SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 30, 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT USE THIS PROSPECTUS TO SELL SECURITIES UNTIL THE
REGISTRATION STATEMENT CONTAINING THIS PROSPECTUS, WHICH HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE SENTINEL FUNDS
SENTINEL GROWTH INDEX FUND
PROSPECTUS SUPPLEMENT DATED SEPTEMBER , 1999 TO THE
PROSPECTUS DATED MARCH 31, 1999
AND, STARTING ON PAGE 7,
PROSPECTUS SUPPLEMENT DATED JULY 22, 1999
On September , 1999, Sentinel Group Funds, Inc. (the "Company") began
offering shares of a new fund named Sentinel Growth Index Fund (the "Growth
Index Fund"). This Supplement, which is to be used in conjunction with the
Prospectus for the Sentinel Funds dated March 31, 1999 (the "Prospectus"),
describes the investment objective and policies and other features of the
Growth Index Fund.
WHAT IS THE MAIN GOAL AND INVESTMENT STRATEGY OF THE GROWTH INDEX FUND?
The Growth Index Fund seeks to match, as closely as possible, before
expenses, the performance of the S&P 500/BARRA Growth Index, which includes
those stocks of the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Index") with higher than average price to book value ratios. The Fund
will invest primarily in the common stocks of the companies that comprise the
S&P 500/BARRA Growth Index, in approximately the same proportions as they are
represented in the S&P 500/BARRA Growth Index.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE GROWTH INDEX FUND?
The value of the Growth Index Fund, like all equity mutual funds,
will go up and down as the prices of the stocks held by the Fund go up and
down. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. Stocks could decline generally or underperform
other types of investment assets. An investor in the Fund could lose money
over short or even long periods of time.
The Growth Index Fund is also subject to investment style risk, which
is the chance that returns from large capitalization growth stocks will trail
returns from other asset classes or the overall stock market. Growth stocks
tend to go through cycles of doing better, or worse, than the stock market in
general. These periods have, in the past, lasted for as long as several years.
There is also a risk that the Growth Index Fund will not track
closely the performance of the S&P 500/BARRA Growth Index for a number of
reasons, including the Fund's costs of buying and selling securities and the
flow of money into and out of the Fund.
There can be no assurance that the Growth Index Fund will achieve its
objective.
FEES AND EXPENSES
SHAREHOLDER FEES (fees paid directly from your investment)
CLASS A SHARES:
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of the offering price).......................................2.50%1
Maximum Deferred Sales Charge (Load)......................................None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends...............None
Redemption Fees .......................................................None1,2
Exchange Fees ............................................................None
- ---------------
1 The sales charge is reduced to 2.0% for purchase amounts of $500,000 to
$999,999, and to zero for purchase amounts of $1,000,000 or more. If you do
not pay a sales charge because your purchase amount is $1,000,000 or more,
then you may pay a deferred sales charge of up to 1% if you redeem your shares
within two years of your purchase.
2 If you redeem by wire transfer, we assess a wire charge of $25.00.
CLASS B SHARES:
Maximum Sales Charge (Load) Imposed on Purchases..........................None
Maximum Deferred Sales Charge (Load) (as a percentage of the lower of the
purchase price or the net asset value of the shares being redeemed).....2.50%3
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ..............None
Exchange Fees ............................................................None
- ---------------
3 The maximum deferred sales charge is imposed on shares redeemed in the first
two years after purchase. For shares held longer than two years, the deferred
sales charge declines.
ANNUAL FUND OPERATING EXPENSES
We estimate that the Growth Index Fund will incur the expenses shown
below in its first year of operations, expressed as a percentage of the Fund's
average net assets.
CLASS A SHARES CLASS B SHARES
Management Fees 0.30% 0.30%
Rule 12b-1 Fees (includes service fee
and distribution fee) 0.20% 0.75%
Other Expenses:
Accounting and Administrative Costs 0.03% 0.03%
Other 0.17% 0.17%
Total Other Expenses 0.20% 0.20%
-------- -----
Total Fund Operating Expenses 0.70%(a) 1.25%(a)
===== =====
- -------------------------
(a) The above expense ratios do not reflect waivers of fees by Sentinel
Advisors Company. Currently Sentinel Advisors voluntarily waives fees to the
extent necessary to cap the expense ratio of the Class A shares of the Growth
Index Fund at 0.65%. This fee waiver will also proportionately benefit the
Class B shares of the Growth Index Fund. Sentinel Advisors currently intends
to continue this fee waiver indefinitely; however, it may change or terminate
the fee waiver at any time after November 30, 2000.
EXAMPLES:
These examples are intended to help you compare the cost of investing
in the Growth Index Fund with the cost of investing in other mutual funds.
They assume that you invest $10,000 in the Growth Index Fund for the time
periods indicated, that you pay the initial sales charge in the case of the
Class A shares, that the Fund's operating expenses are as estimated above for
the entire period, and that your investment has a 5% return each year. This
assumption is not meant to indicate that you will receive a 5% annual rate of
return. Your annual return may be more or less than the 5% used in these
examples. Although your actual costs may be higher or lower, based on these
assumptions your costs would be as shown below. NOTE THAT THE AMOUNTS SHOWN DO
NOT REFLECT THE WAIVER OF FEES THAT LIMITS EXPENSE RATIOS AS DISCUSSED IN
FOOTNOTE (A) ABOVE.
1 YEAR 3 YEARS
------ -------
Class A shares $320 $468
Class B shares (assuming redemption
at the end of the period) $377 $597
Class B shares (assuming no redemption
at the end of the period) $127 $397
DETAILS ABOUT THE GROWTH INDEX FUND'S INVESTMENT OBJECTIVE, PRINCIPAL
INVESTMENT STRATEGIES, AND ASSOCIATED RISKS
The Growth Index Fund seeks to match, as closely as possible, before
expenses, the performance of the S&P 500/BARRA Growth Index. The S&P 500/BARRA
Growth Index includes those stocks of the S&P 500 Index with higher than
average price to book value ratios. The S&P 500 is an unmanaged index and
typically includes companies that are the largest and most dominant in their
industries. There can be no assurance that the Fund will achieve its
objective.
The Fund will invest at all times at least 80% of its total assets in
the common stocks of the companies that comprise the S&P 500/BARRA Growth
Index. It intends normally to invest substantially all its total assets in
these common stocks, in approximately the same weightings as the S&P 500/BARRA
Growth Index. The Fund also may hold up to 20% of its assets in money market
instruments and stock index options and futures. Futures and options are
considered "derivatives" because they "derive" their value from a traditional
security (like a stock or bond) or index. The Fund intends to buy index
options or futures, if at all, only in anticipation of buying stocks.
The Growth Index Fund is not "actively managed", which would involve
the investment advisor buying and selling securities based on research and
analysis. Rather, the Growth Index Fund tries to match, as closely as
possible, before expenses, the performance of its target index, the S&P
500/BARRA Growth Index. It does this by holding, under normal circumstances,
all of the common stocks included in the target index, in approximately the
same weightings as in the index.
The Growth Index Fund by itself is not a balanced investment program.
The Growth Index Fund will generally hold exclusively the stocks of companies
among the 500 largest U.S. publicly owned corporations. Of these stocks, the
stocks included in the S&P 500/BARRA Growth Index have been valued in the
stock market at levels which indicate that the market expects their issuers to
have better than average prospects for growth of revenue and earnings. These
stocks are sometimes referred to as "large capitalization growth stocks". The
Growth Index Fund will not invest in other types of stocks, including the
stocks of small companies, or so-called "value stocks", from which the market
does not expect as much growth in revenue and earnings, but which can be
purchased at lower valuations. Diversifying your investments beyond "large
capitalization growth stocks" may lower the volatility of your overall
investment portfolio, and could improve your long-term investment return.
It is anticipated that the Growth Index Fund will have relatively
small portfolio turnover. However, it may have to sell securities from time to
time to meet redemption requests, and adjustments will be made in the
portfolio from time to time because of changes in the composition of the
S&P/BARRA Growth Index.
RISK FACTORS
Stock Market Risk. The Growth Index Fund is subject to stock market
risk, which is the risk that the value of common stocks in general will
decline.
Investment Style Risk. The S&P 500/BARRA Growth Index is comprised of
larger companies which in general are perceived by the stock market to have
higher growth potential. The Growth Index Fund thus focuses on so-called
"large capitalization growth stocks". Changes in investment style may cause
these large capitalization growth stocks to underperform the stock market in
general, or other asset classes.
Tracking Error Risk. There are several reasons why the Fund's
performance may not match the S&P 500/BARRA Growth Index. First, the Fund
incurs administrative expenses and transaction costs in trading stocks.
Second, the composition of the S&P 500/BARRA Growth Index and the stocks held
in the Fund may diverge, due to cash flows into or out of the Fund and changes
in the composition of the index. Third, the timing and magnitude of cash flows
into and out of the Fund may result in temporarily uninvested cash, or may
lead to weightings of stocks held by the Fund which are not precisely the same
as in the S&P 500/BARRA Growth Index.
Futures and Options. If the Fund invests in stock index futures or
options contracts, the Fund will be subject to the risks that:
- the future or option will not fully offset the underlying
positions,
- the Fund cannot sell the future or option because of an illiquid
secondary market, and
- the intended risk management purpose of the future or option
may not be achieved, and may produce losses or missed
opportunities.
INFORMATION REGARDING THE INDEX
The Growth Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P
makes no representation or warranty, express or implied, to the owners of the
Growth Index Fund or any member of the public regarding the advisability of
investing in securities generally or in the Growth Index Fund particularly or
the ability of the S&P 500/BARRA Growth Index to track general stock market
performance. S&P's only relationship to the Sentinel Funds is the licensing of
certain trademarks and trade names of S&P and the S&P 500/BARRA Growth Index,
which is determined, composed, and calculated without regard to the Growth
Index Fund. S&P has no obligation to take the needs of the Sentinel Funds or
the owners of the Growth Index Fund into consideration in determining,
composing or calculating the S&P 500/BARRA Growth Index. S&P is not
responsible for and has not participated in the determination of the prices at
which the Growth Index Fund shares are sold, the timing of the offering of
Growth Index Fund shares, or the determination of the prices at which Growth
Index Fund shares may be redeemed. S&P has no obligation or liability in
connection with the administration or marketing of the Growth Index Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500/BARRA GROWTH INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY THE GROWTH
INDEX FUND, OWNERS OF THE GROWTH INDEX FUND, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500/BARRA GROWTH INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500/BARRA GROWTH INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
PURCHASE OPTIONS
The Growth Index Fund offers both Class A and Class B shares. You can
compare the differences among the Class A shares and the Class B shares using
the table below.
- --------------------------------------------------------------------------------
TOTAL 12B-1 FEE,
CLASS SALES CHARGE SERVICE FEE INCLUDING SERVICE FEE CONVERSION FEATURE
- --------------------------------------------------------------------------------
A Maximum 2.50% Maximum of Maximum of 0.20% No
initial sales 0.20%
charge
- --------------------------------------------------------------------------------
B CDSC of up to 0.25% 0.75% Class B Shares
2.50% for a convert to Class
maximum of A Shares
six years automatically
after the
applicable CDSC
period
- --------------------------------------------------------------------------------
Please see page 27 of the Prospectus for a discussion of things to
think about when choosing which share class to buy.
CLASS A SHARES
For purchases of Class A shares of the Growth Index Fund, you pay the
public offering price, which includes the front-end sales charge, next
computed after we receive your order. The sales charge ranges from 2.50% of
the offering price (2.56% of the net amount invested) to zero, depending on
the size of your purchase, as shown below.
SALES CHARGE AS SALES CHARGE AS A
A PERCENTAGE OF PERCENTAGE OF NET DEALER
SALE SIZE OFFERING PRICE AMOUNT INVESTED REALLOWANCE
- ---- ---------------------------------- ----------------- -----------
$0 to $499,999 2.50% 2.56% 2.25%
$500,000 to $999,999 2.00% 2.04% 1.75%
$1,000,000 or more -0- -0- -0-
In cases in which there is no sales charge because your purchase was
$1,000,000 or more, the Funds' distributor, Sentinel Financial Services
Company, will pay dealers compensation of 1.00% for sales of up to $4,999,999.
In these cases, if you redeem the shares in the first one year after the
purchase, a 1.0% CDSC will be imposed, and if you redeem in the second year, a
0.5% CDSC will be imposed. For sales of $5,000,000 or more, Sentinel Financial
will individually negotiate dealer compensation and CDSCs. After the second
year, there will be no CDSC. You can find additional information on this CDSC
on page 28 of the Prospectus.
You can receive a reduced sales charge for a number of reasons, as
discussed on pages 28-30 of the Prospectus.
The Class A shares of the Growth Index Fund participate in the
Company's Class A Distribution Plan. This Plan provides for a fee to the
Distributor of the Sentinel Funds at a maximum annual rate of 0.20% of average
daily net assets of the Class A shares of the Growth Index Fund. We will pay
trail commissions to dealers on Class A shares of the Growth Index Fund at an
annual rate of 0.20% of average daily net assets. Additional information on
this Distribution Plan is set forth on page 30 of the Prospectus.
CLASS B SHARES
For purchases of Class B shares of the Growth Index Fund, you pay the
current net asset value. There is no initial sales charge. A contingent
deferred sales charge, or CDSC, will be imposed on Class B shares of the
Growth Index Fund if you redeem shares during the CDSC period, unless you can
use one of the CDSC waivers listed on page 34 of the Prospectus. Whether you
pay a CDSC upon a redemption, and how much it is, depends on the amount of
your purchases and the number of years since you made the purchase. The CDSC
schedules for Class B shares of the Growth Index Fund are shown below:
CDSC PERCENTAGE
---------------
Year Since Purchase Payment Was Made
------------------------------------
PURCHASE AMOUNT 1st 2nd 3rd 4th 5th 6th
- --------------- --- --- --- --- --- ---
Up to $500,000 2.50% 2.50% 2% 1.50% 1.25% 0.50%
$500,000 to $1,000,000 2% 2% 1% 1% - -
The maximum purchase amount for Class B shares is $1,000,000. For additional
information on CDSCs on Class B shares, see page 30 of the Prospectus.
The Class B shares of the Growth Index Fund participate in the
Company's Class B Distribution Plan. This Plan provides for a fee to Sentinel
Financial at a maximum annual rate of 0.75% of average daily net assets of the
Class B shares of the Growth Index Fund. We will pay trail commissions to
dealers on Class B shares at varying rates depending on the overall average
daily net assets in all Class B shares of the Sentinel Funds for which a
particular registered representative is the registered representative of
record, as described on page 31 of the Prospectus. Additional information on
this Distribution Plan is set forth on page 31 of the Prospectus.
Class B shares of the Growth Index Fund automatically convert to
Class A shares of the Growth Index Fund at the end of the applicable CDSC
period, in the same way as the Class B shares of the other Sentinel Funds
which offer Class B shares convert to Class A shares of the same Fund. See
page 31 of the Prospectus.
Sentinel Financial pays selling dealers, at the time you purchase
Class B shares of the Growth Index Fund, an amount equal to 2.50% of your
purchase payment (2.0% in the case of purchases between $500,000 and
$1,000,000).
EXCHANGES
Shares of the Growth Index Fund may be exchanged into shares of the
same class of any other Fund, as described on pages 37-38 of the Prospectus,
but only after at least 90 days have elapsed from their purchase, in the case
of purchases initially made in the Growth Index Fund. Shares of other Sentinel
Funds may be exchanged into shares of the same class of the Growth Index Fund,
but not within the first 90 days after the initial purchase of such other
Sentinel Fund shares.
OTHER INFORMATION
For other information on how to buy, sell exchange or transfer shares
of the Sentinel Funds, please see "How to Buy, Sell, Exchange and Transfer
Shares", beginning on page 35 of the Prospectus.
INITIAL MARKETING INCENTIVE
Sentinel Financial will pay to dealers, in addition to the normal
dealer reallowance described above, an amount of 0.25% of investments during
the first 90 days of the Growth Index Fund's operation for which a single
registered representative is the registered representative of record, if the
amount of such investments during the first 90 days of the Growth Index Fund's
operation for which such registered representative is the registered
representative of record is $500,000 or more.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Growth Index Fund pays dividends substantially equivalent to its
net investment income, if any, once per year in December. Distributions of net
realized capital gains, if any, are paid annually in December. Unless you
elect otherwise, your dividends and capital gains distributions will be
reinvested automatically in shares of the same class of the Growth Index Fund.
See "Dividends, Capital Gains and Taxes" on page 40 of the Prospectus.
MANAGEMENT OF THE GROWTH INDEX FUND
The investment advisor to the Growth Index Fund is Sentinel Advisors
Company, which also is the investment advisor to the other Sentinel Funds.
Information on Sentinel Advisors can be found on page 42 of the Prospectus.
For its services as investment advisor, Sentinel Advisors receives from the
Growth Index Fund a fee equal to 0.30% per annum of the average daily value of
the net assets of the Growth Index Fund.
PORTFOLIO MANAGEMENT. Sentinel Advisors uses a team approach in
managing the Sentinel Funds. The Growth Index Fund is managed by Sentinel
Advisors' Equity Growth Team. Information on Sentinel Advisors' team approach
to portfolio management and on the Equity Growth Team can be found on pages 42
and 43 of the Prospectus.
PROSPECTUS SUPPLEMENT DATED JULY 22, 1999
MATTERS NOT RELATING SPECIFICALLY TO THE GROWTH INDEX FUND
Portfolio Manager Changes
Effective June 22, 1999, Van Harissis joined Sentinel Advisors as
Senior Vice President, and became the leader of Sentinel Advisors' Equity
Value Team, replacing Richard A. Pender. Mr. Harissis was a managing director
and portfolio manager at Phoenix Investment Partners from 1995 to 1999, and
previously was a portfolio manager at Howe & Rusling. Effective July 12, 1999,
William C. Kane, previously co-manager of the Bond Fund, became the sole
portfolio manager of the Bond Fund. Richard D. Temple is retiring from
Sentinel Advisors.
World Fund SubAdvisor
Effective July 1, 1999, the sub-advisor to the World Fund changed
from INVESCO Capital Management, Inc. to INVESCO Global Asset Management
(N.A.), Inc. These entities are under common control. The terms of the
contract have not changed and the personnel serving the World Fund has not
changed.
Systematic Withdrawal Plans
We have enhanced our systematic withdrawal plan administration to
permit redemptions subject to a CDSC to be either a fixed dollar amount or a
percentage of the account's value, rather than only a percentage of the
account's value, as indicated on page 34 of the Prospectus in item 5 under
"Waiver or Reduction of a CDSC."
EXAMPLES
The numbers below replace the corresponding numbers in the examples shown on
page 13 of the Prospectus.
<TABLE>
<CAPTION>
CLASS B (if you redeem at the end of the period): 1 year 3 years 5 years
<S> <C> <C> <C>
Common Stock $584 $ 869 $1180
Balanced 593 897 1226
Mid Cap Growth 632 1015 1425
Small Company 628 1003 1405
World 628 1003 1405
High Yield 555 780 1029
Bond 587 879 1195
Money Market 480 549 633
CLASS C (if you redeem at the end of the period): 1 year
Common Stock $295
Balanced 321
World 324
High Yield 309
CLASS D (if you redeem at the end of the period): 1 year 3 years 5 years
Balanced $769 $1023 $1302
</TABLE>
PERFORMANCE DATA
The Funds may from time to time include average annual total return
figures in advertisements or other material the Funds send to existing or
prospective shareholders. The Funds calculate these figures by determining the
average annual compounded rates of return that would produce the redeemable
value of the Fund being shown at the end of each period for a given initial
investment. All recurring and nonrecurring expenses are included in the
calculation. It is assumed that all dividends and distributions are
reinvested. In addition, to better illustrate the performance of money already
invested in the Funds, the Funds may also periodically advertise total return
without subtracting sales charges.
The fixed income Funds also may 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 average 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. These Funds 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
Tax-Free Income, New York and Pennsylvania Funds may also include
tax-equivalent yields in advertisements. Tax-equivalent yields increase the
yield as calculated above to make it comparable on an after-tax basis to an
investment which produces taxable income.
The Funds also may compare their performance to relevant indices in
advertisements. The equity Funds may compare their performance to stock
indices, including the Dow Jones Industrial Average, the S&P 500 Index, the
S&P 500/BARRA Growth Index, and the Russell 2000 Index. The World Fund may
compare its performance to the "EAFE" (Europe, Australia, Far East) Index. The
High Yield Fund may compare its performance to the Chase Manhattan Bank Index.
The fixed income Funds may compare their performance to bond or money market
indices, including the Lehman Aggregate Bond Index, Municipal Bond Index, or
Government Bond Index, and Donoghue's Money Fund Report.
The Funds also may refer to rankings and ratings published by
independent tracking services and publications of general interest including
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's;
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial 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 publications 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.
HIGH YIELD FUND CLASS B SHARES - PROMOTION
As a special promotion during the period May 1, 1999 to July 31,
1999, Sentinel Financial Services Company will pay to dealers who agree to
participate in the promotion, on sales of Class B shares of Sentinel High
Yield Bond Fund, the following amounts (stated as percentages of the aggregate
purchase amount):
Amount of Purchase Payment Broker-Dealer Payment
Up to $249,999 5.00%
$250,000 to $499,999 3.5%
$500,000 to $999,999 3.0%
These amounts are 1.0% greater than the payments normally made on
such sales.
