest-
ments for such plans. The Distributor may pay dealers for
share purchases of the Funds (other than the Money Market
Fund) sold at net asset value to an employee benefit plan in
accordance with this paragraph as follows: 1% of the first $2
million of such purchases, plus 0.80% of the next $1 million
of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any
Money Market Fund shares sold at net asset value to an em-
ployee benefit plan in accordance with this paragraph.
OTHER MATTERS RELATING TO DISTRIBUTION OF FUND SHARES
The Distributor will reimburse all broker-dealers who agree
with the Distributor to undertake activities designed to spe-
cifically promote the Funds, for costs incurred by such bro-
ker-dealers in the course of such activities. Dealer conces-
sions on automated periodic investment programs may be
advanced to dealers who have entered into an agreement with
the Distributor with respect to such advances. The Advisor
has adopted a policy under which sales of shares of the Funds
may be considered as a factor in the selection of broker-
dealers to execute portfolio transactions for the Funds, sub-
ject to the conditions that commissions paid to such broker-
dealers be no higher than would otherwise be paid, and that
the prices be, in the judgment of the Advisor, the best then
available.
The Distributor is sponsoring a sales contest during the pe-
riod January 1, 1998 to December 31, 1998, in which regis-
tered representatives of all broker-dealers who have elected
to participate in the contest can qualify for a trip to a
destination to be announced by achieving sales of shares of
the Funds (other than the Money Market Fund) and sales of ac-
counts managed by American Guaranty & Trust Company, the Dis-
tributor's trust company affiliate, aggregating at least
$1,200,000, and may bring a guest at the Distributor's ex-
pense by achieving such sales of at least $1,700,000. In the
event that a change in law prohibits such a sales contest,
however, the Distributor will be forced to cancel the con-
test.
OPEN AN Accounts may be opened with only $50 using the Automatic In-
ACCOUNT WITH vestment Plan. Otherwise, the minimum initial investment in
AS LITTLE AS any Fund is $1,000, except as otherwise provided in the
$50 Statement of Additional Information and except for certain
retirement plan accounts. The minimum subsequent investment
is $50. The Funds reserve the right to reject any order and
may charge a fee of $25 for each check or electronic payment
returned unpaid due to insufficient funds.
PURCHASING SHARES BY CHECK
Make your checks payable to "Sentinel Administrative Service
Company" and remit to:
Sentinel Administrative Service Company P.O. Box 1499
Montpelier, VT 05601-1499
All checks must be drawn in U.S. dollars on a U.S. bank. The
Funds reserve the right to withhold the proceeds of a redemp-
tion of shares purchased by check until such check has
cleared, which may take up to 15 days after the purchase
date.
A purchase made by check is effected on the day when federal
funds are made available to a Fund, usually within one busi-
ness day after Sentinel Service receives the check. Federal
funds are monies held by a commercial bank on deposit in one
of the U.S. Federal Reserve branch banks (the "Federal Re-
serve Banks").
PURCHASING SHARES BY WIRE
ANOTHER EASY You may purchase shares by wiring federal funds directly to
WAY TO BUY Sentinel Service when the New York Stock Exchange ("NYSE")
SHARES and Federal Reserve Banks are open for business.
To make your initial purchase by wire, call our toll-free
number noted below and obtain an account number. If you don't
have an application, request one. Complete the application
and return it promptly to Sentinel Service.
Your bank may charge you a fee to wire funds. Payments made
by wire and received by Sentinel Service on any business day
are available to the Fund on the next business day.
38 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
DEALER WIRE PURCHASE ORDERS
As a convenience to shareholders, the Distributor will, act-
ing for the Funds without charge, ordinarily accept orders
from dealers who have sales agreements with the Funds for the
purchase of shares at the applicable offering price.
AUTOMATIC INVESTMENT PLAN
This feature affords you the opportunity to dollar-cost aver-
age using periodic electronic funds transfer from your bank
account to the Fund(s) of your choice.
TELEPHONE INVESTMENT SERVICE
This feature enables you to purchase Fund shares via elec-
tronic funds transfers from your bank account simply by phon-
ing Sentinel Service.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit enables you to purchase Fund shares
(minimum of $50.00 per transaction) by having Federal salary,
Social Security, or certain veterans', military or other pay-
ments from the Federal government automatically deposited
into your account. You may deposit as much of such payments
as you elect. To enroll in Government Direct Deposit, you
must complete and file with Sentinel Service a completed Di-
rect Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The Direct Deposit Sign-
Up Form may be obtained by contacting Sentinel Service or the
appropriate Federal Agency for your type of payment. Death or
legal incapacity will terminate your participation in this
Privilege. You may elect to terminate your participation in
this privilege by providing written notification to the ap-
propriate Federal agency.
PAYROLL SAVINGS PLAN
Payroll Savings Plan permits you to purchase Fund shares
(minimum of $50.00 per transaction) automatically on a regu-
lar basis. Depending upon your employer's direct deposit pro-
gram, you may have part or all of your paycheck transferred
to your existing Sentinel account electronically through the
Automated Clearing House system each pay period. To establish
a Sentinel Payroll Savings Plan account, you must file an au-
thorization form, available from Sentinel Service, with your
employer's payroll department. Changes may be made through
written notification to your employer.
..............................................................
HOW TO REDEEM SHARES
If your shares are held by Sentinel Service, you can redeem
your shares by providing Sentinel Service with the appropri-
ate instructions by mail or otherwise.
If you are the shareholder of record and have a certificate FOLLOW THESE
representing ownership in a Fund, you can redeem your shares EASY STEPS TO
by either: REDEEM SHARES
. Surrendering the certificate in person, to Sentinel Service
(National Life Drive, Montpelier, Vermont),
or
. Mailing the certificate to
Sentinel Administrative Service Company, P. O. Box 1499,
Montpelier, VT 05601-1499
WE SUGGEST SENDING CERTIFICATES BY CERTIFIED MAIL.
Sentinel Service is required to redeem your shares at net as-
set value, less any applicable CDSC, as of the close of busi-
ness on the day such surrender or appropriate instructions
are received, in "good order", prior to 4:00 p.m. on a day
that the NYSE is open for business.
"Good order" means that the instructions must be signed by IMPORTANT
the registered owner(s) exactly as the shares are registered INFORMATION
and the signature(s) must be guaranteed by an eligible guar- FOR REDEEMING
antor institution which meets Sentinel Service's require- SHARES
ments, unless an exception listed below applies. The seal or
stamp of a notary public is not acceptable. You are not re-
quired to provide a signature guarantee when:
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 39
Prospectus
<PAGE>
...............................................................................
. the proceeds of the redemption do not exceed $50,000 in any
one day and the proceeds check is made payable to the reg-
istered owner(s) and mailed to the record address (provided
the record address has not been changed within the past 30
days), or
. the proceeds of the redemption are payable to one of the
Advisor's parent corporations or an affiliate.
No interest will accrue on amounts represented by uncashed
redemption checks.
CLASS B SHARES -- CDSC
If you redeem Class B shares, a CDSC may be imposed. Whether
a CDSC is imposed and the amount of the CDSC depends on the
amount of your purchases and the number of years since you
made the purchase from which an amount is being redeemed.
Partial redemption requests will be increased by the amount
of CDSC due. CDSC balances due for full redemptions will be
deducted from the redemption proceeds. Purchases are subject
to the CDSC according to the following schedules:
For purchase amounts of up to $249,999:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC PERCENTAGE
------------------- ---------------
<S> <C>
First............................................... 4%
Second.............................................. 4%
Third............................................... 3%
Fourth.............................................. 2%
Fifth............................................... 2%
Sixth............................................... 1%
For purchase amounts from $250,000 to $499,999:
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC PERCENTAGE
------------------- ---------------
<S> <C>
First............................................... 3.5%
Second.............................................. 3%
Third............................................... 2%
Fourth.............................................. 1%
Fifth............................................... 1%
For purchase amounts from $500,000 to $999,999:
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC PERCENTAGE
------------------- ---------------
<S> <C>
First............................................... 3%
Second.............................................. 2%
Third............................................... 1%
Fourth.............................................. 1%
</TABLE>
In determining whether a CDSC is payable, redemptions are
taken first from any shares acquired through reinvestment of
distributions, or any other shares as to which a waiver of
the CDSC is applicable. The purchase payment from which a re-
demption is made is the earliest purchase payment from which
a redemption or exchange has not already been fully effected.
The amount of the CDSC will be equal to the applicable CDSC
percentage multiplied by the lower of the purchase price or
the net asset value of the shares being redeemed. Any CDSC
imposed on a redemption of Class B shares is paid to the Dis-
tributor.
If you exchange Class B shares into Class B shares of the
Money Market Fund, or purchase Class B shares of the Money
Market Fund in connection with the program described on page
34, the time during which these assets are held in the Class
B shares of the Money Market Fund will not count either to-
ward the time that must elapse before Class B shares are au-
tomatically converted to Class A shares of the same Fund, or
toward the time that results in a declining CDSC. Therefore,
if such Class B shares of the Money Market Fund are ulti-
mately redeemed, a CDSC will apply in the amount that would
have been applicable on the date the assets were exchanged
into the Class B shares of the Money Market Fund, regardless
of how long the Class B shares of the Money Market Fund were
held. Also, if the Class B shares of the Money
40 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
Market Fund are then further exchanged into Class B shares of
another Fund, and such shares are ultimately redeemed, a CDSC
will apply in the amount that would have been applicable if
the total holding period for the shares was the period during
which Class B shares of Funds other than the Money Market
Fund were held. In such a case, the automatic conversion into
Class A shares of the same Fund will occur only after Class B
shares of Funds other than the Money Market Fund have been
held for the six, five or four year period, as applicable.
WAIVER OR REDUCTION OF THE CDSC
You are subject to a reduced CDSC on Class B shares for quan-
tity purchases, as indicated above, or when you buy shares in
connection with the ROA or a LOI. The ROA will apply to pur-
chases of Class B shares when you and members of your family
own Class A, Class B or Class C shares in the aggregate of
more than $250,000. See "How to Purchase Shares -- Class A
Shares -- Reduced Sales Charges" for more information on the
ROA and the LOI.
Any applicable CDSC may be waived in the following situations
when the Funds have been notified at the time of redemption:
1. Redemptions of shares acquired from the reinvestment of
income distributions and/or capital gains distributions;
2. Redemptions from the account of a shareholder (including
one who owns the shares as joint tenant with his or her
spouse) following his or her death or from the account
of a trust whose primary income beneficiary has died,
provided the redemption is requested within one year of
the shareholder's or beneficiary's death;
3. Redemptions from qualified retirement accounts taken in
equal or substantially equal periodic payments not to
exceed life, or joint life expectency and not otherwise
subject to the 10% penalty tax for early withdrawal of
Code section 72(t);
4. Redemptions that occur as a result of a loan taken from
an account established as a retirement plan account for
an employee of a tax-exempt organization under section
403(b)(7) of the Code; and
5. Redemptions in amounts up to 10% annually of the
account's then current net asset value.
The Distributor may require documentation prior to waiver of
the CDSC, including, without limitation, certification by
plan administrators, applicable tax forms, or death certifi-
cates. The above CDSC waiver provisions will not apply to
Class B shares initially invested in the Money Market Fund as
part of the program described on page 34.
In addition, no CDSC will apply to Class B or Class C share
accounts owned by affiliates of the Advisor, where the Dis-
tributor has not paid an initial commission to a selling
dealer.
CLASS C SHARES -- CDSC
Class C shares are subject to a CDSC if they are redeemed in
the first year after purchase, in the amount of 1.00% of the
lower of the purchase price or the net asset value of the
shares redeemed. Partial redemption requests will be in-
creased by the amount of CDSC due. CDSC balances due for full
redemptions will be deducted from the redemption proceeds.
The Distributor receives the entire amount of any CDSC paid.
The CDSC is currently waived as specified under "Waiver or
Reduction of the CDSC" above. In determining whether a CDSC
is payable, the Funds will first redeem shares not subject to
any charge.
If an investor exchanges Class C shares for Class A shares of
the Money Market Fund during the first year after the pur-
chase of the Class C shares, any redemption of the Money Mar-
ket Fund shares will be subject to a CDSC of 1.00%, regard-
less of how long the Money Market Fund shares are held. If
the Money Market Fund shares are exchanged back into the
Class C shares of any Fund, the holding period of the Class C
shares will be aggregated with any holding periods of the
Class C shares prior to the exchange, and when such holding
periods in Class C shares aggregate more than one year, the
investment will no longer be subject to the 1.00% CDSC.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 41
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
CLASS A SHARES PURCHASED IN AMOUNTS OVER $1,000,000 -- CDSC
In the case of a purchase of Class A shares with no front-end
sales charge because the sale is in an amount of $1,000,000
or more, if the shares purchased are redeemed within one year
of the purchase, a CDSC will be imposed in the amount of
1.00%. If the shares are redeemed during the second year af-
ter the purchase, a CDSC of 0.50% will be imposed. After the
second year, no CDSC will apply. As with the CDSC payable on
redemptions of Class B shares, the CDSC is imposed on the
lower of the cost or the current net asset value of the
shares redeemed. Partial redemption requests will be in-
creased by the amount of CDSC due. CDSC balances due for full
redemptions will be deducted from the redemption proceeds.
The Distributor receives the entire amount of any CDSC paid.
The CDSC is currently waived as specified under "Waiver or
Reduction of the CDSC" above. In determining whether a CDSC
is payable, the Funds will first redeem shares not subject to
any charge.
OTHER INFORMATION ON REDEEMING SHARES
Normally, Sentinel Service will mail you payment for such
shares within seven days after it receives all documents re-
quired to process the redemption. Exceptions to this policy
include any period in which the right of redemption is sus-
pended or date of payment is postponed because the NYSE is
closed, trading on such Exchange is restricted, or the Secu-
rities and Exchange Commission (the "Commission") deems an
emergency to exist.
Additional documentation may be required to redeem shares
that are registered in the name of a corporation, trust, com-
pany retirement plan, agent or fiduciary, or if a shareholder
is deceased. The Funds reserve the right to withhold the pro-
ceeds of redemptions where shares to be redeemed have been
purchased by check within 15 calendar days prior to the date
the redemption request is received. The Funds will not with-
hold redemption proceeds if they (or Sentinel Service) have
been advised and have confirmed that such check has been
cleared for payment.
If you write a check to redeem Class A shares (see "Share-
holder Services -- Check Writing Privileges" below) in the
High Yield, Government Securities, Bond, New York, Pennsylva-
nia, Tax-Free Income, Short Maturity Government or Money Mar-
ket Funds, Sentinel Service normally will not honor the re-
demption check if those shares have been purchased less than
15 calendar days prior to the date the redemption request is
presented to Sentinel Service.
Distributions from retirement plans may be subject to with-
holding by the Internal Revenue Service ("IRS") under the
Code.
Due to the expense of maintaining accounts with small bal-
ances, the Funds reserve the right to liquidate and to charge
an annual maintenance fee of up to $25 to any account that
has a current value less than $1,000 and that has been open
for at least 24 months.
401(k), pension and profit-sharing plans which elect to have
individually registered accounts for the benefit of plan par-
ticipants will be assessed an annual service fee for each
participant account. The fee will be deducted automatically
from each participant account in June of each year unless
prepaid.
The fee assessed will vary based upon the average account
value of all participant accounts within the plan, and will
be as set forth below:
FEE PER PARTICIPATING
AVERAGE ACCOUNT VALUE ACCOUNT
--------------------- ---------------------
$0 - $1000.................................... $20.00
$1000 - $2999................................. $10.00
$3000 and over................................ No fee
DEALER WIRE REDEMPTION ORDERS
For the convenience of shareholders, the Distributor, acting
for the Funds without charge, ordinarily accepts orders from
dealers who have sales agreements with the Funds for the re-
purchase of shares based on net asset value, less any appli-
cable CDSC. (The net asset value may be more or less than
your initial cost. It is computed as described below on days
on which the NYSE is open.) Such orders to repurchase shares
of the Funds are confirmed on the same basis as orders to
purchase. Brokers are not prohibited from charging for their
service for such a redemption.
42 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
TELEPHONE REDEMPTION
Unless otherwise specified when opening your account or by YOU CAN REDEEM
subsequently submitting a Telephone Authorization and Request BY TELEPHONE
with a proper signature guarantee and supporting documents
where applicable, you may redeem up to $1,000,000 from your
account each business day.
In such instances, you may request that the proceeds be sent
directly to a predesignated commercial bank account. If you
have not provided the name of a bank, the proceeds will be
sent automatically to the address of record, provided the ad-
dress has not been changed within the preceding 30 days.
You must furnish a signature guarantee when making any change
in redemption instructions. To redeem shares by telephone,
please call Sentinel Service.
If proceeds are wired to your bank, a fee normally not
greater than $25 will be deducted from the proceeds. Neither
the Funds, the Advisor nor Sentinel Service is responsible
for the authenticity of exchange or redemption instructions
received by telephone, and they are not liable in the event
of an unauthorized telephone exchange or redemption, provided
that, in the case of the Funds, the Funds have followed pro-
cedures reasonably designed to prevent such losses taking
into account the cost of such procedures and the potential
risk of loss. In processing telephone exchange or redemption
requests, the Funds will determine that reasonable procedures
are employed to confirm that such telephone instructions are
genuine, and if such procedures are not employed, the Funds
may be liable for any resulting losses. Such procedures in-
clude receiving all calls for telephone redemptions and ex-
changes on a recorded telephone line, and screening callers
through a series of questions regarding specific account in-
formation.
No fees are charged for telephone redemptions; however, serv- NO FEES FOR
ice fees described above may apply, and the CDSC described TELEPHONE
above under "How to Redeem Shares" may apply. REDEMPTIONS
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 43
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
TAX-DEFERRED RETIREMENT PLANS
THE FUNDS CAN The federal tax laws provide for a variety of retirement
BE USED IN plans offering tax benefits. Fund shares may be purchased by
MANY TYPES OF all types of tax-deferred retirement plans, including Keogh
PLANS Plans, IRAs, Roth IRA's, Education IRAs, SIMPLE IRAs, Simpli-
fied Employee Pension Plans, Section 403(b) Plans, Section
457 Plans, and other corporate pension and profit-sharing
plans.
American Guaranty & Trust Company, a Delaware trust company
and an affiliate of the Advisor, will act as a custodian for
IRAs, SIMPLE IRAs, and 403(b) plans, if desired, and will
charge an annual fee of $15 per individual (individuals with
more than one account will be charged only one fee). This fee
will be deducted automatically from the account in November
of each year unless prepaid (in the case of more than one ac-
count owned by the same person, the fee will be deducted from
the largest account). Sentinel Service will act as agent for
the custodian and will receive from the custodian $12 of the
above annual fee per participant. A fee of $15 is charged for
each account when closing; however, a fee of $25 per transac-
tion is assessed for transferring assets. Consult your tax
advisor for details regarding deductibility of contributions
to IRAs other than Roth IRA's.
The Funds intend to enter into agreements with third parties
who will provide administrative services to section 403(b)
plans, which are qualified retirement savings plans for em-
ployees of governmental and charitable institutions. The
Funds may assess an annual fee in an amount of up to $100 to
accounts in 403(b) plans which have elected to obtain admin-
istrative services from third party administrators pursuant
to the agreements between such administrators and the Funds.
Such third party administrators may include both affiliates
of the Advisor and nonaffiliates.
..............................................................
DETERMINATION OF NET ASSET VALUE
HOW THE VALUE Net asset value for each Fund is calculated once each busi-
OF FUND SHARES ness day at 4:00 p.m., Eastern Time, and becomes effective
IS DETERMINED immediately upon its determination. The net asset value per
share is computed by dividing the total value of the assets
of each Fund, less its liabilities, by the total number of
each Fund's outstanding shares. Securities that comprise the
Funds are valued as shown below:
. Equity securities are valued at the latest transaction
prices on the principal stock exchanges on which they are
traded.
. Unlisted and listed securities for which there were no
sales during the day are valued at the mean between the
latest available bid and asked prices.
. Fixed-income securities are valued daily on the basis of
valuations furnished by an independent pricing service.
. Financial futures are valued at the settlement price estab-
lished each day by the board of trade or exchange on which
they are traded.
. Exchange-traded options are valued at the last sale price
unless there is no timely sale price, in which event cur-
rent prices provided by market makers are used.
The Money Market Fund's assets are valued on the basis of am-
ortized cost, which involves valuing a portfolio instrument
at its cost initially and thereafter assuming a constant am-
ortization to maturity of any discount or premium regardless
of the impact of fluctuating interest rates on the market
value of the instrument.
The per share net asset value of Class A shares generally
will be higher than the per share net asset value of Class B
and Class C shares, reflecting the daily expense accruals of
the account maintenance and distribution fees applicable with
respect to Class B and Class C shares. It is expected, howev-
er, that the per share net asset value of the classes will
tend to converge (although not necessarily meet) immediately
after the payment of dividends or distributions which will
differ by approximately the amount of the expense accrual
differentials between the classes.
44 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund pays dividends substantially equivalent to its net WHEN THE FUNDS
investment income in accordance with the following schedule: PAY DIVIDENDS
FUND DIVIDENDS PAID
- ---- --------------
Growth Fund................................... Annually
Small Company Fund............................ Annually
World Fund.................................... Annually
Common Stock Fund............................. Quarterly
Balanced Fund................................. Quarterly
High Yield Fund............................... Monthly
Bond Fund..................................... Monthly
Government Securities Fund.................... Monthly
Short Maturity Government Fund................ Monthly
Tax-Free Income Fund.......................... Monthly
New York Fund................................. Monthly
Pennsylvania Fund............................. Monthly
The Money Market Fund's net income is determined as of the
close of business, 4:00 p.m. Eastern Time, on each day the
NYSE is open. The Fund declares dividends of all of its daily
net income to shareholders of record as of the close of busi-
ness the preceding business day. Dividends are declared and
accrued each day the NYSE is open and are payable monthly.
The amount of the dividend may fluctuate daily and dividends
will not be paid on days when net realized losses on securi-
ties in the portfolio or expenses exceed the Fund's income.
Distributions of any net realized gains for a fiscal year are
paid in December, following the November 30th fiscal year-
end. Income dividends and capital gains distributions will be
reinvested automatically in Fund shares at net asset value at
the close of business on the designated record date, unless
you elect otherwise (see "Shareholder Services -- Distribu-
tion Options" below). You may also elect to have dividends
sent directly to your bank account through electronic funds
transfer. Any dividend or distribution of less than $10.00
must be reinvested.
If you elect to receive dividends and/or capital gain distri-
butions in cash and the postal or other delivery service is
unable to deliver checks to your address of record, your dis-
tribution option will automatically be converted to having
all dividend and other distributions reinvested in additional
shares. No interest will accrue on amounts represented by
uncashed dividend or other distribution checks.
ALLOCATION OF INCOME, GAINS, LOSSES AND EXPENSES. Allocation
of income, gains and losses of each Fund shall be allocated
pro rata according to the net assets of each class of shares
of such Fund.
Allocation of expenses not allocated to a specific class of
shares of a Fund (except for the Money Market Fund) shall be
allocated according to the net assets or number of share-
holder accounts, each on a pro rata basis, of each class of
shares. Allocations in the case of the Money Market Fund, ex-
cept for class specific expenses, shall be made (i) to each
share without regard to class, provided that the Fund has re-
ceived undertakings from the Advisor or any other provider of
services to the Fund, agreeing to waive or reimburse the Fund
for payments to such service provider by one or more classes,
as allocated as described above, to the extent necessary to
assure that all classes of the Funds maintain the same net
asset value per share, or (ii) on the basis of relative net
asset value.
..............................................................
TAXES
GENERAL. Each Fund intends to continue to qualify, and the HOW INCOME AND
High Yield Fund intends to elect and to qualify, for the spe- GAINS ARE
cial tax treatment afforded regulated investment companies TAXED
under the Code. Qualifying Funds (but not their shareholders)
are free from federal income tax on net ordinary income and
net realized capital gains distributed to shareholders. The
Funds intend to distribute substantially all of this income
and gain.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR 45
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
Unless your shares are held in a tax-deferred retirement
plan, or in the New York, Pennsylvania or Tax-Free Income
Funds, which are discussed below, you are subject to ordinary
income tax for federal income tax purposes on dividends from
investment income and distributions made from an excess of
net short-term capital gains over net long-term capital
losses (together referred to as "ordinary income dividends").
Distributions made from an excess of net long-term capital
gains over net short-term capital losses (including gains or
losses from certain transactions in options and futures)
("capital gain dividends") are taxable as long-term capital
gains for federal income tax purposes, regardless of the
length of time you have owned your shares. Recent legislation
creates additional categories of capital gains taxable at
different rates. Generally not later than 60 days after the
close of its taxable year, each Fund will provide its share-
holders with a written notice designating the amounts of any
exempt-interest dividends, if applicable, ordinary income
dividends or capital gain dividends, as well as the amount of
capital gain dividends in the different categories of capital
gain referred to above. Distributions in excess of a Fund's
earnings and profits will first reduce the adjusted tax basis
of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder
for federal income tax purposes (assuming the shares are held
as a capital asset). Dividends generally are taxable to
shareholders even though they are reinvested in additional
shares (unless they are designated as exempt-interest divi-
dends).
Any loss incurred on the sale or exchange of shares of a Fund
held for six months or less will be treated as a long-term
capital loss for federal income tax purposes to the extent of
any capital gain dividends received with respect to such
shares. For the New York, Pennsylvania and Tax-Free Income
Funds, such loss will be disallowed to the extent of any "ex-
empt-interest dividends" paid, as defined in section
852(b)(5) of the Code, with any additional loss not disal-
lowed under this rule treated as long-term capital loss to
the extent of capital gain dividends received.
No gain or loss will be recognized by Class B shareholders
for federal income tax purposes on the conversion of their
Class B shares into Class A shares. A shareholder's basis in
the Class A shares acquired will be the same as such share-
holder's basis in the Class B shares converted, and the hold-
ing period of the acquired Class A shares will include the
holding period for the converted Class B shares. Shareholders
should consult their tax advisors regarding the state and lo-
cal tax consequences of exchanging or converting classes of
shares.
If a shareholder exercises an exchange privilege within 90
days of acquiring the shares, then the loss the shareholder
can recognize on the exchange for federal income tax purposes
will be reduced (or the gain increased) to the extent of the
sales charge the shareholder would have owed in the absence
of the exchange privilege. Instead, such sales charge will be
treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of a Fund
will be disallowed for federal income tax purposes if other
shares of the same Fund are acquired (whether through the au-
tomatic reinvestment of dividends or otherwise) within a 61-
day period beginning 30 days before and ending 30 days after
the date that the shares are disposed of. In such a case, the
basis of the shares acquired will be adjusted to reflect the
disallowed loss.
A portion of a Fund's ordinary income dividends may be eligi-
ble for the dividends received deduction allowed to corpora-
tions under the Code, if certain requirements are met. If a
Fund pays a dividend in January which was declared in the
previous October, November or December to shareholders of
record on a specified date in one of these months, then the
dividend will be treated for federal income tax purposes as
if it were paid by the Fund and received by its shareholders
on December 31st of the year in which the dividend was de-
clared.
Under certain provisions of the Code, some shareholders may
be subject to a 31% withholding tax on most ordinary income
dividends and on capital gain dividends and redemption pay-
ments ("backup withholding"). Generally, shareholders subject
to backup withholding include the following:
. Those for whom no certified taxpayer identification num-
ber is on file with Sentinel Service,
. Those who have furnished Sentinel Service with an incor-
rect certified taxpayer identification number, and
. Those identified by the IRS.
46 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
When establishing an account, you must certify, under penalty
of perjury, that your taxpayer identification number is cor-
rect and that you are not otherwise subject to back-up with-
holding.
Ordinary income dividends paid to nonresident alien share-
holders or foreign entities will be subject to a 30% United
States withholding tax under existing provisions of the Code
applicable to foreign individuals and entities unless a re-
duced rate of withholding or a withholding exemption is pro-
vided under applicable treaty law. If you are a nonresident
alien shareholder, consult your tax advisor concerning the
applicability of the United States withholding tax.
By law, interest income from obligations of the U.S. Treasury
is exempt from state and local taxes. Many states with income
taxes permit this exemption to be passed through to dividends
of regulated investment companies that invest in such securi-
ties. Therefore, many shareholders can expect to receive
Money Market Fund dividends and a significant portion of Gov-
ernment Securities Fund and Short Maturity Government Fund
dividends free of state and local taxes. If you live in a
state that imposes income taxes, consult with your tax advi-
sor to determine whether all or part of the dividends from
the Money Market Fund, the Government Securities Fund or the
Short Maturity Government Fund are exempt from state and lo-
cal taxation. In any case, such income will not be exempt
from federal income tax. Furthermore, capital gains, if any,
realized by such Funds will not be exempt from federal taxes
or, generally, from state and local taxes.
Dividends and/or interest received by the World Fund and to a
lesser extent, the Bond Fund and to a much smaller degree,
the Balanced Fund and the Common Stock Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States
may reduce or eliminate such taxes. Shareholders of the World
Fund may be able to claim United States foreign tax credits
with respect to such taxes, subject to certain conditions and
limitations contained in the Code. For example, certain re-
tirement accounts cannot claim foreign tax credits on invest-
ments in foreign securities held in the World Fund. In addi-
tion, recent legislation permits a foreign tax credit to be
claimed with respect to withholding tax on a dividend only if
the shareholder meets certain holding period requirements. In
addition, recent legislation permits a foreign tax credit to
be claimed with respect to withholding tax on a dividend only
if the shareholder meets certain holding period requirements.
If more than 50% in value of the World Fund's total assets at
the close of its taxable year consists of securities of for-
eign corporations, the Fund will be eligible, and intends, to
file an election with the Internal Revenue Service pursuant
to which shareholders of such fund will be required to in-
clude their proportionate shares as taxes paid by them, and
deduct such proportionate shares in computing their federal
taxable incomes or, alternatively, use them as foreign tax
credits against their United States income taxes. In the case
of foreign taxes passed through by a RIC, the holding period
requirements referred to above must be met by both the share-
holder and the RIC. In the case of foreign taxes passed
through by a RIC, the holding period requirements referred to
above must be met by both the shareholder and the RIC. No de-
ductions for foreign taxes, however, may be claimed by
noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a for-
eign corporation may be subject to United States withholding
tax on the income resulting from the World Fund's election
described in this paragraph but may not be able to claim a
credit or deduction against such United States tax for the
foreign taxes treated as having been paid by such sharehold-
er. The World Fund will report annually to its shareholders
the amount per share of such withholding taxes and other in-
formation needed to claim the foreign tax credit.
Under Code Section 988, gains or losses of the World Fund
from certain debt instruments, from certain forward con-
tracts, from futures contracts that are not "regulated
futures contracts" and from unlisted options will generally
be treated as ordinary income or loss. Such Code Section 988
gains or losses will generally increase or decrease the
amount of the World Fund's investment company taxable income
available to be distributed to shareholders as ordinary in-
come. Additionally, if Code Section 988 losses exceed other
investment company taxable income during a taxable year, the
World Fund would not be able to make any ordinary income div-
idend distributions, and all or a portion of distributions
made before the losses were realized but in the same taxable
year would be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each sharehold-
er's fund shares and resulting in a capital gain for any
shareholder who received a distribution greater than the
shareholder's fund shares and resulting
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 47
Prospectus
<PAGE>
...............................................................................
in a capital gain for any shareholder who received a distri-
bution greater than the shareholder's tax basis in fund
shares (assuming the shares were held as a capital asset).
The foregoing description relates only to federal income tax-
es. You should consult with your tax advisor as to the avail-
ability of any exemptions from state or local taxes.
NEW YORK, PENNSYLVANIA AND TAX-FREE INCOME FUNDS.
Each of the New York, Pennsylvania and Tax-Free Income Funds
intends to invest a sufficient portion of its assets in mu-
nicipal bonds and notes to qualify to pay "exempt-interest
dividends" to shareholders. Such dividends are excludable
from gross income for federal income tax purposes. Exempt-in-
terest dividends are included, however, in determining the
portion, if any, of an individual's social security benefits
and railroad retirement benefits subject to federal income
taxes. All or a portion of the New York, Pennsylvania and
Tax-Free Income Funds' gain from the sale or redemption of
tax-exempt obligations purchased at a market discount will be
treated as ordinary income for federal income tax purposes
rather than capital gain. This rule may increase the amount
of ordinary income dividends received by shareholders of
these Funds.
Interest on indebtedness incurred or continued to purchase or
carry shares of a regulated investment company paying exempt-
interest dividends will not be deductible by the shareholder
for federal income tax purposes to the extent attributable to
exempt-interest dividends.
The Code subjects interest received on certain otherwise tax-
exempt securities to an AMT. The AMT applies to interest re-
ceived on private activity bonds issued after August 7, 1986.
Private activity bonds are bonds which, although tax-exempt,
are used for purposes other than those generally performed by
governmental units and which benefit non-governmental enti-
ties (e.g. bonds used for commercial or housing purposes).
Income received on such bonds is classified as an item of
"tax preference" which would subject investors in such bonds,
including shareholders of the New York, Pennsylvania and Tax-
Free Income Funds, to an AMT. Each of the New York, Pennsyl-
vania and Tax-Free Income Funds may purchase private activity
bonds and will report to shareholders within 60 days after
its taxable year-end on the portion of its dividends declared
during the year which is a tax preference item for AMT pur-
poses. The Code further provides that corporations are sub-
ject to an AMT based in part on certain differences between
taxable income as adjusted for other tax preferences and the
corporation's adjusted current earnings. Because an exempt-
interest dividend paid by the New York, Pennsylvania or Tax-
Free Income Fund will be included in adjusted current earn-
ings, a corporate shareholder may be required to pay AMT on
exempt-interest dividends paid by any such Fund. Persons who
may be substantial users (or "related persons" of substantial
users) of facilities financed by industrial development bonds
or private activity bonds held by the New York, Pennsylvania
or Tax-Free Income Fund should consult their tax advisors be-
fore purchasing Fund shares.
The Code provides that every person required to file a tax
return must include on such return the amount of exempt-in-
terest dividends received from the New York, Pennsylvania and
Tax-Free Income Funds during the taxable year.
The New York Fund intends to invest primarily in New York Ob-
ligations. Distributions from the New York Fund which are at-
tributable to interest income received from such obligations
also will be exempt from New York State and New York City
personal income tax. The Pennsylvania Fund, likewise, intends
to invest primarily in Pennsylvania Obligations. Distribu-
tions from the Pennsylvania Fund which are attributable to
interest income received from such obligations also will be
exempt from Pennsylvania personal income tax. Distributions
from the New York and Pennsylvania Funds which are attribut-
able to interest received from qualifying obligations of the
U.S. government, its agencies and instrumentalities similarly
will be exempt from New York State and New York City or from
Pennsylvania personal income tax, respectively. Distributions
from these Funds may, however, be subject to taxation at a
local level within either New York State (but outside New
York City) or Pennsylvania.
Exempt-interest dividends paid to a corporate shareholder in
the New York Fund will be subject to New York State corpora-
tion franchise tax and New York City general corporation tax.
To the extent exempt-interest dividends paid to a shareholder
of the Pennsylvania Fund are excluded from taxable income for
48 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
federal corporate income tax purposes (determined before net
operating loss carryovers and special deductions), they will
not be subject to the Pennsylvania corporate net income tax.
However, it is unclear whether an investment in the Pennsyl-
vania Fund by a corporate shareholder will qualify as an ex-
empt asset for purposes of apportionment of the Pennsylvania
capital stock/foreign franchise tax.
Distributions from the Pennsylvania Fund will be exempt from
the Philadelphia School District investment income tax for
individual residents of the City of Philadelphia to the ex-
tent that such distributions are attributable to interest re-
ceived from Pennsylvania Obligations or from qualifying obli-
gations of the U.S. Government, its agencies and
instrumentalities, or to the extent such distributions are
designated as capital gain dividends for federal income tax
purposes. Shares of the Pennsylvania Fund will be exempt from
Pennsylvania county personal property tax to the extent Penn-
sylvania Fund assets are comprised of Pennsylvania Obliga-
tions and qualifying obligations of the U.S. government, its
agencies and instrumentalities on the annual assessment date.
If the New York and Pennsylvania Funds invest in obligations
and allowable investments other than New York Obligations and
Pennsylvania Obligations, respectively, a portion of the in-
come distributed to shareholders may be subject to state and
local taxes, and possibly federal income tax. Shareholders of
the New York and Pennsylvania Funds who are subject to taxa-
tion by states other than New York or Pennsylvania will real-
ize a lower after-tax return than New York or Pennsylvania
shareholders, respectively, since the dividends distributed
by the New York and Pennsylvania Funds generally will not be
exempt, to any significant degree, from income taxation by
such other states. The New York and Pennsylvania Funds will
inform shareholders annually as to the portion of such Fund's
distributions which constitutes exempt-interest dividends and
the portion which is exempt from New York or Pennsylvania
personal income taxes.
Consult with your tax advisor regarding specific questions CONSULT WITH
about federal, foreign, state or local taxes. Foreign invest- YOUR TAX
ors should consider applicable foreign taxes in their evalua- ADVISOR ABOUT
tion of an investment in the Funds. TAX
IMPLICATIONS
OF CERTAIN
DISTRIBUTIONS
The foregoing is a general and abbreviated summary of the ap-
plicable provisions of the Code and U.S. Treasury regula-
tions, and relevant state and local tax laws presently in ef-
fect. For the complete provisions, refer to the pertinent
Code sections and the U.S. Treasury regulations promulgated
thereunder, and relevant state and local tax laws. The Code
and U.S. Treasury Regulations, and relevant state and local
tax laws are subject to change by legislative, judicial or
administrative action, either prospectively or retroactively.
..............................................................
SHAREHOLDER SERVICES
When you establish a new account, all dividends and any capi- MANY
tal gains distributions are reinvested at net asset value and CONVENIENT
without charge to purchase additional shares, unless you SHAREHOLDER
elect another option. Many other features are available to SERVICES ARE
you, as described below. Minimum account values apply for AVAILABLE
some.
DISTRIBUTION OPTIONS: Several options for receiving dividends
and capital gains distributions are available, including the
ability to reinvest dividends and distributions from shares
of one Fund into shares of the same class in another Fund.
CHECK WRITING PRIVILEGES: Check writing is offered without
charge to holders of Class A shares of the High Yield, Bond,
New York, Pennsylvania, Tax-Free Income, Government Securi-
ties, Short Maturity Government and Money Market Funds.
EXCHANGE PRIVILEGE: Once every 15 days, you may exchange
shares of one Fund for shares of the same class of another
Fund, without charge, by phoning Sentinel Service or by pro-
viding appropriate instructions in writing to Sentinel Serv-
ice. Because Class B shares in the Tax-Free Income, New York,
Pennsylvania, Government Securities and Short Maturity Gov-
ernment Funds are not currently offered, holders of Class B
shares in the other Funds may not exchange into these Funds.
Similarly, because Class C shares of the Growth, Small Compa-
ny, Bond, Tax-Free Income, New York, Pennsylvania, Government
Securities and Short Maturity Government Funds are not cur-
rently offered, holders of Class C shares of the other
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 49
Prospectus
<PAGE>
...............................................................................
Funds may not exchange into these Funds. Class C shares may
be exchanged for Class A shares of the Money Market Fund. If
the Class C shares which were exchanged were held for less
than one year in the Class C Fund, a 1.00% CDSC will normally
apply if the Money Market Fund shares are redeemed. Such
Money Market Fund shares may be exchanged back into Class C
shares at any time. Funds are only available for exchange for
residents of states in which such Funds are registered. In
the case of purchases of less than $1 million of the Short
Maturity Government Fund, however, shares purchased (other
than by exchange from another Fund other than the Money Mar-
ket Fund) must remain in the account for 90 days before they
are eligible for the exchange privilege. Also, where Class A
shares in the Money Market Fund, which were not acquired in
exchange for Class A shares of another Fund, are exchanged
for Class A shares of another Fund, you will be required to
pay a sales charge equal to what the sales charge would have
been for an initial purchase of the shares into which Money
Market Fund shares are being exchanged. In determining the
holding period for Class B or Class C shares, the holding pe-
riod for shares which have been exchanged into the then cur-
rently held shares will be included, except that the time
that an investment is in the Money Market Fund will not count
toward the time necessary to reduce or eliminate any applica-
ble CDSC, or to be converted into Class A shares. The normal
minimum account sizes apply to new accounts opened by ex-
change.
New purchases must remain in an account for 15 days before
they can be exchanged to another Fund. All shareholders auto-
matically receive the privilege to make exchanges over the
telephone by calling Sentinel Service. See "How to Redeem
Shares -- Telephone Redemption" above for a statement of the
Funds' liability disclaimer policy for unauthorized telephone
instructions. Although the Funds and Sentinel Service will
attempt in good faith to provide adequate telephone exchange
service at all times, telephone exchanges may be difficult to
implement in times of drastic economic change. In the event
you cannot contact Sentinel Service by telephone, you may ef-
fect an exchange by sending a written request to Sentinel Ad-
ministrative Service Company, P. O. Box 1499, Montpelier, VT
05601-1499. Please be certain to specify which account op-
tions are desired on any newly established account. There is
currently no limitation on the number of times a shareholder
may exercise the exchange privilege. The exchange privilege
may be modified or terminated in accordance with the rules of
the Commission (the current rules of the Commission require
60 days advance notice to shareholders prior to the modifica-
tion or termination of the exchange privilege).
SYSTEMATIC EXCHANGE: This feature enables you to sell a spec-
ified number or dollar-value of shares in one of the Funds
periodically and use the proceeds to purchase the same class
of shares in another Fund.
TRANFERS: When you need to change ownership of or the name on
an account, a Sentinel Service representative will provide
you with the necessary assistance.
SYSTEMATIC WITHDRAWAL PLAN: If you want to have regular with-
drawals from your account, this feature will enable you to
have shares sold regularly with the proceeds directed as you
elect. Each withdrawal constitutes a taxable event. You must
reinvest dividends and capital gains distributions to use a
systematic withdrawal plan. No interest will accrue on
amounts represented by uncashed checks sent pursuant to a
systematic withdrawal plan.
REINSTATEMENT PRIVILEGE: If you redeem shares or receive div-
idends or capital gains distributions in cash and subse-
quently want to reinvest your proceeds, you may do so within
365 days at net asset value, without paying any additional
sales charge.
To learn more about these services or to find out how to add
any of them to your account, please refer to the Shareholder
Services Guide and/or the Statement of Additional Informa-
tion.
..............................................................
PERFORMANCE DATA
Periodically, the Funds include average annual total return
in advertisements or in information distributed to existing
and prospective shareholders.
50 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
................................................................................
Average annual total return quotations are calculated by de- HOW THE FUNDS
termining the average annual compounded rates of return COMPUTE TOTAL
(based on net investment income and any capital gains or RETURN
losses on portfolio investments over such periods) that would
equate the initial amount invested to the redeemable value of
such investment at the end of each period.
Included in the calculation are all applicable recurring and
nonrecurring expenses, and it is assumed that all dividends
and distributions are reinvested.
To better illustrate the performance of money already in-
vested in the Funds, the Funds may also periodically adver-
tise total return for specified periods without subtracting
sales charges.
Periodically, the Bond, New York, Pennsylvania, Tax-Free In- HOW THE FUNDS
come, Government Securities, Short Maturity Government and COMPUTE YIELD
Money Market Funds may also quote yields in advertisements.
Yields are computed by dividing net investment income for a
recent 30-day (or one month) period by the product of the av-
erage daily number of shares outstanding during that period
and the maximum offering price per share on the last day of
the period. The result is then annualized. (The amount of in-
come generated during the 30-day period is assumed to be
earned, reinvested at a constant rate at the end of such pe-
riod and compounded semi-annually.)
The Funds listed above may also show comparable yields to
those shareholders already invested in the Funds by using the
net asset value per share instead of maximum offering price
in the above calculations. This has the effect of raising the
quoted yields.
The Small Company, Growth, Common Stock and Balanced Funds
may compare their performance to the following indices:
. Dow Jones Industrial Average
. The Standard & Poor's 500 Stock Index
. The Russell 2000 Index
The World Fund may compare its performance to the "EAFE" (Eu-
rope, Australia, Far East) Index.
The High Yield Fund may compare its performance to the Chase
Manhattan Bank Index.
The Bond, New York, Pennsylvania, Tax-Free Income, Government
Securities, Short Maturity Government, and Money Market Funds
may compare their performance to the following indices:
. Lehman Aggregate Bond Index
. Municipal Bond Index
. Government Bond Index
. Donoghue's Money Fund Report
In addition, the New York, Pennsylvania and Tax-Free Income
Funds may quote tax-equivalent yields in advertisements.
To determine the tax-equivalent yield of the Tax-Free Income HOW THE FUNDS
Fund, divide the tax-exempt part of the Fund's yield by an COMPUTE TAX-
amount which is one minus a stated tax rate, and add the re- EQUIVALENT
sult to that part, if any, of the Fund's yield that is tax- YIELD
able.
To determine the tax-equivalent yields of the New York or
Pennsylvania Funds, the yield as calculated above is in-
creased by the amount necessary to reflect the payment of
federal and either New York State and City or Pennsylvania
state taxes, as applicable, at a stated tax rate.
Note: The tax-equivalent yields for the New York, Pennsylva-
nia and Tax-Free Income Funds will always be higher than
their yields. (For more information on performance data,
please refer to "Total Return, Yield and Tax-Equivalent Yield
Information" in the Statement of Additional Information.)
The Funds may also refer to rankings and ratings published by
independent tracking services and publications of general in-
terest including, but not limited to: Lipper Analytical Serv-
ices, Inc.,
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 51
Prospectus
<PAGE>
...............................................................................
CDA/Wiesenberger, Morningstar, Donoghue's; magazines such as
Money, Forbes, Kiplinger's Personal Finance Magazine, Finan-
cial World, Consumer Reports, Business Week, Time, Newsweek,
U.S. News and World Report; and other publications such as
the Wall Street Journal, Barron's, Investor's Daily, and
Standard & Poor's Outlook. These ranking services and publi-
cations may rank the performance of the Funds against all
other mutual funds or against funds in specified categories.
The rankings may or may not include the effects of sales or
other charges.
..............................................................
ORGANIZATION OF THE FUNDS
HISTORICAL All of the Funds except the Pennsylvania Fund are series of
INFORMATION the Company. The Company was originally incorporated in Dela-
ABOUT THE ware as Group Securities, Inc. in 1933. The Company sold its
FUNDS first shares to the public in January 1934, and became a
Maryland corporation in 1973. Effective February 3, 1997, the
name of the Sentinel Short-Intermediate Government Fund was
changed to Sentinel Short Maturity Government Fund. Previous-
ly, it was known as Sentinel Short-Intermediate Government
Fund. Effective March 31, 1997, the Sentinel Small Company
Fund began doing business under its present name. Previously,
it was known as Sentinel Emerging Growth Fund.
The Company's stock is fully paid and non-assessable. Each
share of the Company entitles its shareholders to one vote
for each dollar of net asset value per share for all purpos-
es.
In the case of dissolution or other liquidation of the Compa-
ny, shareholders are entitled to receive (ratably per share)
the net assets of each Fund in which they are invested, with
any general assets distributed ratably per share, regardless
of the Fund. Voting rights are non-cumulative.
The Pennsylvania Fund is a separate trust formed under Penn-
sylvania law in 1986. Its shares of beneficial interest are
fully paid and non-assessable. Each share of beneficial in-
terest is entitled to one vote for all purposes. Voting
rights are non-cumulative. The Fund became a member of the
Sentinel Family of Funds on March 1, 1993, when the Advisor
and the Distributor assumed responsibility for the Fund. Pre-
viously, the Fund was known as "ProvidentMutual Pennsylvania
Tax-Free Trust".
52 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
APPENDIX A
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") MUNICIPAL BOND RATINGS
Moody's describes its ratings for corporate and municipal bonds as follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to
as "gilt edge". Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Rating Requirements: Moody's may apply numerical modifiers 1, 2 and 3 in
each generic rating classification from Aa through B in its bond rating sys-
tem. The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rat-
ing category. Note: Those bonds in the Aa, A, Baa, Ba and B categories which
Moody's believes possess the strongest credit attributes within those catego-
ries are designated by the symbols Aa1, A1, Baa1, Ba1 and B1.
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. ("STANDARD &
POOR'S") MUNICIPAL DEBT RATINGS
A Standard & Poor's issue credit rating is a current opinion of the credit-
worthiness of an obligor with respect to a specific financial obligation, a
specific class of financial obligations, or a specific financial program. It
takes into consideration the creditworthiness of guarantors, insurers and
other forms of credit enhancement on the obligation.
The issue credit rating is not a recommendation to purchase, sell or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the obligors or
obtained by Standard & Poor's from other sources it considers reliable. Stan-
dard & Poor's does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or based on other circumstances.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 53
Prospectus
<PAGE>
...............................................................................
The ratings are based, in varying degrees, on the following considerations:
I--Likelihood of payment capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms of
the obligation.
II--Nature of and provisions of the obligation; and
III--Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
Standard & Poor's describes its ratings for corporate and municipal debt as
follows:
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its commitment on the obligation is
extremely strong.
AA--Debt rated AA has differs from the highest rated obligations only in
a small degree. The obligor's capacity to meet its commitment on the
obligation is very strong.
A--Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. The obligor's capacity to meet its commitment on the obligation
is still strong.
BBB--Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment
to the obligation.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC and C is regarded as having
significant speculative characteristics. BB indicates the least degree of
speculation and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse conditions.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC--The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C--The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR--Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of policy.
Indicates that continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or closing documen-
tation confirming investments and cash flows.
54 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
...............................................................................
Provisional Ratings--The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or risk of default upon failure of,
such completion. Accordingly, the investor should exercise his own judgment
with respect to such likelihood and risk.
Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into ac-
count currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four catego-
ries ("AAA", "AA", "A", "BBB", commonly known as "investment grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies, in-
surance companies and fiduciaries generally.
FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863) 55
Prospectus
<PAGE>
................................................................................
THE SENTINEL FUNDS
National Life Drive
Montpelier, VT 05604
INVESTMENT ADVISOR
Sentinel Advisors Company
National Life Drive
Montpelier, VT 05604
PRINCIPAL UNDERWRITER
Sentinel Financial Services Company
National Life Drive
Montpelier, VT 05604
COUNSEL
Brown & Wood LLP
One World Trade Center
New York, NY 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUNDS' CUSTODIAN AND DIVIDEND PAYING AGENT
*Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
TRANSFER AGENT, SHAREHOLDER SERVICING AGENT AND ADMINISTRATOR
Sentinel Administrative Service Company
*National Life Drive
Montpelier, VT 05604
800-282-FUND (3863)
- ---------
* All mail and correspondence should be sent to Sentinel
Administrative Service Company, P. O. Box 1499, Montpelier,
VT 05601-1499
56 FOR INFORMATION AND ASSISTANCE CALL YOUR FINANCIAL ADVISOR OR INVESTOR
SERVICES AT 1-800-282-FUND (3863)
Prospectus
<PAGE>
Part C
Other Information
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
--------------------
Included in Part A:
- Financial Highlights - Selected Per Share Data and Ratios for the
ten years ended November 30, 1997
Incorporated by reference in Part B previously filed on May , 1998
Investments in Securities at November 30, 1997*
- Financial highlights - Selected Per Share Data and Ratios for the
five years ended November 30, 1997*
- Statement of Assets and Liabilities at November 30, 1997*
- Statement of Operations for the year ended November 30, 1997*
- Statement of Changes in Net Assets for the years ended November 30,
1997 and 1996*
- Notes to Financial Statements*
- Report of Independent Accountants*
Included in Propectus Supplement:
- Investments in Securities at May 31, 1998 (Unaudited) and for the
five years ended November 30, 1997.**
- Financial Highlights - Selected Per Share Data and Ratios at May
31, 1998 (unaudited)**
- Statement of Assets and Liabilities at May 31, 1998 (unaudited)**
- Statement of Operations for the six months ended May 31, 1998
(unaudited) and for the year ended November 30, 1997**
- Statement of Changes in Net Assets for the six months ended May 31,
1998 (unaudited) and for the year ended November 30, 1997**
- Notes to Financial Statements (unaudited)**
- ---------------
* Previously filed as the Registrant's 1997 Annual Report to shareholders
filed with the Securities and Exchange Commission for the year ended
November 30, 1997 pursuant to Rule 30b2-1 under the Investment Company Act
of 1940, as amended ("1940 Act").
** Previously filed as the Registrant's Semi-Annual Report to shareholders
filed with the Securities and Exchange Commission for the six months ended
May 31, 1998 pursuant to Rule 30b2-1 under the 1940 Act.
(b) Exhibits:
--------
1. (a) Amended and Restated Articles of Incorporation of the
Registrant.(1)
1. (b) Articles of Amendment reclassifying capital stock as Class A
shares.(1)
1. (c) Articles Supplementary creating Class B shares of capital
stock.(1)
1. (d) Articles of Amendment relating to name change of Sentinel Short
Maturity Government Fund.(1)
1. (e) Articles of Amendment relating to name change of Sentinel Small
Company Fund.(1)
1. (f) Articles of Amendment relating to name change of Sentinel
Emerging Growth Fund.(1)
1. (g) Articles Supplementary creating Class C shares of capital
stock.(1)
1. (h) Form of Articles Supplementary creating Class D shares of
Sentinel Balanced Fund.
2. By-Laws of the Registrant, as amended.
3. None.
4. (a) Portion of the Articles of Incorporation and the By-Laws of the
Registrant defining the rights of holders of Class A shares of
each Fund as series of the Registrant.(2)
4. (b) Form of Class A Stock Certificates.(1)
5. Investment Advisory Agreement between the Registrant and
Sentinel Advisors Company (the "Advisor"), dated as of March 1,
1993.(3)
6. Distribution Agreement between the Registrant and Sentinel
Financial Services Company ("SFSC"), dated as of March 1,
1993.(3)
7. None.
<PAGE>
8. Custody Agreement between the Registrant and Investors
Fiduciary Trust Company ("IFTC"), dated December 1, 1989.(1)
9. (a) Dividend Paying Agent Agreement between the Registrant and
IFTC, dated December 1, 1989.(1)
9. (b) Service Agreement between Sentinel Administrative Service
Corporation and IFTC, dated December 1, 1989.(1)
9. (c) Administrative Services Agreement between Sentinel
Administrative Service Corporation and IFTC, dated December 1,
1989.(1)
9. (d) Fund Services Agreement between the Registrant and Sentinel
Administrative Services Company ("SASC"), dated as of March 1,
1993.(3)
9. (e) Form of Agreement and Plan of Reorganization between the
Registrant and The Independence Capital Group of Funds, Inc.(4)
10. None.
11. Consent of PricewaterhouseCoopers LLP, independent accountants
for the Registrant.
12. None.
13. None.
14.(a) Master Form of Keogh Plan.(1)
14.(b) Master Form of IRA.(1)
14.(c) Master Form of Prototype Pension Plan.(1)
14.(d) Master Form of Prototype Profit Sharing Plan.(1)
14.(e) Master Form of 403(b) Plan.(1)
15.(a) Class A Distribution Plan pursuant to Rule 12b-1 under the
1940 Act.(1)
15.(b) Amended Class B Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act.(1)
15.(c) Class C Distribution Plan pursuant to Rule 12b-1 under the 1940
Act.(1)
15.(d) Form of Class D. Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act.
16. Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22.(1)
17. Financial Data Schedules.
18. Amended Plan pursuant to Rule 18f-3 under the 1940 Act.
- ------------------------
(1) Previously filed as an Exhibit to Post-Effective Amendments No. 54, 55, 56,
57 and 58 of the Registrant on Form N-1 and Post-Effective Amendments No.
61, 62, 63, 64, 67, 68, 71, 72, 76, 77, 80 and 83 of the Registrant on Form
N-1A.
(2) Reference is made to Articles Fifth, Sixth, Seventh and Eighth of the
Registrant's Articles of Incorporation, previously filed as Exhibit 1 to
the Registration Statement; and to Paragraphs 4 through 12, 35 through 39,
43 through 45, 50 and 52 through 54 of the Registrant's By-Laws, previously
filed as Exhibit 2 to the Registration Statement.
(3) Previously filed as Exhibits 4, 6(b), 7(b), 13(b) and 13(g) to the
Registration Statement of the Registrant on Form N-14, File No. 33-55000.
(4) Previously filed as Appendix I to the Prospectus contained in the
Registration Statement of the Registrant on Form N-14 filed with the
Commission on January 6, 1995, File No. 33-88326.
Item 25. Persons Controlled by or under Common Control
With The Registrant
---------------------------------------------
None.
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of September 30, 1998
-------------- ------------------------
<S> <C>
Sentinel Small Company Fund 12,287
Sentinel Growth Fund 8,005
Sentinel World Fund 7,356
Sentinel Common Stock Fund 53,240
Sentinel Balanced Fund 14,692
Sentinel Bond Fund 3,917
Sentinel New York Tax-Free Income Fund 171
Sentinel Tax-Free Income Fund 2,273
Sentinel Government Securities Fund 3,112
Sentinel Short Maturity Government Fund 1,882
Sentinel U.S. Treasury Money Market Fund 4,928
Sentinel High Yield Bond Fund 2,236
</TABLE>
Item 27. Indemnification
---------------
See paragraphs 3, 4, 5 and 6 of Article SEVENTH of the Amended and
Restated Articles of Amendment of the Registrant, incorporated by
reference to Exhibit 1(a) to this Registration Statement.
The existing Advisory Agreement (Exhibit 5 hereof) provides that in
the absence of willful malfeasance, bad faith, gross negligence or
reckless disregard of the obligations or duties thereunder on the part
of the Advisor, the Advisor shall not be liable to the Registrant or
to any shareholder of the Registrant for any act or omission in the
course of, or connected with rendering services thereunder or for any
losses that may be sustained in the purchase, holding or selling of
any security.
In addition, the Registrant maintains a directors and officers
liability insurance policy with maximum coverage of $15 million under
which the directors and officers of the Registrant are named insureds.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted
to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the 1933 Act and therefore is unenforceable. In the event that a
claim for indemnification against such liabilities (other than for
expenses paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant, unless the matter has been settled by controlling
precedent in the opinion of its counsel, will submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 28. Business and Other Connections of the Investment Adviser
--------------------------------------------------------
Information on the Advisor is incorporated by reference to the
Prospectus included in this Registration Statement.
Partners of the Advisor
-----------------------
Sentinel Management Co. - Managing General Partner
Sentinel Advisors, Inc. - General Partner
Provident Mutual Management Co., Inc. - General Partner
HTK of Delaware, Inc. - General Partner
Officers of the Advisor
-----------------------
Rodney A. Buck, Chief Executive Officer
David M. Brownlee, Senior Vice President
Robert L. Lee, Senior Vice President
Richard A. Pender, Senior Vice President
Richard D. Temple, Vice President
Kenneth J. Hart, Vice President
Bruce R. Bottamini, Vice President
Thomas H. Brownell, Vice President
William C. Kane, Vice President
Kay L. Edson, Vice President
Henry J. Restaino, Vice President
Dean R. Howe, Vice President and Treasurer
Scott T. Brayman, Vice President
Daniel J. Manion, Vice President
Lisa M. Pettrey, Secretary
Each of the above officers is also an officer or employee of National
Life Insurance Company or its subsidiary, National Life Investment
Management Company, Inc. The principal business address of each such
company is National Life Drive, Montpelier, Vermont 05604.
<PAGE>
Item 29. Principal Underwriters
----------------------
(a) The Registrant's principal underwriter, SFSC, also serves as principal
underwriter for Sentinel Pennsylvania Tax-Free Trust.
(b) As to each officer of SFSC:
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with SFSC the Registrant
- ------------------ --------------------- --------------
<S> <C> <C>
Joseph M. Rob Chief Executive Officer President
Julie B. Hendrickson President and Chief None
Operating Officer
John M. Grab, Jr. Senior Vice President, Vice President
Chief Financial Officer,
and Treasurer
</TABLE>
The principal business address of all such persons is National Life Drive,
Montpelier, Vermont 05604.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The following maintain physical possession of each account book or other
documents required by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder.
(a) Sentinel Administrative Service Company
National Life Drive
Montpelier, Vermont 05604
Rule 31a-1(a)
Rule 31a-1(b)(1)(2)(3)(4)(5)(6)(7)(8)
Rule 31a-2(a)(b)(c)(f)
<PAGE>
(b) Sentinel Advisors Company
National Life Drive
Montpelier, Vermont 05604
Rule 31a-1(a)(9)(10)(11)
Rule 31a-1(d)(f)
Rule 31a-2(a)(c)(f)
(c) Sentinel Financial Services Company
National Life Drive
Montpelier, Vermont 05604
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Montpelier and State of Vermont, on the 28th day of October, 1998.
SENTINEL GROUP FUNDS, INC.
(Registrant)
By: /s/ Patrick E. Welch
---------------------------------------
Patrick E. Welch
Chairman
As required by the Securities Act of 1933, this post-effective amendment to
the Registration Statement has been signed by the following persons in the
capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Patrick E. Welch Chairman October 28, 1998
- ---------------------------------- (Chief Executive
Patrick E. Welch Officer)
/s/ Richard J. Borda* Director
- ----------------------------------
Richard J. Borda
/s/ Kalman J. Cohen* Director
- ----------------------------------
Kalman J. Cohen
/s/ Richard D. Farman* Director
- ----------------------------------
Richard D. Farman
/s/ John D. Feerick* Director
- ----------------------------------
John D. Feerick
/s/ Richard J. Johannesen, Jr.* Director
- ----------------------------------
Richard J. Johannesen, Jr.
/s/ Robert B. Mathias* Director
- ----------------------------------
Robert B. Mathias
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Director
- ----------------------------------
Keniston P. Merrill
/s/ Deborah G. Miller* Director
- ----------------------------------
Deborah G. Miller
/s/ John Raisian* Director
- ----------------------------------
John Raisian
/s/ Joseph M. Rob Director October 28, 1998
- ----------------------------------
Joseph M. Rob
/s/ Susan M. Sterne* Director
- ----------------------------------
Susan M. Sterne
/s/ Angela E. Vallot* Director
- ----------------------------------
Angela E. Vallot
/s/ John M. Grab, Jr. Vice President October 28, 1998
- ---------------------------------- and Principal
John M. Grab, Jr. Financial and
Accounting Officer
*By /s/ Joseph M. Rob October 28, 1998
------------------------------
Joseph M. Rob
Attorney-in-Fact
</TABLE>
<PAGE>
Exhibit 1(b)
SENTINEL GROUP FUNDS, INC.
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION
CREATING AN ADDITIONAL CLASS OF COMMON STOCK
SENTINEL GROUP FUNDS, INC., a Maryland corporation having its principal
Maryland office c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation, that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by its charter, the Board of Directors, at a meeting duly
convened and held on August 21, 1998, has reclassified twenty million
(20,000,000) authorized and unissued shares of Capital Stock of the Corporation
as Class D shares of common stock of Sentinel Balanced Fund with a par value of
one cent ($.01) per share and of the aggregate par value of two hundred thousand
dollars ($200,000).
SECOND: The preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of Class D shares of common stock of Sentinel Balanced
Fund are as follows:
The Class D shares of common stock of Sentinel Balanced Fund shall
represent the same interest in the Corporation and have identical preferences,
designations, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption as the Class A, Class B and Class C shares of common stock of
Sentinel Balanced Fund as of the date of these Articles Supplementary, except as
otherwise set forth in the Corporation's charter and further except that:
(i) Expenses related to the distribution of the Class D shares of common
stock of Sentinel Balanced Fund shall be borne solely by such class and such
class shall have exclusive voting rights with respect to matters relating to the
expenses being borne solely by such class; and
(ii) Such distribution expenses borne solely by the Class D shares of
common stock of Sentinel Balanced Fund shall be appropriately reflected (in the
manner determined by the Board of Directors) in the net asset value, dividends,
distribution and liquidation rights of the shares of such class.
<PAGE>
IN WITNESS WHEREOF, SENTINEL GROUP FUNDS, INC. has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
attested by its Secretary on October 27, 1998.
SENTINEL GROUP FUNDS, INC.
By
----------------------------------
Joseph M. Rob
President
Attest:
- --------------------------
D. Russell Morgan
Secretary
THE UNDERSIGNED, President of SENTINEL GROUP FUNDS, INC., who executed on
behalf of said Corporation the foregoing Articles Supplementary, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects, and
that this statement is made under the penalties for perjury.
---------------------------
Joseph M. Rob
President
2
<PAGE>
EXHIBIT 11
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Post-Effective Amendment No. 84 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 19, 1997, relating to the financial statements and financial highlights
appearing in the November 30, 1997 Annual Report to Shareholders of Sentinel
Group Funds, Inc. which are also incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading "Financial
Highlights" in the Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
October 26, 1998
<PAGE>
Exhibit 15(d)
CLASS D DISTRIBUTION PLAN
OF
SENTINEL GROUP FUNDS, INC.
PURSUANT TO RULE 12B-1
Class D Distribution Plan (the "Plan") dated as of the 21st day of August,
1998, of Sentinel Group Funds, Inc., a Maryland corporation (the "Company") and
Sentinel Financial Services Company (the "Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as a series open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, the Distributor is a securities firm engaged in the business of
marketing shares of investment companies through other securities firms; and
WHEREAS, the Company has entered into a Distribution Agreement with the
Distributor, pursuant to which the Distributor acts as the primary distributor
of the Company's shares, and the sole distributor and representative of the
Company in the offer and sale through independent broker-dealers of the common
stock, par value $.01 per share, of each Fund of the Company, including in
particular the Class D shares of the Balanced Fund of the Company (such class,
together with all class D classes of Funds that may be authorized for issuance
and sale in the future by the Board of Directors of the Company, being
hereinafter referred to as the "Class D Classes"); and
WHEREAS, the Company desires to adopt the Plan pursuant to Rule 12b-1 under
the Investment Company Act, pursuant to which the Company will pay certain fees
to the Distributor with respect to the shares of the Company's Class D Classes;
and
WHEREAS, the Directors of the Company have determined that there is a
reasonable likelihood that adoption of the Plan will benefit each Class D Class
and its shareholders.
NOW, THEREFORE, the Company hereby adopts, and the Distributor hereby
agrees to the terms of, the Plan in accordance with Rule 12b-1 under the
Investment Company Act on the following terms and conditions:
1. The Company shall, for the purpose and on the further terms and
conditions set forth herein, pay to the Distributor an amount equal to the
aggregate of the distribution expenditures
<PAGE>
relating to the sale of the shares of common stock of each Class D Class of the
Company, up to a maximum of 0.75% per annum of average daily net assets of each
Class D Class.
2. The Company shall reimburse the Distributor for expenses actually
incurred by the Distributor for: (a) recovery of front-end sales commissions
paid by the Distributor to securities broker-dealers who have executed a Dealer
Agreement with the Distributor with respect to sales of shares of the Class D
Classes, together with the costs of financing such payments incurred by the
Distributor, except to the extent such costs are recovered through contingent
deferred sales charges collected by the Distributor; (b) salaries and expenses
of the Distributor's wholesale sales force, and the Distributor's home office
management and marketing personnel; (c) expenses incurred by the Distributor for
the occupancy of its office space in Montpelier, Vermont; (d) expenses incurred
by the Distributor with respect to equipment and supplies; (e) expenses incurred
for the preparation, printing and distribution of sales literature used in
connection with the offering of the Company's Class D Classes to the public; (f)
expenses incurred in advertising, promoting and selling shares of the Company's
Class D Classes to the public; (g) expenses incurred for the preparation,
printing and distribution of the prospectus and statement of additional
information of the Company, and any supplement thereto used in connection with
the offering of the Company's Class D shares to the public; (h) expenses
incurred for the printing of additional copies for use by the Distributor as
sales literature of reports and other communications which were prepared by the
Company for distribution to existing shareholders, and (i) expenses incurred for
state "blue sky" registration fees for the first year of operations of a new
Fund of the Company. Reimbursements contemplated above shall be paid monthly
upon receipt by the Company of a written expense report detailing the expenses
qualifying for such reimbursement and purposes thereof. In the event that for
any Class D Class or Classes the aggregate of these reimbursable expenses
exceeds the maximums set forth in paragraph 1 above, then the Distributor will
not be reimbursed for any unreimbursed eligible expenses from any other Class D
Class, or in any future year.
3. The Distributor shall prepare reports to the Board of Directors of the
Company on a quarterly basis summarizing all payments made by it pursuant to the
Plan and the Dealer Agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Directors or the
Directors who are not interested persons may reasonably request from time to
time.
4. The Plan shall become effective as to each Class D Class upon its
approval by (a) a majority of the outstanding voting securities (as such phrase
is defined in the Investment Company Act) of such Class, and (b) a majority of
the members of the Board of Directors of the Company, including a majority of
the members of the Board of Directors who are not interested persons of the
Class D Classes and have no direct or indirect financial interest in the
operation of the Plan, with votes cast in person at a meeting called for the
purpose of voting on the Plan, and (c) upon the effectiveness of a Post-
Effective Amendment to the Company's Registration Statement reflecting this
Plan, filed with the U.S. Securities and Exchange Commission under the
Securities Act of 1933. The date on which the last of (a), (b) and (c) occurs
with respect to a Class D Class shall be the "Effective Date" with respect to
such Class D Class.
5. Upon receipt of the approvals required by paragraph 4 above, the Plan
and the Dealer Agreements contemplated hereby shall continue in effect with
respect to any Class D Class beyond
-2-
<PAGE>
the first anniversary of its adoption by the Board of Directors of the Company
only so long as (a) its continuation is approved at least annually in the manner
set forth in either clause (a) or clause (b) of paragraph 4 above and (b) the
selection and nomination of those Directors of the Company who are not
interested persons of the Company are committed to the discretion of such
Directors.
6. The Plan or any agreement related to the Plan may be terminated without
penalty at any time by a majority of those Directors of the Company who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
or with respect to any Class D Class, by the holders of a majority of the
outstanding voting securities of such Class D Class.
7. This Plan may not be amended to increase the maximum amount permitted
to be expended hereunder except with the approval of the holders of a majority
of the outstanding voting securities of any affected Class D Class, and may not
be amended in any other material respect except with the approval of the
majority of the members of the Board of Directors of the Company who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan. Amendments required to conform to
changes in the Rule shall not be deemed to be material amendments. The Plan or
any agreement related to the Plan will terminate automatically in the event of
its assignment.
8. The Company shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 3 hereof, for a period of
not less than six years from the date of the Plan, or the agreements or reports,
as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
SENTINEL GROUP FUNDS, INC.
by
-------------------------
Patrick E. Welch
Chairman
SENTINEL FINANCIAL SERVICES COMPANY
by
--------------------------
Joseph M. Rob
Chief Executive Officer
-3-
<PAGE>
Exhibit 18
SENTINEL GROUP FUNDS, INC.
AMENDED RULE 18F-3 PLAN
Rule 18f-3 under the Investment Company Act of 1940 (the "Investment
Company Act") permits mutual funds to issue multiple classes of shares. Under
Rule 18f-3(a), each mutual fund that seeks to rely upon Rule 18f-3 is required
to (i) create a plan (the "Plan") setting forth the differences among each class
of shares, (ii) receive the approval of a majority of the Board of Directors of
the fund (including a majority of the non-interested directors) that the Plan,
including the expense allocation between each class of shares, is in the best
interests of each class individually and the fund as a whole, and (iii) file a
copy of the Plan with the Securities and Exchange Commission (the "Commission")
as an exhibit to the a registration statement. The following Plan
describes the differences among the classes of shares for certain (each a
"Fund," and collectively, the "Funds") series of Sentinel Group Funds, Inc. (the
"Company") as set forth in Appendix A hereto.
Each Fund is advised by Sentinel Advisors Company (the "Advisor") and
offers shares as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES Class D Shares
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund Balanced Fund Balanced Fund Balanced Fund
Bond Fund Bond Fund Common Stock Fund
Common Stock Fund Common Stock Fund High Yield Bond Fund
Government Securities Growth Fund World Fund
Fund High Yield Bond Fund
Growth Fund Small Company Fund
High Yield Bond Fund U.S. Treasury Money
Short Maturity Market Fund
Government Fund World Fund
Small Company Fund
Tax-Free Income Fund
U.S. Treasury Money
Market Fund
World Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The shares of each class may be purchased at a price equal to the next
determined net asset value per share subject to the sales charges and ongoing
fee arrangements described below, except that Class B shares of Sentinel U.S.
Treasury Money Market Fund (the "Money Market Fund") may be acquired only
through exchanges and may not be purchased directly, as described below. Class
A shares are sold to investors choosing the initial sales charge alternative,
and Class B, Class C and Class D shares are sold to investors choosing the
deferred sales charge alternative. Initial sales charges, contingent deferred
sales charges ("CDSCs"), fees ("Rule 12b-1 fees") payable under the Company's
distribution plans pursuant to Rule 12b-1 under the Investment Company Act (each
a "Rule 12b-1 Plan"), conversion periods and rights of accumulation for each of
the Funds are as set forth in the current prospectus and statement of additional
information for the Company.
Each Class A, Class B, Class C and Class D share of a Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
higher ongoing Rule 12b-1 fees and the additional incremental transfer agency
costs resulting from the additional recordkeeping required
1
<PAGE>
by the deferred sales charge arrangement, although Class C shares are subject to
a shorter CDSC period at a lower rate and they forgo the Class B and Class D
conversion feature. Each class of shares has exclusive voting rights with
respect to the Rule 12b-1 Plan applicable to that class. The Rule 12b-1 fees
that are imposed on the Class A, Class B, Class C and Class D shares of a Fund
and the deferred sales charges that are imposed on the Class B, Class C and
Class D shares of that Fund are imposed directly against that class and not
against all assets of the Fund and, accordingly, such charges will not affect
the net asset value of any other class or have any impact on investors choosing
another sales charge option. Dividends paid by a Fund for each class of shares
will be calculated in the same manner at the same time and will differ only to
the extent that Rule 12b-1 fees and any incremental transfer agency costs
relating to a particular class are borne exclusively by that class.
Class A: Class A shares incur an initial sales charge when they are purchased
and bear ongoing Rule 12b-1 fees. Class A shares will be issued upon
reinvestment of dividends of outstanding Class A shares. Investors
purchasing in the aggregate shares in the amount $1 million or more
will be offered Class A shares only.
Class A investors may qualify for reduced initial sales charges
through the purchase of certain minimum amounts of Class A shares of a
Fund, as described in Appendix B hereto. In cases in which no initial
sales charge is imposed, a CDSC of up to 1% will be imposed on
redemptions of Class A shares within two years of purchase, as
described in Appendix B hereto.
Class B: Class B shares are sold on a deferred sales charge basis. Class B
shares do not incur a sales charge when they are purchased, but they
are subject to ongoing Rule 12b-1 fees that are higher than the Rule
12b-1 fees imposed on Class A shares and a CDSC for periods of up to
six years as described in Appendix B hereto. Once the applicable
Class B CDSC period has expired, Class B shares will convert
automatically to Class A shares at a specified time as described
below. Class B shares are available only to investors whose share
holdings aggregate less than $1 million.
Class C: Class C shares are sold on a deferred sales charge basis. Class C
shares do not incur a sales charge when they are purchased, but they
are subject to ongoing Rule 12b-1 fees that are higher than the Rule
12b-1 fees imposed on Class A shares and a CDSC for only one year.
Class C shares have no conversion feature.
Class D: Class D shares are sold on a deferred sales charge basis. Class D
shares do not incur a sales charge when they are purchased, but they
are subject to ongoing Rule 12b-1 fees that are higher than the Rule
12b-1 fees imposed on Class A shares but lower than the Rule 12b-1
fees imposed on Class B and Class C shares and a CDSC for seven years
as described in Appendix C hereto. Once the Class D conversion period
has expired, Class D shares will convert automatically to Class A
shares at a specified time as described below. Class D shares may
only be purchased in increments of $249,999 or less.
2
<PAGE>
Exchange Privilege. Holders of Class A, Class B and Class C shares of a
Fund have an exchange privilege with the other Funds. There is currently no
limitation on the number of times a shareholder may exercise the exchange
privilege. The exchange privilege may be modified or terminated in accordance
with the rules of the Commission. Holders of Class D shares have an exchange
privilege with Class A shares of the Money Market Fund only.
Class A and Class B shares of each Fund are exchangeable with shares of the
same class of the other Funds. Class C shares of Balanced Fund, Common Stock
Fund, High Yield Bond Fund and World Fund (each a "Class C Fund") are
exchangeable with Class C shares of the other Class C Funds. Class A shares are
also exchangeable for shares of Government Securities Fund, Growth Fund, New
York Tax-Free Income Fund and Short-Intermediate Government Fund, each a series
of the Company, and for shares of Sentinel Pennsylvania Tax-Free Trust (the
"Single Class Funds").
Shares of a Fund are exchangeable on the basis of relative net asset value
per share without the payment of any CDSC that might otherwise be due upon
redemption of the shares of such Fund. Except with respect to exchanges into
the Money Market Fund, for purposes of computing the CDSC that may be payable
upon a disposition of the shares acquired in the exchange, the holding period
for the previously owned shares of a Fund is "tacked" to the holding period of
the newly acquired shares of the second Fund.
Class A shares of the Money Market Fund may be acquired either through a
purchase or through an exchange of Class A, Class C or Class D shares of another
Fund; Class B shares of the Money Market Fund may not be purchased and may be
acquired only in exchange for Class B shares of another Fund. The holding
period for shares of the Money Market Fund acquired through an exchange of Class
B, Class C or Class D shares, however, will not count toward satisfaction of the
holding period requirement for the previously owned Class B, Class C or Class D
shares for reduction of any CDSC imposed on such shares.
Right of Accumulation. The right of accumulation for each class of shares
for each of the Funds is as set forth in the current prospectus and statement of
additional information for the Company.
Allocation of Income, Gains, Losses and Expenses. Allocation of income,
gains and losses of each Fund shall be allocated pro rata according to the net
assets of each class. Allocation of expenses not allocated to a specific class
of each Fund other than the Money Market Fund shall be allocated according to
the net assets or number of shareholder accounts, each on a pro rata basis, of
each class. Allocations in the case of the Money Market Fund shall be made (i)
to each share without regard to class, provided that the Fund has received
undertakings from the Advisor or any other provider of services to the Fund,
agreeing to waive or reimburse the Fund for payments to such service provider by
one or more classes, as allocated as described above, to the extent necessary to
assure that all classes of the Funds maintain the same net asset value per
share, or (ii) on the basis of relative net asset value.
Amending Rule 12b-1 Plans. No Fund will implement any amendment to the
Company's Class A, Class B, Class C or Class D Rule 12b-1 Plan that would
materially increase the amount that may be borne by each class of shares unless
the holders of such class of shares, voting
3
<PAGE>
separately as a class, approve the proposal.
Conversion of Class B Shares to Class A Shares. After the applicable CDSC
period has expired, Class B shares and shares purchased through reinvestment of
dividends on those converting Class B shares of a Fund will automatically
convert into Class A shares of the same Fund on the basis of relative net asset
value per share of the two classes without the imposition of any sales load, fee
or other charge. For purposes of computing the period for conversion of Class B
shares to Class A shares, the holding period for the previously owned shares of
a Fund is "tacked" to the holding period of the newly acquired shares of the
second Fund. The period of time that shares are held in the Money Market Fund,
however, will not count toward satisfaction of the holding period necessary to
convert Class B shares to Class A shares. Shareholders holding Class B shares in
certificate form will not receive Class A share certificates until the
shareholder tenders the Class B share certificate(s) to the Fund's Transfer
Agent. Until Class B share certificates are exchanged for Class A share
certificates, the Class B share certificates will represent the shareholder's
interest in the Class A shares received upon conversion.
Conversion of Class D Shares to Class A Shares. Approximately ten years
from the date of purchase, Class D shares and shares purchased through
reinvestment of dividends on those converting Class D shares of a Fund will
automatically convert into Class A shares of the same Fund on the basis of
relative net asset value per share of the two classes without the imposition of
any sales load, fee or other charge. The period of time that shares are held in
the Money Market Fund, however, will not count toward satisfaction of the
holding period necessary to convert Class D shares to Class A shares.
Shareholders holding Class D shares in certificate form will not receive Class A
share certificates until the shareholder tenders the Class D share
certificate(s) to the Fund's Transfer Agent. Until Class D share certificates
are exchanged for Class A share certificates, the Class D share certificates
will represent the shareholder's interest in the Class A shares received upon
conversion.
4
<PAGE>
APPENDIX A
Series participating in the Rule 18f-3 Plan
of
Sentinel Group Funds, Inc.
--------------------------
Sentinel Balanced Fund
Sentinel Bond Fund
Sentinel Common Stock Fund
Sentinel Growth Fund
Sentinel High Yield Bond Fund
Sentinel Small Company Fund
Sentinel Tax-Free Income Fund
Sentinel U.S. Treasury Money Market Fund
Sentinel World Fund
B-1
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
================================================================================================================
CLASS A SHARES (EXCEPT MONEY MARKET FUND)
================================================================================================================
SALE SIZE INITIAL SALES CHARGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$0 to $99,999 5.0%
- ----------------------------------------------------------------------------------------------------------------
$100,000 to $249,999 4.0%
- ----------------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.5%
- ----------------------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.0%
- ----------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.0%
================================================================================================================
</TABLE>
There is no initial sales charge for purchases of Class A shares of the
Money Market Fund. Initial sales charges for the Single Class Funds are as set
forth in the current prospectus and statement of additional information for the
Company.
In cases in which there is no sales charge because the sale is in an amount
of $1,000,000 or more, if the Class A shares purchased are redeemed within one
year of the purchase, a CDSC will be imposed in the amount of 1.0%. If the
Class A shares are redeemed during the second year after the purchase, a CDSC of
0.5% will be imposed. After the second year, no CDSC will apply. The CDSC is
imposed on the lower of the cost or the current net asset value of the shares
redeemed. In determining whether a CDSC is payable, a Fund will first redeem
shares not subject to any sales charge.
Class A shares otherwise subject to a CDSC and owned by certain tax-exempt
qualified retirement plans may be redeemed without charge to pay benefits. In
addition, any shares acquired by reinvestment of dividends will be redeemable
without a CDSC. In determining whether a CDSC is payable, the Funds and Single
Class Funds will first redeem shares not subject to any charge.
2
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================
CLASS B SHARES (EXCEPT MONEY MARKET FUND)
=====================================================================================================
SALE SIZE YEAR CDSC
=====================================================================================================
<S> <C> <C> <C>
$0 to $249,999 1 4.0%
- -----------------------------------------------------------------------------------------------------
2 4.0%
- -----------------------------------------------------------------------------------------------------
3 3.0%
- -----------------------------------------------------------------------------------------------------
4 2.0%
- -----------------------------------------------------------------------------------------------------
5 2.0%
- -----------------------------------------------------------------------------------------------------
6 1.0%
====================================================================================================
$250,000 to $499,999 1 3.5%
- -----------------------------------------------------------------------------------------------------
2 3.0%
- -----------------------------------------------------------------------------------------------------
3 2.0%
- -----------------------------------------------------------------------------------------------------
4 1.0%
- -----------------------------------------------------------------------------------------------------
5 1.0%
=====================================================================================================
$500,000 to $1,000,000 1 3.0%
- -----------------------------------------------------------------------------------------------------
2 2.0%
- -----------------------------------------------------------------------------------------------------
3 1.0%
- -----------------------------------------------------------------------------------------------------
4 1.0%
=====================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
CLASS C SHARES
SALE SIZE YEAR CDSC
===================================================================================================================
<S> <C> <C> <C>
all 1 1.0%
===================================================================================================================
===================================================================================================================
CLASS D SHARES
===================================================================================================================
SALE SIZE YEAR CDSC
===================================================================================================================
$0 to $249,999 1 6.0%
- -------------------------------------------------------------------------------------------------------------------
2 6.0%
- -------------------------------------------------------------------------------------------------------------------
3 6.0%
- -------------------------------------------------------------------------------------------------------------------
4 4.0%
- -------------------------------------------------------------------------------------------------------------------
5 4.0%
- -------------------------------------------------------------------------------------------------------------------
6 3.0%
- -------------------------------------------------------------------------------------------------------------------
7 2.0%
===================================================================================================================
</TABLE>
WAIVERS OF CLASS A, CLASS B, CLASS C AND CLASS D CDSCS
- ------------------------------------------------------
CDSCs payable on redemptions of Class A, Class B, Class C and Class D
shares will be waived in the following circumstances:
* Redemptions of shares issued as a result of reinvestment of dividends and
capital gains
* Redemptions upon the death of the shareholder
* Redemptions to effect distributions required by the Employee Retirement
Income Security Act of 1974, as amended, or regulations of the Internal
Revenue Service
* Redemptions to distribute proceeds of loans made to employees of not-for-
profit organizations ((S)501(c)(3) companies) against shares held in
retirement plan accounts ((S)403(b)(7) accounts)
* Redemptions made pursuant to a systematic withdrawal plan in amounts up to
10% of the account's then current value annually for Class B and Class C
Shares and in amounts up to 8% of the account's then current value annually
for Class D Shares
4
