<PAGE>
[LOGO OF THE NEW ENGLAND APPEARS HERE]
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ZENITH FUND
VARIABLE PRODUCTS
SEMIANNUAL REPORTS
JUNE 30, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Loomis Sayles Small Cap Series.............................................. 1
Draycott International Equity Series........................................ 8
Alger Equity Growth Series.................................................. 14
Capital Growth Series....................................................... 20
Loomis Sayles Avanti Growth Series.......................................... 24
Venture Value Series........................................................ 30
Westpeak Value Growth Series................................................ 36
Westpeak Stock Index Series................................................. 43
Loomis Sayles Balanced Series............................................... 53
Back Bay Advisors Managed Series............................................ 60
Salomon Brothers Strategic Bond Opportunities Series........................ 68
Back Bay Advisors Bond Income Series........................................ 74
Salomon Brothers U.S. Government Series..................................... 80
Back Bay Advisors Money Market Series....................................... 84
Notes to Financial Statements............................................... 90
Footnotes to Portfolio Manager Commentary................................... 97
</TABLE>
IMPORTANT:
Some funds appearing in this report may not be available under your variable
life or variable annuity product.
<PAGE>
August, 1996
TO OUR POLICYHOLDERS/CONTRACT OWNERS:
We are pleased to provide you with the 1996 Semiannual Report for the Zenith
Fund variable life insurance and variable annuity products. This report
includes performance histories, present investments, and financial reports as
of June 30, 1996, as well as the outlook and strategy of each fund. It is
intended to help you make an informed decision regarding the investment of the
cash value of your variable product.
The New England offers many variable life and variable annuity products to
help you meet your financial objectives. We are committed to meeting your
expectations by providing quality products with strong performance potential
and excellent personal service.
Please feel free to contact one of our Registered Representatives* with any
questions you may have regarding your financial objectives. Thank you for
making The New England your financial partner.
Sincerely,
[ART] /s/ Bruce Long
David Allen Bruce Long
Senior Vice President President
New England Life New England Annuities
* Variable products are offered through New England Securities Corporation.
[LOGO OF RECYCLABLE PAPER
APPEARS HERE]
<PAGE>
ZENITH LOOMIS SAYLES SMALL CAP SERIES
PORTFOLIO MANAGERS: MARY CHAMPAGNE AND JEFFREY PETHERICK;
LOOMIS SAYLES & COMPANY, L.P.
MARKET REVIEW
---------------- -------------------
Through mid-year, the economic
[PHOTO OF [PHOTO OF environment was good for small cap
MARY CHAMPAGNE JEFFREY PETHERICK stocks, as investors began to favor
APPEARS HERE] APPEARS HERE] niche-oriented companies. This shift
from 1995's emphasis on large-cap
issues served our portfolio well,
given its small stock focus.
We concentrated on finding
undervalued, growing companies that
were dominant, or look to become
- ----------------- ------------------- dominant, in a specific market
subsegment. Throughout the first half of 1996, these included leaders in energy,
oil and gas and consumer cyclicals.
Energy stocks were among the portfolio's best performers. Global Industries,
which lays pipe for offshore drilling activity, and Belden and Blake, an oil
and gas producer located in the Appalachian Basin, are good examples of
leading small companies that have benefited from recent foreign exploration
and higher oil and gas prices.
Another growth area has been business services, especially the temporary
help segment. CDI, which serves both the technology and automotive arenas, was
up 88% for the first six months of 1996. Career Horizons was up over 100% when
we sold it earlier this year.
Early in 1996, we increased our weighting in consumer cyclicals--retail
stores, restaurants and other consumer services--and reaped the rewards.
Healthy consumer spending in the first and second quarters enhanced the growth
of investments such as Ann Taylor, a retailer of upscale women's clothing, and
Cole National, a specialty eyewear and giftware retailer.
OUTLOOK AND STRATEGY
We have deliberately limited investments in the technology sector for most
of 1996. Our 7% level was significantly below the 12% average for the Russell
2000 Small Cap Index/19/. However, the sector's correction in June presented
a buying opportunity, and we plan to add to our technology exposure further in
the coming months if we think market conditions make it appropriate.
We expect the economy to grow slowly for the balance of the year, and that
interest rates will remain at or near their current levels. Given this
scenario, the earnings growth of small, niche-oriented companies should
support a renewed focus on small capitalization issues. Those companies which
target affluent baby boomers and older consumers may do particularly well.
We do not anticipate making major changes in portfolio structure or in
sector weightings. We plan to take profits aggressively, eliminate any non-
performers and continue to pursue added value through disciplined stock
selection. Given the market outlook, we believe the portfolio is well
positioned for the months ahead.
1
<PAGE>
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: Long-term growth from
investment in common stocks or
Small Cap Russell their equivalent.
Series 2,000/19/
Inception 5/1/94 $10,000 $10,000 START DATE: May 1, 1994
12/31/94 9,676 10,027
12/31/95 12,470 12,879 SIZE: $50 million as of June 30,
6/30/96 14,451 14,214 1996
MANAGERS: Jeffrey Petherick and
Average Annual Return Mary Champagne. Mr. Petherick
has co-managed the Series since
Small Cap Lipper Variable Small its inception in May, 1994. Ms.
Series Company Fund Average/15/ Champagne joined the management
6 mos.* 15.88% 14.36% of the Series in July 1995. Mr.
1 year 34.43% 29.31% Petherick has also co-managed
Since the Loomis Sayles portion of the
inception 18.57% n/a New England Star Advisers Fund
*not annualized since July 1, 1994. Ms. Champagne
has co-managed the Loomis Sayles
portion of the New England Star
Advisers Fund since July, 1995.
They also manage the Loomis Sayles
Small Cap Fund and the Maxim
Funds--Small Cap Series. Mr.
Petherick joined Loomis Sayles in
1990. Ms. Champagne joined Loomis
Sayles in 1993.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
2
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--87.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--0.4%
11,000 Whittaker Corp.(c)....................................... $ 203,500
-----------
AUTOMOBILE & RELATED--1.9%
9,900 Strattec Security Corp.(c)............................... 175,725
30,600 Tower Automotive(c)...................................... 749,700
-----------
925,425
-----------
BANKS--SAVINGS & LOAN--2.0%
10,500 Charter One Financial, Inc. ............................. 366,188
9,250 Commercial Federal Corp. ................................ 353,813
11,000 First Financial Corp. ................................... 247,500
-----------
967,501
-----------
BUSINESS SERVICES--1.9%
18,500 CDI Corp.(c)............................................. 624,375
16,100 Cort Business Services Corp.(c).......................... 313,950
-----------
938,325
-----------
CHEMICALS--SPECIALTY--4.7%
10,500 Cambrex Corp. ........................................... 536,813
4,200 Cytec Industries, Inc.(c)................................ 359,100
20,600 Dexter Corp. ............................................ 612,850
27,200 Intertape Polymer Group, Inc. ........................... 550,800
10,400 Learonal, Inc. .......................................... 260,000
-----------
2,319,563
-----------
COMPUTER SOFTWARE & SERVICES--4.8%
7,100 Analysts International Corp. ............................ 298,200
14,500 Boole & Babbage, Inc. ................................... 348,000
7,400 MDL Information System, Inc.(c).......................... 220,150
30,000 Mentor Graphics Corp. ................................... 487,500
18,300 National Computer Systems, Inc. ......................... 391,163
19,400 Read Rite Corp. ......................................... 274,025
14,900 SPSS, Inc.(c)............................................ 372,500
-----------
2,391,538
-----------
COSMETICS--0.8%
18,000 Paragon Trade Brands, Inc. .............................. 387,000
-----------
ELECTRICAL EQUIPMENT--1.9%
12,000 Belden, Inc. ............................................ 360,000
10,200 Gasonics International Corp.(c).......................... 107,100
6,400 Technitrol, Inc. ........................................ 253,600
17,900 Woodhead Industries...................................... 210,325
-----------
931,025
-----------
ELECTRONIC COMPONENTS--4.0%
30,000 Amphenol Corp.(c)........................................ 690,000
11,700 Burr Brown Corp.(c)...................................... 207,675
15,700 Inter Tel, Inc. ......................................... 411,144
29,200 S3, Inc. ................................................ 359,525
15,600 Unitrode Corp.(c)........................................ 302,250
-----------
1,970,594
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ENVIRONMENTAL SERVICES--1.7%
10,400 United Waste Systems Inc.(c)............................. $ 335,400
27,800 World Fuel Services Corp. ............................... 503,875
-----------
839,275
-----------
FINANCIAL SERVICES--4.8%
21,400 Dignity Partners, Inc. .................................. 197,950
26,900 DVI(c)................................................... 423,675
26,800 Financial Federal Corp. ................................. 418,750
12,760 Imperial Credit Industries, Inc.(c)...................... 385,990
17,700 Southern Pacific Funding Corp. .......................... 309,750
28,800 WFS Financial, Inc.(c)................................... 648,000
-----------
2,384,115
-----------
FOOD & BEVERAGES--2.6%
46,000 Flowers Industries, Inc. ................................ 741,750
33,800 Unimark Group, Inc. ..................................... 561,925
-----------
1,303,675
-----------
FREIGHT TRANSPORTATION--1.6%
9,400 ABC Rail Products Corp.(c)............................... 203,275
29,000 Harper Group, Inc. ...................................... 565,500
-----------
768,775
-----------
HEALTH CARE--DRUGS--0.5%
10,800 Applied Bioscience International, Inc. .................. 113,400
13,600 Minntech Corp. .......................................... 147,900
-----------
261,300
-----------
HEALTH CARE--MEDICAL TECHNOLOGY--3.0%
20,200 Conmed Corp.(c).......................................... 537,825
19,900 Gelman Sciences, Inc.(c)................................. 450,238
18,600 Sofamor/Danek Group, Inc.(c)............................. 516,150
-----------
1,504,213
-----------
HEALTH CARE--SERVICES--3.5%
35,945 Grancare, Inc.(c)........................................ 714,407
25,100 Health Images, Inc....................................... 291,788
15,900 Healthplan Services Corp.(c)............................. 365,700
33,800 Regency Health Services(c)............................... 384,475
-----------
1,756,370
-----------
HOME PRODUCTS--2.3%
7,300 Aptargroup, Inc. ........................................ 220,825
10,800 Bush Boake Allen, Inc.(c)................................ 234,900
9,850 Inbrand Corporation(c)................................... 275,800
25,950 US Can Corp.(c).......................................... 421,688
-----------
1,153,213
-----------
HOTELS & RESTAURANTS--1.5%
30,000 WMS Industries, Inc. .................................... 738,750
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HOUSING & BUILDING MATERIALS--3.0%
25,200 Congoleum Corp. ......................................... $ 289,800
11,500 Crossman Communities Inc.(c)............................. 224,250
22,700 Dayton Superior Corp. ................................... 297,938
28,700 Giant Cement Holdings Inc.(c)............................ 362,338
9,200 Toro Co. ................................................ 304,750
-----------
1,479,076
-----------
INSURANCE--5.9%
18,400 Allied Group Inc. ....................................... 800,400
12,700 Capital Resource Corp. .................................. 466,725
10,200 Meadrowbrook Insurance Group(c).......................... 313,650
14,700 Protective Life Corp. ................................... 516,337
12,500 Reinsurance Group of America, Inc. ...................... 471,875
10,350 Triad Guaranty, Inc.(c).................................. 380,362
-----------
2,949,349
-----------
LEISURE--0.7%
7,495 Harman International..................................... 369,129
-----------
MACHINERY--2.1%
10,600 Greenfield Industries Inc. .............................. 349,800
11,500 Hardinge Bros Inc. ...................................... 365,125
14,800 Keystone International Inc. ............................. 307,100
-----------
1,022,025
-----------
MEDIA & ENTERTAINMENT--3.3%
27,800 Banta Corp. ............................................. 701,950
14,300 Houghton Mifflin Co. .................................... 711,425
12,400 Vertex Communications Corp. ............................. 230,950
-----------
1,644,325
-----------
METALS--3.5%
33,100 Citation Corp.(c)........................................ 397,200
9,700 Cleveland Cliffs Inc. ................................... 379,512
20,000 Quanex Corp. ............................................ 472,500
24,300 Republic Engineered Steels(c)............................ 85,050
42,500 UNR Industries Inc. ..................................... 409,062
-----------
1,743,324
-----------
MINING--1.2%
27,000 Pittston Co. ............................................ 583,875
-----------
MISCELLANEOUS--1.4%
10,300 Kenneth Cole Productions, Inc............................ 203,425
12,600 Horizon Group, Inc....................................... 258,300
12,300 Merix Corp............................................... 246,000
-----------
707,725
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
MULTI-INDUSTRY--1.4%
45,700 Griffon Corp.(c)......................................... $ 371,312
9,700 Insilco Corp.(c)......................................... 324,950
-----------
696,262
-----------
OIL--INDEPENDENT PRODUCERS--3.7%
26,300 Belden & Blake Corp.(c).................................. 545,725
17,900 Cross Timbers Oil Co..................................... 443,025
19,400 Lomak Petroleum Inc.(c).................................. 276,450
22,800 Vintage Petroleum Inc.................................... 581,400
-----------
1,846,600
-----------
OIL--SERVICES--3.2%
15,700 Global Industries Inc.(c)................................ 467,075
37,000 Pride Petroleum Services Inc.(c)......................... 527,250
21,300 Seitel Inc.(c)........................................... 583,087
-----------
1,577,412
-----------
PAPER PRODUCTS--1.0%
19,400 Caraustar Industries Inc................................. 514,100
-----------
REAL-ESTATE INVESTMENT TRUSTS--5.4%
33,100 Capstone Capital Corp.(c)................................ 678,550
30,600 Chateau Properties Inc................................... 680,850
29,900 Liberty Property......................................... 594,262
25,400 Patriot American Hospitality(c).......................... 752,475
-----------
2,706,137
-----------
RETAIL--3.1%
21,000 Carson Pirie Scott & Co.................................. 561,750
35,650 Cato Corp.(c)............................................ 213,900
19,500 99 Cents Only Stores..................................... 273,000
19,500 Haverty Furniture Companies Inc.......................... 199,875
18,500 Zale Corp. .............................................. 312,187
-----------
1,560,712
-----------
STEEL & IRON--2.4%
7,500 J & L Specialty Steel, Inc............................... 111,562
55,600 Oregon Steel Mills, Inc.................................. 764,500
14,000 RMI Titanium Co. ........................................ 329,000
-----------
1,205,062
-----------
TELECOMMUNICATIONS--1.5%
36,300 Cole National Corp.(c)................................... 726,000
-----------
TEXTILE & APPAREL--0.5%
4,900 Jones Apparel Group(c)................................... 240,712
-----------
Total Common Stocks
(Identified Cost $38,913,135)........................... 43,315,982
-----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
SHORT-TERM INVESTMENTS--13.3%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
COMMERCIAL PAPER--13.3%
$2,298,440 Associates Corp. of North America 5.450%, 7/01/96... $ 2,298,440
2,300,000 Chevron Oil Finance Co.
5.250%, 7/01/96.................................... 2,300,000
2,000,000 Exxon Asset Management
5.200%, 7/01/96.................................... 2,000,000
-----------
Total Short-Term Investments
(Identified Cost $6,598,440)....................... 6,598,440
-----------
Total Investments--100.5%
(Identified Cost $45,511,575)(b)................... 49,914,422
Other assets less liabilities....................... (229,358)
-----------
TOTAL NET ASSETS--100%.............................. $49,685,064
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $45,511,575 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 5,833,370
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (1,430,523)
-----------
Net unrealized appreciation......................... $ 4,402,847
===========
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $49,914,422
Cash..................................................... 194
Receivable for:
Fund shares sold......................................... 319,636
Securities sold.......................................... 306,254
Dividends and interest................................... 62,364
-----------
50,602,870
LIABILITIES
Payable for:
Securities purchased..................................... $839,248
Fund shares redeemed..................................... 8,489
Accrued expenses:
Management fees.......................................... 38,571
Other expenses........................................... 31,498
--------
917,806
-----------
NET ASSETS................................................ $49,685,064
===========
Net Assets consist of:
Capital paid in.......................................... $41,869,961
Undistributed net investment income...................... 176,304
Accumulated net realized gains........................... 3,235,952
Unrealized appreciation on investments................... 4,402,847
-----------
NET ASSETS................................................ $49,685,064
===========
Computation of offering price:
Net asset value and redemption price per share
($49,685,064 divided by 360,902 shares of beneficial
interest)................................................ $ 137.67
===========
Identified cost of investments............................ $45,511,575
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 201,499
Interest................................................. 144,088
----------
345,587
EXPENSES
Management fees.......................................... $184,139
Trustees' fees and expenses.............................. 6,518
Custodian................................................ 31,255
Audit and tax services................................... 5,700
Legal.................................................... 5,979
Printing................................................. 11,832
Miscellaneous............................................ 5,003
--------
Total expenses.......................................... 250,426
Less expenses assumed by the investment adviser......... (66,288) 184,138
-------- ----------
NET INVESTMENT INCOME..................................... 161,449
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net......................................... 2,830,789
Unrealized appreciation on:
Investments--net......................................... 2,162,465
----------
Net gain on investment transactions....................... 4,993,254
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $5,154,703
==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 186,550 $ 161,449
Net realized gain on investments.................... 1,462,220 2,830,789
Unrealized appreciation on investments.............. 2,281,753 2,162,465
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 3,930,523 5,154,703
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (171,695) 0
Net realized gain on investments.................... (1,055,203) 0
----------- -----------
(1,226,898) 0
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 25,462,402 24,029,113
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 171,695 0
Distributions from net realized gain................ 1,055,203 0
----------- -----------
26,689,300 24,029,113
Cost of shares redeemed............................. (4,756,656) (7,239,898)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 21,932,644 16,789,215
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 24,636,269 21,943,918
NET ASSETS
Beginning of the period............................. 3,104,877 27,741,146
----------- -----------
End of the period................................... $27,741,146 $49,685,064
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 14,855
=========== ===========
End of the period................................... $ 14,855 $ 176,304
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 234,111 183,310
Issued in connection with the reinvestment of:
Distributions from net investment income............ 1,477 0
Distributions from net realized gain................ 9,076 0
----------- -----------
244,664 183,310
Redeemed............................................ (43,301) (55,910)
----------- -----------
Net change.......................................... 201,363 127,400
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
MAY 2, 1994 (A) SIX MONTHS
THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- ------------ ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.. $100.00 $ 96.61 $118.80
------- ------- -------
Income From Investment Operations
Net Investment Income................ 0.14 0.85 0.49
Net Realized and Unrealized Gain
(Loss) on Investments............... (3.38) 26.93 18.38
------- ------- -------
Total From Investment Operations..... (3.24) 27.78 18.87
------- ------- -------
Less Distributions
Distributions From Net Investment
Income.............................. (0.15) (0.78) 0.00
Distributions From Net Realized
Capital Gains....................... 0.00 (4.81) 0.00
------- ------- -------
Total Distributions.................. (0.15) (5.59) 0.00
------- ------- -------
Net Asset Value, End of Period........ $ 96.61 $118.80 $137.67
======= ======= =======
TOTAL RETURN (%)...................... (3.23)(c) 28.88 15.88(c)
Ratio of Operating Expenses to Average
Net Assets (%)....................... 1.00 (b) 1.00 1.00(b)
Ratio of Net Investment Income to
Average Net Assets (%)............... 0.32 (b) 1.26 0.87(b)
Portfolio Turnover Rate (%)........... 80 (b) 98 63(b)
Average Commission Rate(d)............ -- -- $0.0313
Net Assets, End of Period (000)....... $ 3,105 $27,741 $49,685
The ratios of expenses to average net
assets without giving effect to the
voluntary expense agreement described
in Note 4 to the Financial Statements
would have been (%).................. 2.31 (b) 1.91 1.36(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
7
<PAGE>
ZENITH DRAYCOTT INTERNATIONAL EQUITY SERIES
PORTFOLIO MANAGERS: NICHOLAS D. P. CARN, TIMOTHY S. GRIFFEN, GREGORY D.
ECKERSLEY AND NIGEL HANKIN; DRAYCOTT PARTNERS, LTD.
- ----------------- ------------------ MARKET REVIEW
The first six months of 1996 marked
[PHOTO OF [PHOTO OF a turning point, of sorts, in world
NICHOLAS D.P. TIMOTHY S. economies. The Japanese stock market
CARN APPEARS GRIFFEN APPEARS continued to rise after showing signs
HERE] HERE] of stabilization in the later part of
1995, though its returns were slightly
reduced by the weakness of the yen
when translated into dollars. German
- ----------------- ------------------ bond yields are up in anticipation of
a stronger economy. On the currency
- ----------------- ------------------ front, the yen and, to a slightly
lesser extent, the European currencies
[PHOTO OF [PHOTO OF were weak against the dollar.
GREGORY D. NIGEL HANKIN
ECKERSLEY APPEARS HERE] Currently, the Draycott
APPEARS International Equity Series is very
HERE similar in structure to its
performance benchmark, the EAFE
Index/2/. The overall performance of
- ----------------- ------------------ the EAFE/2/ was modestly surpassed by
the Series. Through June 30, 1996 the
Series delivered a return of 6.62%. In
comparison, the EAFE Index/2/ returned
4.5% during the same time frame. In
terms of international equity trends,
strong stock market gains in Japan,
France and Germany were partially
offset by the rising dollar, which
made those foreign stocks less
valuable in dollar terms.
Due to our closeness to the EAFE/2/, our selection of stocks was very broad
based. Stock selection in Japan and Europe added the most value to the
portfolio in the first six months. Again, we believe Japan is emerging from a
period of very weak economic growth over the last few years, and we're going
to see a continuation of very low interest rates and very fast monetary
growth. These conditions will resemble the economic environment that occurred
in the United States in 1990 setting the stage for Japan to take its turn at
prosperity.
Within Europe, countries that most benefited the Series in the first half of
the year were Italy and Spain. Both economies experienced falling long term
interest rates; this is in contrast to Germany, which experienced rising long-
term rates. In response to these conditions, we kept the Series' portfolio
overweighted in securities of issuers in Italy and Spain--a strategy we intend
to maintain through the rest of the year. Less helpful to the Series
performance was its overweighting of British stocks, which underperformed the
international equity markets as a whole.
OUTLOOK AND STRATEGY
We believe that over the next six months Japan's stock market cycle will
continue to turn upwards. We also think the "dollar area", which includes the
United States, Canada and Latin America, will turn downwards. As a result,
these areas will trade places for a while.
International stock markets continue to offer tremendous opportunities to
investors who recognize the wisdom of international diversification and are
aware of its risks. Our emphasis on fundamental research and discovery of
undervalued stocks and market situations remain keys to successful investment
through the rest of 1996.
8
<PAGE>
A $10,000 investment Compared to an Index FUND FACTS
GOAL: total return from long-
[GRAPH APPEARS HERE] term growth of capital and
dividend income, primarily
through investment in
international securities.
International
Equity Series EAFE/2/ START DATE: October 31, 1994
10/30/94 $10,000 $10,000
12/31/94 10,260 9,555 SIZE: $29 million as of June 30,
12/31/95 10,879 10,455 1996
6/30/96 11,599 10,844
MANAGERS: Nicholas Carn, Timothy
Average Annual Return Griffen, Gregory Eckersley and
Lipper Variable Nigel Hankin have served as
International International/13/ portfolio managers since the
Equity Series Fund Average Series' inception in 1994. Each
6 mos.* 6.62% 10.46% has also served as portfolio
1 year 12.28% 17.56% manager of New England
Since International Equity Fund since
inception 9.31% n/a 1991. They also have managed the
*not annualized Maxim Series--Foreign Equity
Portfolio since November, 1994.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
9
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--86.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AUSTRALIA--4.5%
11,000 Capral Aluminum.......................................... $ 31,811
20,800 Australian & New Zealand Bank Group...................... 98,402
13,050 Amcor Ltd. .............................................. 88,709
5,200 Broken Hill Property..................................... 71,799
4,100 CRA Ltd. ................................................ 63,022
31,300 CSR Ltd. ................................................ 110,442
29,250 Fairfax (John)........................................... 60,914
6,100 Lend Lease Corp. ........................................ 93,477
22,900 News Corporation......................................... 129,752
21,800 Normandy Mining.......................................... 9,936
66,300 Normandy Mining Ltd. .................................... 104,725
31,200 North Ltd. .............................................. 89,493
28,700 QNI Limited.............................................. 64,053
14,500 Southcorp Holdings Ltd. ................................. 35,894
22,600 Westpac Bank Corp. ...................................... 99,991
23,500 WMC Limited.............................................. 168,055
-----------
1,320,475
-----------
BELGIUM--1.0%
2,700 Delhaize Le Lion......................................... 135,856
840 Glaverbel................................................ 91,242
500 Powerfin................................................. 68,527
-----------
295,625
-----------
DENMARK--1.0%
3,000 Carli Gry Intl A/S....................................... 98,319
600 Crisplant Industries..................................... 38,918
6,570 ISS International........................................ 146,910
-----------
284,147
-----------
FINLAND--1.7%
2,200 Cultor OY................................................ 107,825
1,935 Huhtamaki OY............................................. 64,756
5,020 Kesko.................................................... 74,569
670 Kone Corp. .............................................. 74,788
1,800 Raison Tentaat........................................... 107,652
3,860 UPM Kymmene OY........................................... 80,090
-----------
509,680
-----------
GERMANY--6.4%
3,020 Adidas AG................................................ 254,034
160 Boss (Hugo) AG........................................... 184,150
380 Henkel Kgaa.............................................. 164,196
9,790 Hoechst AG............................................... 332,235
970 Mannesmann AG............................................ 335,561
1,210 SGL Carbon............................................... 141,651
4,200 Tarkett AG............................................... 88,668
7,050 Veba Ag. ................................................ 374,964
-----------
1,875,459
-----------
GREAT BRITAIN--20.1%
32,300 BAA...................................................... 234,011
46,000 BTR...................................................... 180,742
32,750 Barclays................................................. 392,908
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
GREAT BRITAIN--(CONTINUED)
18,100 Bass..................................................... $ 227,269
22,450 British Aerospace........................................ 340,463
14,250 British Petroleum........................................ 125,039
38,750 British Telecommunication................................ 208,223
23,400 British Sky Broadcast.................................... 159,719
25,100 Cadbury Schweppes........................................ 198,414
17,875 Carlton Communications................................... 143,799
50,800 Cookson Group............................................ 223,271
22,300 General Electric......................................... 120,002
20,850 Glaxo Welcome............................................ 280,742
22,400 Greenalls Group.......................................... 200,031
55,950 Hanson................................................... 156,406
88,000 Ladbroke Group........................................... 243,951
61,150 National Grid Group...................................... 161,921
16,350 National Westminster..................................... 155,908
42,200 Orange................................................... 147,788
10,700 Pearson.................................................. 110,340
49,812 Pillar Properties Inv.................................... 123,777
19,500 Rank Organisation........................................ 150,664
20,900 Reed International....................................... 349,415
13,150 Smithkline Beecham....................................... 140,608
24,700 Storehouse............................................... 122,440
43,500 Telewest Communication................................... 108,767
33,450 Ti Group................................................. 279,486
7,265 Thorn EMI................................................ 202,414
50,650 Tomkins.................................................. 190,360
37,550 Williams Holdings........................................ 197,401
-----------
5,876,279
-----------
ITALY--3.4%
58,250 BCA Fideuram SPA......................................... 126,296
164,500 Credito Italiano......................................... 192,942
21,700 Edison................................................... 131,086
7,200 Mediolanum............................................... 71,706
43,450 Saipem................................................... 183,022
75,300 Stet..................................................... 197,931
25,660 Unicem (Union Cem)....................................... 83,620
-----------
986,603
-----------
JAPAN--33.0%
17,000 Asahi Glass Co. ......................................... 203,630
18,750 Bank of Tokyo............................................ 435,468
13,000 Canon Inc. .............................................. 271,019
16,000 Dai Nippon Printing...................................... 310,154
6,000 Daiwa Securities......................................... 77,356
13 East Japan Railway....................................... 68,349
21,000 Fuji Bank................................................ 453,161
1,000 Hitachi.................................................. 9,327
110,000 Hokkaido Takushoku....................................... 333,928
13,000 Honda Motor Co. ......................................... 337,585
48,000 Ishikawajima Har......................................... 234,810
11,000 Kirin Brewery Co. ....................................... 134,778
21,000 Matsushita Electronic Industries......................... 391,716
17,000 Mitsubishi Bank.......................................... 223,838
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
JAPAN--(CONTINUED)
26,000 Mitsubishi Chemical...................................... $ 120,294
15,000 Mitsubishi Heavy Industrial.............................. 130,709
16,000 Mitsubishi Warehouse..................................... 286,746
15,000 Mitsui + Co. ............................................ 136,195
33,000 Mitsukoshi............................................... 353,038
17,000 Mitsui Fudosan Co. ...................................... 230,055
52,000 Nippon Credit Bank....................................... 193,517
12,000 Nippondenso Co. ......................................... 261,144
67,000 Nippon Steel Corp. ...................................... 230,348
12,000 Nomura Securities........................................ 234,810
30,780 Odakyu Electric Railway.................................. 207,705
14,000 Onward Kkashiyama........................................ 229,141
69,000 Osaka Gas Co. ........................................... 252,997
17,000 Ricoh Company............................................ 180,314
16,000 Sakura Bank.............................................. 178,485
17,000 Sanwa Bank............................................... 315,549
18,000 Sato Kogyo Co. .......................................... 110,602
8,000 Sony Corp. .............................................. 527,408
7,000 Sumitomo Bank............................................ 135,692
1,000 Sumitomo Marine & Fire................................... 8,732
22,000 Sumitomo Rubber.......................................... 190,902
28,000 Taisei Corp. ............................................ 199,186
13,000 Takashimaya Co. ......................................... 202,076
25,000 Tokai Bank............................................... 324,601
16,000 Toto..................................................... 241,393
5,000 Toyota Motor Corp. ...................................... 125,269
19,000 Yakult Honsha Co. ....................................... 269,282
46,000 Yasuda Trust & Banking................................... 291,483
-----------
9,652,792
-----------
NETHERLANDS--3.8%
1,400 Ahrend NV................................................ 62,797
14,300 Fortis Amev NV........................................... 410,009
2,000 KLM...................................................... 64,028
4,600 Kon PTT Nederland........................................ 174,236
8,000 Vendex International..................................... 279,097
1,000 Wolters Kluwer NV........................................ 113,691
-----------
1,103,858
-----------
NORWAY--1.8%
8,100 Benor Tankers............................................ 48,682
3,000 Narvesen ASA............................................. 68,422
2,600 Norske Skogsindust....................................... 72,522
1,600 Orkla ASA................................................ 84,326
2,050 Protector Forsikrg....................................... 51,494
16,600 Schibsted ASA............................................ 214,883
-----------
540,329
-----------
SPAIN--4.1%
6,300 Banco Santander SA....................................... 294,317
1,950 Gas Natural Sdg SA....................................... 409,789
42,250 Sevillana de Elec........................................ 389,477
480 Sol Melia................................................ 10,125
5,100 Viscofan Envoltura....................................... 80,680
-----------
1,184,388
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
SWITZERLAND--5.9%
353 Alusuisse Lonza HD.................................. $ 291,673
600 Adia SA............................................. 150,696
60 Baloise Holdings.................................... 130,539
203 Nestle SA........................................... 232,032
45 Roche Holdings AG................................... 343,565
189 Sandoz AG........................................... 216,333
152 Schindler Holdings AG............................... 161,702
189 Swissair............................................ 183,074
-----------
1,709,614
-----------
Total Common Stocks
(Identified Cost $23,630,314)...................... 25,339,249
-----------
SHORT-TERM INVESTMENT--9.0%
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$2,627,000 Repurchase agreement with State Street Bank & Trust
Company dated
6/28/96 at 4.750% to be repurchased at $2,628,040
on 7/1/96 collateralized by $2,750,000.00 U.S.
Treasury Notes due 12/19/96 with a value of
$2,680,750......................................... 2,627,000
-----------
Total Short-Term Investment
(Identified Cost $2,627,000)....................... 2,627,000
-----------
Total Investments--95.7%
(Identified Cost $26,257,314)(b)................... 27,966,249
Other assets less liabilities(c).................... 904,152
-----------
TOTAL NET ASSETS--100%.............................. $28,870,401
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $26,257,314 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 1,971,735
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (258,443)
-----------
Net unrealized appreciation......................... $ 1,713,292
===========
As of June 30, 1996, the Series had a net tax basis capital loss carry
forward as follows:
</TABLE>
Expiring December 31, 2002 $323
Expiring December 31, 2003 $50,456
(c) Including deposits in foreign denominated currencies with a value of
$587,804 and a cost of $583,447.
TEN LARGEST INDUSTRY HOLDINGS AT JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Banking.................................................................. 12.55%
Basic Industries......................................................... 6.72%
Miscellaneous Industries................................................. 6.59%
Conglomerates............................................................ 5.45%
Retail Trade............................................................. 4.88%
Food & Beverage.......................................................... 4.44%
Broadcasting/Publishing.................................................. 3.94%
Household Appliances..................................................... 3.73%
Electric Utilities....................................................... 3.33%
Drugs/Health Care........................................................ 3.21%
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $27,966,249
Cash..................................................... 797
Foreign cash at value.................................... 587,804
Receivable for:
Fund shares sold......................................... 115,319
Securities sold.......................................... 419,586
Dividends and interest................................... 44,628
Foreign withholding taxes................................ 20,563
Due from adviser......................................... 11,819
Unamortized organization expense......................... 6,702
-----------
29,173,467
LIABILITIES
Payable for:
Securities purchased..................................... $156,482
Fund shares redeemed..................................... 86,696
Foreign withholding taxes................................ 5,077
Accrued expenses:
Management fees.......................................... 14,937
Other expenses........................................... 39,874
--------
303,066
-----------
NET ASSETS................................................ $28,870,401
===========
Net Assets consist of:
Capital paid in.......................................... $26,632,782
Undistributed net investment income...................... 154,743
Accumulated net realized gains........................... 367,987
Unrealized appreciation on investments and foreign
currency................................................ 1,714,889
-----------
NET ASSETS................................................ $28,870,401
===========
Computation of offering price:
Net asset value and redemption price per share
($28,870,401 divided by 2,523,511 shares of beneficial
interest)................................................ $ 11.44
===========
Identified cost of investments............................ $26,257,314
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $ 306,079(a)
Interest............................................ 799
----------
306,878
EXPENSES
Management fees..................................... $ 100,615
Trustees' fees and expenses......................... 6,434
Custodian........................................... 69,651
Audit and tax services.............................. 14,000
Legal............................................... 5,411
Printing............................................ 5,523
Amortization of organization expenses............... 1,003
Miscellaneous....................................... 5,006
----------
Total expenses..................................... 207,643
Less expenses assumed by the investment adviser.... (62,308) 145,335
---------- ----------
NET INVESTMENT INCOME................................ 161,543
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net.................................... 906,775
Foreign currency transactions--net.................. (374,258)
----------
Total realized gain on investments and foreign
currency transactions.............................. 532,517
----------
Unrealized appreciation (depreciation) on:
Investments--net.................................... 1,108,730
Foreign currency transactions--net.................. (250,872)
----------
Total unrealized appreciation on investments and
foreign currency transactions...................... 857,858
----------
Net gain on investment transactions.................. 1,390,375
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $1,551,918
==========
(a)Net of foreign taxes of: $39,335.
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 123,277 $ 161,543
Net realized gain (loss) on investments and foreign
currency transactions.............................. (125,269) 532,517
Unrealized appreciation on investments, and foreign
currency transactions.............................. 798,519 857,858
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 796,527 1,551,918
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (123,277) 0
In excess of net investment income.................. (48,516) 0
----------- -----------
(171,793) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 16,189,698 14,181,296
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 171,793 0
----------- -----------
16,361,491 14,181,296
Cost of shares redeemed............................. (3,707,935) (3,130,320)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 12,653,556 11,050,976
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 13,278,290 12,602,894
NET ASSETS
Beginning of the period............................. 2,989,217 16,267,507
----------- -----------
End of the period................................... $16,267,507 $28,870,401
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ (6,800)
=========== ===========
End of the period................................... $ (6,800) $ 154,743
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 1,564,292 1,290,420
Issued in connection with the reinvestment of:
Distributions from net investment income............ 16,055 0
----------- -----------
1,580,347 1,290,420
Redeemed............................................ (355,736) (283,626)
----------- -----------
Net change.......................................... 1,224,611 1,006,794
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994 (A) YEAR SIX MONTHS
THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
-------------------- ------------ ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $10.00 $ 10.23 $ 10.73
------ ------- -------
Income From Investment Operations
Net Investment Income........... 0.03 0.09 0.66
Net Realized and Unrealized Gain
on Investments................. 0.23 0.53 0.05
------ ------- -------
Total From Investment
Operations..................... 0.26 0.62 0.71
------ ------- -------
Less Distributions
Distributions From Net
Investment Income.............. (0.02) (0.09) 0.00
Distributions in Excess of Net
Investment Income.............. 0.00 (0.03) 0.00
Distributions From Paid-in
Capital........................ (0.01) 0.00 0.00
------ ------- -------
Total Distributions............. (0.03) (0.12) 0.00
------ ------- -------
Net Asset Value, End of Period... $10.23 $ 10.73 $ 11.44
====== ======= =======
TOTAL RETURN (%)................. 2.60(c) 6.03 6.62(c)
Ratio of Operating Expenses to
Average Net Assets (%).......... 1.30(b) 1.30 1.30(b)
Ratio of Net Investment Income to
Average Net Assets (%).......... 2.56(b) 1.29 1.43(b)
Portfolio Turnover Rate (%)...... 4(b) 89 104(b)
Average Commission Rate(d)....... -- -- $0.0190
Net Assets, End of Period (000).. $2,989 $16,268 $28,870
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
agreement described in Note 4 to
the Financial Statements would
have been (%)................... 5.38(b) 3.12 3.13(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
13
<PAGE>
ZENITH ALGER EQUITY GROWTH SERIES
PORTFOLIO MANAGER: DAVID D. ALGER
FRED ALGER MANAGEMENT, INC.
- ---------------- MARKET REVIEW
The first six months of 1996 have been extremely
[PHOTO OF DAVID challenging and volatile. On more than one occasion, we
ALGER APPEARS have experienced the financial market equivalent of wind
HERE] shear. The reason for market conditions so far this year
has been a dramatic change in perception about the nature
of the economy.
The conventional wisdom in the market earlier in the
year was that the economy was extremely weak, and
consequently would require a series of Federal Reserve
- ---------------- actions to lower interest rates in order to avoid a possible
recession. Over the second quarter, the market's focus shifted to whether the
economy was growing too fast which might cause inflation and potentially lead to
Federal Reserve actions to raise interest.
Against this backdrop, we were fairly active within the Alger Equity Growth
Series. Our strategy of emphasizing individual security selection,
particularly quality growth stocks at reasonable valuations, resulted in
several portfolio changes. Nine West Group, Inc., Schlumberger Ltd. and
Tidewater Inc. are examples of three companies that were added to the
portfolio over the six month period. Examples of companies that were
eliminated from the portfolio over the period include US Robotics, Inc., Bay
Networks and Digital Equipment Corp. The portfolio's best performing stocks
included Tellabs, Inc. and Cisco Systems, Inc., which increased in value by
80.7% and 51.8%, respectively during the first six months of 1996.
During the last several weeks of this period, the portfolio felt a strong
negative impact from declining technology stock prices. Although we eliminated
a number of positions and reduced others in anticipation of this effect, we
were startled by a few bad earnings pre-announcements. Some of the stocks
which pre-announced poor earnings were stocks already presumed to be having
poor quarters. Therefore, we believe this severe negative reaction was
exaggerated.
OUTLOOK AND STRATEGY
Although the performance of the Series was unexciting during the first six
months of 1996, we believe the second half of the year will be more inspired.
Many of the stocks which did not have bad earnings but were nevertheless
caught in the down-draft of pre-announced poor earnings should rebound nicely.
The second half of the year for technology stocks, particularly those related
to personal computers, should be stronger. Finally, the semiconductor glut
will likely dissipate in which case we expect those companies to resume
positive price movement.
We continue to believe that the stock market is undervalued relative to the
bond market and that the bond market should rally in the second half of the
year. Moreover, we do not believe that the Federal Reserve will find it
necessary to raise rates even at their August 20 meeting. For these reasons,
we believe that there is a good chance that the market will attain a target
objective of 6000 by year end or at least the middle of 1997.
14
<PAGE>
A $10,000 Investment Compared to an Index FUND FACTS
GOAL: Long-term capital
[GRAPH APPEARS HERE] appreciation.
START DATE: October 31, 1994
Alger Equity S & P
Growth Series 500/20/ SIZE: $85 million as of June 30,
10/31/94 $10,000 $10,000 1996
12/31/94 9,580 9,794
12/31/95 14,245 13,461 MANAGER: David D. Alger,
6/30/96 15,019 14,818 President and Chief Investment
Officer (since 1975), Executive
Average Annual Return Vice President, Portfolio
Lipper Manager and Director of Research
Alger Variable Growth (since 1971), Fred Alger
Equity Growth Fund Average/11/ Management, Inc.; Portfolio
6 mos.* 5.36% 10.56% Manager, The Alger Growth
1 year 18.39% 23.96% Portfolio (since 1986), The
Since Alger American Fund Growth
inception 27.66% n/a Portfolio (since 1989) and The
*not annualized Alger Retirement Fund (since 1993).
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
15
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--92.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--3.2%
12,200 Boeing Co. ............................................... $ 1,062,925
45,400 Sundstrand Corp. ......................................... 1,662,775
-----------
2,725,700
-----------
APPAREL--2.0%
9,000 Nike, Inc. ............................................... 924,750
15,000 Tommy Hilfiger Corp.(c)................................... 804,375
-----------
1,729,125
-----------
BANKS--2.3%
28,000 Chase Manhattan Corp. .................................... 1,977,500
-----------
BIO TECHNOLOGY--1.8%
41,600 Biochem Pharmacy, Inc.(c)................................. 1,560,000
-----------
BUILDING & CONSTRUCTION--1.0%
42,500 Clayton Homes, Inc. ...................................... 850,000
-----------
CHEMICALS--0.9%
22,500 Monsanto Company.......................................... 731,250
-----------
COMMUNICATIONS--2.2%
7,400 Cascade Communications Corp.(c)........................... 503,200
20,000 Glenayre Technologies, Inc.(c)............................ 1,000,000
5,400 Tellabs, Inc.(c).......................................... 361,125
-----------
1,864,325
-----------
COMPUTER RELATED & BUSINESS EQUIPMENT--11.6%
23,200 Ascend Communications, Inc.(c)............................ 1,305,000
44,000 Cisco Systems, Inc.(c).................................... 2,491,500
25,000 Compuware Corp.(c)........................................ 987,500
31,801 First Data Corp. ......................................... 2,532,155
18,400 Microchip Technology, Inc.(c)............................. 455,400
44,900 3Com Corp.(c)............................................. 2,054,175
-----------
9,825,730
-----------
COMPUTER SOFTWARE--1.9%
70,700 Informix Corporation(c)................................... 1,590,750
-----------
COMPUTER TECHNOLOGY--0.8%
13,450 Adaptec, Inc.(c).......................................... 637,194
-----------
DEFENSE--2.4%
3,000 Lockheed Martin Corp. .................................... 252,000
36,400 McDonnell Douglas Corp. .................................. 1,765,400
-----------
2,017,400
-----------
FINANCE--4.8%
19,400 American International Group, Inc. ....................... 1,913,325
26,500 MBNA Corp. ............................................... 755,250
30,150 Travelers Group, Inc ..................................... 1,375,594
-----------
4,044,169
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
FINANCIAL SERVICES--1.6%
4,000 Merrill Lynch & Co., Inc. ................................ $ 260,500
45,000 Charles Schwab Corp. ..................................... 1,102,500
-----------
1,363,000
-----------
HEALTH CARE--5.3%
11,000 Boston Scientific Corp.(c)................................ 495,000
29,400 Columbia/HCA Healthcare Corp. ............................ 1,569,225
21,500 Merck & Co., Inc. ........................................ 1,389,437
20,500 United Healthcare Corp. .................................. 1,035,250
-----------
4,488,912
-----------
HEALTH CARE--ADMINISTRATIVE SERVICES--0.3%
10,000 Liposome, Inc.(c)......................................... 187,500
-----------
HEALTH MAINTENANCE SERVICES--1.0%
19,900 Oxford Health Plans, Inc.(c).............................. 818,388
-----------
INSURANCE--0.7%
20,000 Travelers Aetna Property Casual Corp.(c).................. 567,500
-----------
MACHINERY--1.0%
17,200 Case Corp. ............................................... 825,600
-----------
MEDICAL SERVICES--1.7%
12,900 Guidant Corp. ............................................ 635,325
14,700 Medtronic, Inc. .......................................... 823,200
-----------
1,458,525
-----------
MISCELLANEOUS--3.7%
30,000 Money Store, Inc. ........................................ 663,750
32,000 Service Corp. International............................... 1,840,000
15,000 Tidewater, Inc. .......................................... 658,125
-----------
3,161,875
-----------
MORTGAGE--1.5%
39,500 Green Tree Financial Corp. ............................... 1,234,375
-----------
MOTOR VEHICLES--1.4%
19,600 Chrysler Corp. ........................................... 1,215,200
-----------
NON-FERROUS METALS--1.0%
15,200 Aluminum Co. of America................................... 872,100
-----------
OFFICE EQUIPMENT--0.8%
13,100 Xerox Corp. .............................................. 700,850
-----------
OIL SERVICES--1.6%
16,900 Halliburton Co. .......................................... 937,950
5,000 Schlumberger, Ltd. ....................................... 421,250
-----------
1,359,200
-----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PHARMACEUTICALS--5.5%
10,300 Amgen, Inc.(c)............................................ $ 556,200
29,000 Astra AB(c)............................................... 1,268,750
16,100 Eli Lilly & Company....................................... 1,046,500
6,096 Johnson & Johnson......................................... 301,752
9,500 Pfizer, Inc. ............................................. 678,063
14,700 Smithkline Beecham PLC.................................... 799,313
-----------
4,650,578
-----------
RESTAURANTS & LODGING--5.0%
52,000 Boston Chicken, Inc.(c)................................... 1,690,000
55,800 Lone Star Steakhouse Saloon(c)............................ 2,106,450
11,900 Outback Steakhouse, Inc.(c)............................... 410,364
-----------
4,206,814
-----------
RETAILING--9.3%
9,800 Cintas Corp. ............................................. 524,300
20,500 Gucci Group NY, Inc.(c)................................... 1,337,625
15,000 Nine West Group, Inc.(c).................................. 766,875
15,000 Nordstrom, Inc. .......................................... 667,500
81,000 Officemax, Inc.(c)........................................ 1,933,875
50,000 The Gap, Inc. ............................................ 1,606,250
20,000 TJX Companies, Inc. ...................................... 675,000
11,000 Viking Office Products, Inc.(c)........................... 345,125
-----------
7,856,550
-----------
SEMI-CONDUCTORS--6.2%
21,500 Altera Corp.(c)........................................... 817,000
15,000 Intel Corp. .............................................. 1,101,562
23,000 Linear Technology Corporation............................. 690,000
33,500 Maxim Integrated Products, Inc.(c)........................ 914,969
53,300 Xilinx, Inc.(c)........................................... 1,692,275
-----------
5,215,806
-----------
SERVICES--3.6%
30,500 CUC International, Inc.(c)................................ 1,082,750
33,200 Loewen Group, Inc. ....................................... 1,004,300
33,500 USA Waste Services, Inc.(c)............................... 992,437
-----------
3,079,487
-----------
SOAPS--1.2%
12,000 Colgate Palmolive Co. .................................... 1,017,000
-----------
TELECOMMUNICATIONS--5.2%
13,000 LCI International, Inc.(c)................................ 407,875
20,000 MFS Communications, Inc. ................................. 752,500
11,400 Telecomunicacoes Brasileiras.............................. 793,725
43,700 Worldcom, Inc.(c)......................................... 2,419,887
-----------
4,373,987
-----------
Total Common Stocks
(Identified Cost $72,275,066)............................ 78,206,390
-----------
</TABLE>
SHORT-TERM INVESTMENT--11.1%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$9,372,262 Seven Seas U.S. Government Money Market Fund........ $ 9,372,262
-----------
Total Short-Term Investment
(Identified Cost $9,372,262)....................... 9,372,262
-----------
Total Investments--103.6%
(Identified cost $81,647,328)(b)................... 87,578,652
Other assets less liabilities....................... (3,040,763)
-----------
TOTAL NET ASSETS--100%.............................. $84,537,889
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $81,647,328 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 7,775,714
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (1,844,390)
-----------
Net unrealized appreciation......................... $ 5,931,324
===========
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $87,578,652
Receivable for:
Fund shares sold....................................... 341,513
Securities sold........................................ 328,056
Dividends and interest................................. 74,105
Foreign taxes.......................................... 123
Unamortized organization expense....................... 6,702
-----------
88,329,151
LIABILITIES
Payable for:
Securities purchased................................... $3,557,831
Fund shares redeemed................................... 104,594
Withholding taxes...................................... 717
Accrued expenses:
Management fees........................................ 80,884
Other expenses......................................... 47,236
----------
3,791,262
-----------
NET ASSETS.............................................. $84,537,889
===========
Net Assets consist of:
Capital paid in........................................ $78,092,571
Undistributed net investment income.................... 56,676
Accumulated net realized gains......................... 457,318
Unrealized appreciation on investments................. 5,931,324
-----------
NET ASSETS.............................................. $84,537,889
===========
Computation of offering price:
Net asset value and redemption price per share
($84,537,889 divided by 5,815,420 shares of beneficial
interest).............................................. $ 14.54
===========
Identified cost of investments.......................... $81,647,328
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 160,728(a)
Interest.............................................. 189,279
----------
350,007
EXPENSES
Management fees....................................... $235,857
Trustees' fees and expenses........................... 6,655
Custodian............................................. 24,428
Audit and tax services................................ 9,900
Legal................................................. 5,411
Printing.............................................. 13,165
Amortization of organization expenses................. 1,003
Miscellaneous......................................... 5,020
--------
Total expenses....................................... 301,439
Less expenses assumed by the investment adviser...... (6,754) 294,685
-------- ----------
NET INVESTMENT INCOME.................................. 55,322
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 1,302,740
Unrealized appreciation on Investments--net........... 1,430,434
----------
Net gain on investment transactions.................... 2,733,174
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $2,788,496
==========
(a) Net of foreign taxes of: $717
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 30,373 $ 55,322
Net realized gain on investments.................... 448,499 1,302,740
Unrealized appreciation on investments.............. 4,579,507 1,430,434
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 5,058,379 2,788,496
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (30,373) 0
In excess of net investment income.................. (993) 0
Net realized gain on investments.................... (1,285,986) 0
----------- -----------
(1,317,352) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 47,127,562 46,775,195
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 31,366 0
Distributions from net realized gain................ 1,285,986 0
----------- -----------
48,444,914 46,775,195
Cost of shares redeemed............................. (7,716,452) (11,412,204)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 40,728,462 35,362,991
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 44,469,489 38,151,487
NET ASSETS
Beginning of the period............................. 1,916,913 46,386,402
----------- -----------
End of the period................................... $46,386,402 $84,537,889
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 1,354
----------- -----------
End of the period................................... $ 1,354 $ 56,676
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 3,648,304 3,246,736
Issued in connection with the reinvestment of:
Distributions from net investment income............ 2,303 0
Distributions from net realized gain................ 94,419 0
----------- -----------
3,745,026 3,246,736
Redeemed............................................ (583,251) (793,512)
----------- -----------
Net change.......................................... 3,161,775 2,453,224
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1994 1995 1996
------------------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $10.00 $ 9.56 $ 13.80
------ ------- -------
Income From Investment Operations
Net Investment Income............ 0.02 0.01 0.02
Net Realized and Unrealized Gain
(Loss) on Investments........... (0.44) 4.65 0.72
------ ------- -------
Total From Investment Operations. (0.42) 4.66 0.74
------ ------- -------
Less Distributions
Distributions From Net Investment
Income.......................... (0.02) (0.01) 0.00
Distributions From Net Realized
Capital Gains................... 0.00 (0.41) 0.00
------ ------- -------
Total Distributions.............. (0.02) (0.42) 0.00
------ ------- -------
Net Asset Value, End of Period.... $ 9.56 $ 13.80 $ 14.54
====== ======= =======
TOTAL RETURN (%).................. (4.20)(c) 48.80 5.36 (c)
Ratio of Operating Expenses to
Average Net Assets (%)........... 0.85 (b) 0.85 0.90 (b)
Ratio of Net Investment Income to
Average Net Assets (%)........... 1.07 (b) 0.14 0.20 (b)
Portfolio Turnover Rate (%)....... 32 (b) 107 89 (b)
Average Commission Rate (d)....... -- -- $0.0728
Net Assets, End of Period (000)... $1,917 $46,386 $84,538
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
agreement described in Note 4 to
the Financial Statements would
have been (%).................... 2.74 (b) 2.45 0.92 (b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
19
<PAGE>
ZENITH CAPITAL GROWTH SERIES
PORTFOLIO MANAGER: G. KENNETH HEEBNER
CAPITAL GROWTH MANAGEMENT, L.P.
- ----------------- --------------------------------------------------------
MARKET REVIEW
--------------------------------------------------------
[PHOTO OF Through the first half of 1996, a strong economy, low
KENNETH inflation and a stable interest rate environment resulted
HEEBNER in a solid stock market performance. A principal
APPEARS beneficiary of these conditions was growth stocks, which
HERE] continued to post gains albeit less than in the second
half of 1995. Well managed moderate growth companies,
which the Series favors, are proving to be long-term,
steady performers. Many such companies offer earnings
growth rates approaching 20% yet still at deep discounts
to average market multiples.
- ----------------- Capitalizing on a business environment that emphasizes low
labor and capital costs and high productivity, the Capital Growth Series
returned 5.31% over the first half of the year. Returns were compromised
somewhat by late selloffs in the stock market in June, due in part to
inflationary fears stemming from the fast growing economy.
Throughout the first half of the year, we've maintained confidence in the
growth of the economy. As a result, we have maintained substantial positions
in airline and bank stocks, which continued to increase in value over the six-
month period.
The Series' success over the last ten years stems from our commitment in
quality, long term investments in well established companies that are
reasonably priced. We did not deviate from this approach through the first
half of 1996.
- --------------------------------------------------------------------------------
OUTLOOK AND STRATEGY
- --------------------------------------------------------------------------------
Going forward, we anticipate continued moderate growth with relatively low
inflation, an environment conducive to investing in growth companies. We will
continue to avoid investing in companies with high price earnings ratios
relative to high growth rates. Many investors, we believe, are displaying
enormous enthusiasm for growth but without closely examining valuations.
We will keep investing in growth companies but only at reasonable prices and
with a long-term investment horizon in mind. While there may be periodic
bursts of volatility along the way, we feel that the companies we select under
this approach will continue to perform well over the long haul.
A $10,000 Investment Compared to an Index FUND FACT
[GRAPH APPEARS HERE] GOAL: Long-term growth of
capital.
Zenith Capital
Growth Series S&P 500/20/ START DATE: August 26, 1983
6/30/86 $10,000 $10,000
12/86 10,634 9,824 SIZE: $992 million as of June
12/87 16,239 10,333 30, 1996
12/88 14,812 12,038
12/89 19,368 15,841 MANAGER: G. Kenneth Heebner,
12/90 18,368 15,347 since 1983; portfolio manager
12/91 28,786 20,003 of New England Growth Fund
12/92 27,045 21,525 since 1976; CGM Capital
12/93 31,096 23,685 Development Fund since 1976;
12/94 28,896 24,006 CGM Mutual Fund since 1981;
12/95 39,885 32,321 CGM Realty Fund since May,
6/30/96 42,003 36,321 1994; CGM Fixed Income Fund
since June, 1993.
Average Annual Return
Zenith Capital Lipper Variable Growth
Growth Series Fund Average/11/
6 mos.* 5.31% 10.56%
1 year 13.97% 23.96%
5 years 13.12% 15.74%
10 years 15.43% n/a
*not annualized
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life insurance
contracts; if these charges were included, the returns shown would be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
20
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--99.6% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.7%
193,000 Boeing Co. ........................................... $ 16,815,125
------------
AIRLINES--11.9%
310,700 AMR Corp.(c).......................................... 28,273,700
835,000 Northwest Airlines Corp.(c)........................... 32,982,500
1,060,000 UAL Corp.(c).......................................... 56,975,000
------------
118,231,200
------------
APPAREL & TEXTILES--5.2%
500,500 NIKE, Inc. Class B.................................... 51,426,375
------------
BANKS--MONEY CENTER--14.3%
930,000 Chase Manhattan Corp. ................................ 65,681,250
926,000 Citicorp.............................................. 76,510,750
------------
142,192,000
------------
BEVERAGES & TOBACCO--7.2%
155,000 Anheuser-Bush Companies, Inc. ........................ 11,625,000
1,697,000 PepsiCo Inc. ......................................... 60,031,375
------------
71,656,375
------------
COMPUTER SOFTWARE & SERVICES--7.6%
511,000 Computer Associates International, Inc. .............. 36,408,750
280,000 Microsoft Corp.(c).................................... 33,635,000
125,000 Oracle Systems Corp.(c)............................... 4,929,688
------------
74,973,438
------------
ELECTRONIC COMPONENTS--5.1%
895,000 Cisco System, Inc.(c)................................. 50,679,375
------------
FOOD--RETAILERS/WHOLESALERS--5.9%
560,000 Philip Morris Companies, Inc. ........................ 58,240,000
------------
HOTELS & RESTAURANTS--5.1%
450,000 Hilton Hotels Corp. .................................. 50,625,000
------------
INSURANCE--12.0%
1,255,000 Allstate Corp. ....................................... 57,259,375
628,850 American International Group, Inc. ................... 62,020,331
------------
119,279,706
------------
LEISURE--3.3%
460,000 Circus Circus Enterprises(c).......................... 18,860,000
175,000 Eastman Kodak Co. .................................... 13,606,250
------------
32,466,250
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
OIL--SERVICE--11.0%
1,015,000 Halliburton Co. ...................................... $ 56,332,500
626,000 Schlumberger Ltd. .................................... 52,740,500
------------
109,073,000
------------
RETAIL--9.2%
3,370,000 KMart Corp.(c)........................................ 41,703,750
1,030,000 Sears Roebuck and Co. ................................ 50,083,750
------------
91,787,500
------------
Total Common Stock
(Identified Cost $847,205,195)....................... 987,445,344
------------
</TABLE>
SHORT-TERM INVESTMENT--0.3%
<TABLE>
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
$2,865,000 American Express Credit Corp. 5.390%, 07/01/96..... 2,865,000
------------
Total Short-Term Investment
(Identified Cost $2,865,000)...................... 2,865,000
------------
Total Investments--99.9%
(Identified Cost $850,070,195)(b)................. 990,310,344
Other assets less liabilities...................... 1,307,226
------------
TOTAL NET ASSETS--100%............................. $991,617,570
============
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $850,070,195 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $158,314,380
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (18,074,231)
------------
Net unrealized appreciation........................ $140,240,149
============
(c) Non-Income producing security.
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value............................... $ 990,310,344
Cash............................................... 3,733
Receivable for:
Fund shares sold................................... 744,117
Securities sold.................................... 16,123,240
Dividends and interest............................. 1,378,298
--------------
1,008,559,732
LIABILITIES
Payable for:
Securities purchased............................... $15,905,034
Fund shares redeemed............................... 295,148
Miscellaneous...................................... 23,068
Accrued expenses:
Management fees.................................... 517,781
Deferred trustees' fees............................ 44,575
Other expenses..................................... 156,556
-----------
16,942,162
--------------
NET ASSETS.......................................... $ 991,617,570
==============
Net Assets consist of:
Capital paid in.................................... $ 796,452,485
Undistributed net investment income................ 3,844,568
Accumulated net realized
gains............................................. 51,080,368
Unrealized appreciation on investments............. 140,240,149
--------------
NET ASSETS.......................................... $ 991,617,570
==============
Computation of offering price:
Net asset value and redemption price per share
($991,617,570 divided by 2,513,565 shares of
beneficial interest)............................... $ 394.51
==============
Identified cost of investments...................... $ 850,070,195
==============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $ 7,080,715
Interest............................................... 92,992
-----------
7,173,707
EXPENSES
Management fees........................................ $3,093,449
Trustees' fees and expenses............................ 18,092
Custodian.............................................. 80,133
Audit and tax services................................. 7,450
Legal.................................................. 4,028
Printing............................................... 149,575
Miscellaneous.......................................... 4,968
----------
Total expenses........................................ 3,357,695
-----------
NET INVESTMENT INCOME................................... 3,816,012
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net....................................... 31,301,804
Unrealized appreciation on: Investments--net........... 13,982,314
-----------
Net gain on investment transactions..................... 45,284,118
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............. $49,100,130
===========
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................ $ 7,450,611 $ 3,816,012
Net realized gain on investments................. 132,068,325 31,301,804
Unrealized appreciation on investments........... 114,117,353 13,982,314
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS........... 253,636,289 49,100,130
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................ (7,422,072) 0
Net realized gain on investments................. (112,289,797) 0
------------ ------------
(119,711,869) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares..................... 211,234,567 119,915,713
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income......... 7,422,051 0
Distributions from net realized gain............. 112,289,762 0
------------ ------------
330,946,380 119,915,713
Cost of shares redeemed.......................... (210,553,681) (98,842,093)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS.................................... 120,392,699 21,073,620
------------ ------------
TOTAL INCREASE IN NET ASSETS..................... 254,317,119 70,173,750
NET ASSETS
Beginning of the period.......................... 667,126,701 921,443,820
------------ ------------
End of the period................................ $921,443,820 $991,617,570
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period.......................... $ 278,739 $ 28,556
============ ============
End of the period................................ $ 28,556 $ 3,844,568
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................... 561,255 305,199
Issued in connection with the reinvestment of:
Distributions from net investment income......... 19,951 0
Distributions from net realized gain............. 301,846 0
------------ ------------
883,052 305,199
Redeemed......................................... (559,603) (251,290)
------------ ------------
Net change....................................... 323,449 53,909
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------------------------ ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 249.04 $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 3.16 4.04 2.12 5.28 3.47 1.52
Net Realized and
Unrealized Gain (Loss)
on Investments........ 130.75 (25.10) 46.21 (30.54) 114.91 18.37
-------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 133.91 (21.06) 48.33 (25.26) 118.38 19.89
-------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... (3.22) (4.07) (2.18) (5.15) (3.48) 0.00
Distributions From Net
Realized Capital
Gains................. (31.93) 0.00 (16.75) (8.92) (52.58) 0.00
Distributions From
Paid-in Capital....... (0.44) 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- --------
Total Distributions.... (35.59) (4.07) (18.93) (14.07) (56.06) 0.00
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62 $ 394.51
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 54.00 (6.05) 14.97 (7.07) 38.03 5.31(b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.70 0.70 0.68 0.67 0.71 0.70(a)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 1.22 1.53 0.67 1.61 0.92 0.79(a)
Portfolio Turnover Rate
(%).................... 174 207 169 140 242 265(a)
Average Commission
Rate(c)................ -- -- -- -- -- $ 0.0626
Net Assets, End of
Period (000)........... $343,965 $472,017 $644,384 $667,127 $921,444 $991,618
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
23
<PAGE>
ZENITH LOOMIS SAYLES AVANTI GROWTH SERIES
PORTFOLIO MANAGERS: SCOTT PAPE AND BRUCE EBEL
LOOMIS, SAYLES & COMPANY, L.P.
- ------------------ MARKET REVIEW
[PHOTO OF SCOTT Buoyed by an acceleration of activity in key areas such
PAPE & BRUCE as retail sales, employment and housing, the general
EBEL APPEARS economic environment was solid during the first six months
HERE] of 1996. Inflation remained under control during the
period with very little evidence of pricing or labor cost
pressures that traditionally ignite higher inflation.
The only negative trend developing during the first half
of 1996 was the rise of long-term interest rates. Yields
on the thirty-year bellwether long-term Treasury Bond rose
- ------------------ from 5.8% in January to 7.2% by late June. That has led to
some consternation and subsequent volatility in both the fixed income and equity
markets.
Thanks to a boost from consumer and technology stocks, the Avanti Growth
Series continued to post strong gains. For the six months ending June 30,
1996, the Series returned 10.85%.
The Series' continued strong performance was fueled primarily by stocks that
benefited from accelerated consumer spending and retail sales. Holdings that
boosted the overall performance of the Series came from the technology,
financial, and consumer staples sectors, particularly from companies that make
telecommunications, software, personal care and beverage products. Energy
holdings, an area where the Series increased its exposure, also performed
admirably, with oil field service companies driving returns. Overall, growth
indices bettered the performance of value stocks year-to-date, indicating the
heavier proportion of harder-hit industrial and utility stocks in most value
funds.
Sectors that underperformed included heavy industrials, especially companies
that sold basic materials, such as steel, building materials and construction
and home building materials. Utilities were a sub-standard performer as well,
attributable chiefly to the rising interest rate environment during the first
half of the year. The Series was underweighted in both categories during this
period. An area that received greater weighting in the Series in late 1995 and
early 1996 was domestic emerging growth stocks, representing 33% of the Series
as of January 1, 1996, which also performed very well over the first six
months of 1996.
Allocating a third of the Series to domestic emerging growth stocks follows
a general strategy of uncovering dynamic growth companies earlier in their
life cycles than other growth investing. By locating the next Coca-Cola's and
Gillette's of the world, the Series pursued substantially higher overall
returns than those derived from index funds. Combined with core stocks that
have already established a long-term pattern of growth and earnings, the
Series' domestic emerging growth stock allocation targets the upside potential
characteristic of a growth fund, with the market correlation and limitation of
risk sought by an index fund.
Individual stocks that contributed to the growth of the Series during the
period included Microsoft, Cintas and Paychex. Microsoft, our second largest
holding in the Series, exemplifies the Series' management strategy. It's a
premiere company that has dominated its industry and one that has earned above
average rates of return over long periods of time.
Cinta, the market leader in the uniform rental industry, underscores another
tenet that the Series operates under: finding companies with a history of
predictable above average earnings that they have provided quarter after
quarter. Cinta has experienced average growth of 20% annually over the last
ten years.
Paychex personifies the emerging growth stock investment strategy that the
Series employs. A small company that does payroll processing for rapidly
growing businesses, Paychex presents an investment opportunity with high
recurring revenues and consistently strong growth in a market that is not yet
saturated.
24
<PAGE>
OUTLOOK AND STRATEGY
We believe that economic growth will slow moderately through the rest of
1996. Interest rates should remain stable and low inflation should be the norm
for the period. We expect that corporate earnings will continue to be strong
even if the economy loses some momentum. Companies are still enjoying
increased productivity and are working hard to bolster their bottom lines.
That should result in further growth for these companies in particular and the
economy in general during the second half of 1996.
In the meantime, the Series will continue to focus on America's premiere
companies--leaders in their respective industries, with strong management and
excellent prospects for increased revenues and earnings. We feel these stocks
offer investors the best opportunities for long-term growth.
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: Long-term growth of
capital.
Avanti
Growth S&P START DATE: April 30, 1993
Series 500/20/
Inception 4/30/93 $10,000 $10,000 SIZE: $65 million as of June 30,
12/31/93 11,473 10,819 1996
12/31/94 11,443 10,966
12/31/95 14,916 15,072 MANAGERS: Scott Pape has served
6/30/96 16,533 16,592 as a co-portfolio manager of the
Series since 1993; Bruce Ebel
replaced Richard Hurckes, who
Average Annual Return retired in June 1996. They also
manage New England Capital
Avanti Lipper Variable Growth Growth Fund. Mr. Pape joined
Growth Series Fund Average/11/ Loomis Sayles in 1991 and Mr.
6 mos.* 10.85% 10.56% Ebel in 1994. Prior to joining
1 year 20.46% 23.96% Loomis Sayles, Mr. Ebel served
Since as Senior Vice President at
inception 17.21% n/a Kemper Asset Management.
*not annualized
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
25
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--97.3% OF NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.1%
7,800 Boeing Co. .............................................. $ 679,574
-----------
AIRLINES--0.5%
11,500 Southwest Airlines Co. .................................. 334,937
-----------
APPAREL & TEXTILES--0.2%
1,300 Nike, Inc. .............................................. 133,575
-----------
BANKS--1.5%
16,300 First Bank Systems....................................... 945,400
-----------
BUSINESS SERVICES--11.0%
13,000 Ceridian Corp.(c)........................................ 656,500
26,000 Checkfree Corp.(c)....................................... 516,750
21,200 Cintas Corp. ............................................ 1,134,200
19,400 Danka Business Systems................................... 567,450
21,900 First Data Corp. ........................................ 1,743,788
41,250 Fiserv, Inc.(c).......................................... 1,237,500
17,200 Medaphis Corp.(c)........................................ 683,700
11,600 Paychex, Inc. ........................................... 558,250
1,000 Sykes Enterprises, Inc.(c)............................... 49,250
-----------
7,147,388
-----------
CHEMICALS--2.5%
10,000 Air Products & Chemicals, Inc. .......................... 577,500
28,500 Monsanto Co. ............................................ 926,250
3,500 Morton International, Inc. .............................. 130,375
-----------
1,634,125
-----------
COMMUNICATION--9.5%
4,000 Cascade Communications Corp.(c).......................... 272,000
22,500 Cisco Systems, Inc.(c)................................... 1,274,063
14,500 Glenayre Technologies, Inc.(c)........................... 725,000
15,900 Motorola, Inc. .......................................... 999,713
4,600 Paging Network, Inc.(c).................................. 110,400
24,900 Qualcom, Inc.(c)......................................... 1,322,812
15,200 Tellabs, Inc.(c)......................................... 1,016,500
4,900 US Robotics, Inc. ....................................... 418,950
-----------
6,139,438
-----------
COMPUTER SOFTWARE & SERVICES--9.6%
11,000 Adobe Systems, Inc. ..................................... 394,625
11,000 Automatic Data Processing................................ 424,875
9,900 HBO & Co. ............................................... 670,725
49,000 Informix Corp.(c)........................................ 1,102,500
14,400 Microsoft Corp.(c)....................................... 1,729,800
19,000 Oracle Systems Corp.(c).................................. 749,313
26,900 Parametric Technology Corp.(c)........................... 1,166,787
-----------
6,238,625
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
COMPUTERS & BUSINESS EQUIPMENT--2.5%
16,300 Hewlett Packard Co. ...................................... $ 1,623,887
-----------
ELECTRIC--2.4%
18,000 General Electric Co. ..................................... 1,557,000
-----------
ELECTRONIC COMPONENTS--5.5%
17,300 Intel Corp. .............................................. 1,270,468
31,000 LSI Logic Corp.(c)........................................ 806,000
7,000 Molex, Inc. .............................................. 222,250
17,500 Molex, Inc. Class A....................................... 514,063
19,500 Solectron Corp.(c)........................................ 738,563
-----------
3,551,344
-----------
ENERGY--0.7%
2,700 Amoco Corp. .............................................. 195,413
3,100 Schlumberger, Ltd. ....................................... 261,175
-----------
456,588
-----------
FINANCIAL SERVICES--2.1%
14,000 MBNA Corp. ............................................... 399,000
15,200 MGIC Investment Corp. .................................... 853,100
5,300 Charles Schwab Corp. ..................................... 129,850
-----------
1,381,950
-----------
FOOD & BEVERAGES--2.8%
15,000 Coca Cola Co. ............................................ 733,125
30,400 PepsiCo, Inc. ............................................ 1,075,400
-----------
1,808,525
-----------
GAS & PIPELINE UTILITIES--0.5%
8,300 Enron Corp. .............................................. 339,263
-----------
HEALTH CARE--5.7%
19,000 Boston Scientific Corp.(c)................................ 855,000
18,300 Indexx Labs, Inc.(c)...................................... 718,275
21,900 Medtronic, Inc. .......................................... 1,226,400
26,200 Summit Technology, Inc.(c)................................ 366,800
30,000 Ventritex, Inc.(c)........................................ 513,750
-----------
3,680,225
-----------
HEALTH CARE--DRUGS--7.6%
22,400 Amgen, Inc.(c)............................................ 1,209,600
6,000 Biogen, Inc.(c)........................................... 329,250
25,400 Johnson & Johnson......................................... 1,257,300
19,900 Merck & Co. .............................................. 1,286,038
87,000 Oncor, Inc.(c)............................................ 478,500
23,000 Somatogen, Inc.(c)........................................ 324,875
-----------
4,885,563
-----------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--SERVICES--3.5%
18,000 Columbia/HCA Healthcare................................... $ 960,750
28,600 Healthsouth Corp.(c)...................................... 1,029,600
4,050 Phycor, Inc.(c)........................................... 153,900
2,000 United Healthcare Corp. .................................. 101,000
-----------
2,245,250
-----------
HOTELS & RESTAURANTS--5.9%
11,400 Boston Chicken, Inc.(c)................................... 370,500
7,100 Circus Circus Enterprises(c).............................. 291,100
18,800 Lone Star Steakhouse Saloon(c)............................ 709,700
11,300 McDonalds Corp. .......................................... 528,275
21,900 Primadonna Resorts, Inc.(c)............................... 503,700
49,000 Starbucks Corp.(c)........................................ 1,384,250
-----------
3,787,525
-----------
HOUSEHOLD PRODUCTS--3.5%
17,700 Duracell International, Inc. ............................. 763,313
21,500 Gillette Co. ............................................. 1,341,062
1,400 Procter & Gamble Co. ..................................... 126,875
-----------
2,231,250
-----------
INSURANCE--2.8%
11,500 American International Group, Inc. ....................... 1,134,188
10,000 Exel Limited.............................................. 705,000
-----------
1,839,188
-----------
LEISURE TIME--1.6%
13,300 Eastman Kodak Co. ........................................ 1,034,074
-----------
MACHINERY--1.5%
14,000 Illinois Tool Works, Inc. ................................ 946,750
-----------
MEDIA & ENTERTAINMENT--2.5%
16,400 Walt Disney Co. .......................................... 1,031,150
14,400 Tele-Communications, Inc. NE(c)........................... 261,000
1,800 Tribune Co. .............................................. 130,725
10,300 U.S. West Media Group(c).................................. 187,975
-----------
1,610,850
-----------
METALS--0.3%
3,200 Nucor Corp. .............................................. 162,000
-----------
OIL--2.5%
22,000 Anadarko Petroleum Corp. ................................. 1,276,000
11,300 Enron Oil & Gas Co. ...................................... 314,988
-----------
1,590,988
-----------
OIL SERVICES--0.8%
7,800 Baker Hughes, Inc. ....................................... 256,425
18,400 Rowan Companies, Inc.(c).................................. 271,400
-----------
527,825
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RETAIL--3.0%
28,000 Office Max, Inc.(c)................................. $ 668,500
27,150 Petsmart, Inc.(c)................................... 1,296,412
-----------
1,964,912
-----------
RETAIL SPECIALTY--1.8%
32,450 CUC International, Inc.(c).......................... 1,151,974
-----------
TELECOMMUNICATION--0.4%
2,000 AT & T Corp. ....................................... 124,000
6,500 MCI Communications Corp. ........................... 166,563
-----------
290,563
-----------
TOBACCO--1.5%
9,500 Philip Morris Companies, Inc. ...................... 988,000
-----------
Total Common Stocks
(Identified Cost $52,488,895)...................... 62,908,556
-----------
SHORT-TERM INVESTMENT--2.3%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
$1,501,533 Associates Corp. of North America
5.45%, 7/01/96..................................... 1,501,533
-----------
Total Short-Term Investment
(Identified cost $1,501,533)....................... 1,501,533
-----------
Total Investments--99.6%
(Identified cost $53,990,428)(b)................... 64,410,089
Other assets less liabilities....................... 255,935
-----------
TOTAL NET ASSETS--100%.............................. $64,666,024
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost for federal income tax purposes of $53,990,428 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $11,781,569
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (1,361,908)
-----------
Net unrealized appreciation......................... $10,419,661
===========
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $64,410,089
Receivable for:
Fund shares sold....................................... 132,904
Securities sold........................................ 1,254,181
Dividends and interest................................. 47,857
Foreign withholding taxes.............................. 44
-----------
65,845,075
LIABILITIES
Payable for:
Securities purchased................................... $1,060,866
Fund shares redeemed................................... 28,476
Foreign withholding taxes.............................. 212
Miscellaneous.......................................... 474
Accrued expenses:
Management fees........................................ 64,343
Deferred trustees' fees................................ 633
Other expenses......................................... 24,047
----------
1,179,051
-----------
NET ASSETS.............................................. $64,666,024
===========
Net Assets consist of:
Capital paid in........................................ $50,671,120
Undistributed net investment income.................... 43,602
Accumulated net realized gains......................... 3,531,641
Unrealized appreciation on investments................. 10,419,661
-----------
NET ASSETS.............................................. $64,666,024
===========
Computation of offering price:
Net asset value and redemption price per share
($64,666,024 divided by 409,567 shares of beneficial
interest).............................................. $ 157.89
===========
Identified cost of investments.......................... $53,990,428
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 202,346(a)
Interest.............................................. 74,977
----------
277,323
EXPENSES
Management fees....................................... $197,714
Trustees' fees and expenses........................... 6,673
Custodian............................................. 26,467
Audit and tax services................................ 5,700
Legal................................................. 5,163
Printing.............................................. 20,981
Miscellaneous......................................... 3,424
--------
Total expenses....................................... 266,122
Less expenses assumed by the investment adviser...... (26,039) 240,083
-------- ----------
NET INVESTMENT INCOME.................................. 37,240
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net...................................... 2,622,731
Unrealized appreciation on:
Investments--net...................................... 3,089,684
----------
Net gain on investment transactions.................... 5,712,415
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $5,749,655
==========
(a) Net of foreign taxes of: $160.
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 138,413 $ 37,240
Net realized gain on investments.................... 2,703,726 2,622,731
Unrealized appreciation on investments.............. 6,182,432 3,089,684
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 9,024,571 5,749,655
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (132,051) 0
Net realized gain on investments.................... (1,364,969) 0
----------- -----------
(1,497,020) 0
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 25,328,373 17,711,099
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 132,051 0
Distributions from net realized gain................ 1,364,969 0
----------- -----------
26,825,393 17,711,099
Cost of shares redeemed............................. (11,142,834) (7,627,100)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 15,682,559 10,083,999
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 23,210,110 15,833,654
NET ASSETS
Beginning of the period............................. 25,622,260 48,832,370
----------- -----------
End of the period................................... $48,832,370 $64,666,024
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 6,362
=========== ===========
End of the period................................... $ 6,362 $ 43,602
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 188,223 117,619
Issued in connection with the reinvestment of:
Distributions from net investment income............ 929 0
Distributions from net realized gain................ 9,604 0
----------- -----------
198,756 117,619
Redeemed............................................ (83,183) (50,875)
----------- -----------
Net change.......................................... 115,573 66,744
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, 1993 (A) YEAR ENDED SIX MONTHS
THROUGH DECEMBER 31, ENDED
DECEMBER 31, ------------ JUNE 30,
1993 1994 1995 1996
------------------ ------- ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $100.00 $113.67 $112.77 $142.44
------- ------- ------- -------
Income From Investment
Operations
Net Investment Income........ 0.18 0.59 0.42 0.09
Net Realized and Unrealized
Gain (Loss) on Investments.. 14.56 (0.89) 33.80 15.36
------- ------- ------- -------
Total From Investment
Operations.................. 14.74 (0.30) 34.22 15.45
------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income........... (0.18) (0.60) (0.40) 0.00
Distributions From Net
Realized Capital Gains...... (0.67) 0.00 (4.15) 0.00
Distributions From Paid-in
Capital..................... (0.22) 0.00 0.00 0.00
------- ------- ------- -------
Total Distributions.......... (1.07) (0.60) (4.55) 0.00
------- ------- ------- -------
Net Asset Value, End of
Period....................... $113.67 $112.77 $142.44 $157.89
======= ======= ======= =======
TOTAL RETURN (%).............. 14.74 (c) (0.27) 30.35 10.85(c)
Ratio of Operating Expenses to
Average Net Assets (%)....... 0.85 (b) 0.84 0.85 0.85(b)
Ratio of Net Investment Income
to Average Net Assets (%).... 0.46 (b) 0.67 0.37 0.13(b)
Portfolio Turnover Rate (%)... 21 (b) 67 58 84(b)
Average Commission Rate (d).. -- -- -- $0.0312
Net Assets, End of Period
(000)........................ $11,972 $25,622 $48,832 $64,666
The ratios of expenses to
average net assets without
giving effect to the
voluntary expense agreement
described in Note 4 to the
Financial Statements would
have been (%)................ 0.89 (b) 0.84 1.06 0.94(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
29
<PAGE>
ZENITH VENTURE VALUE SERIES
PORTFOLIO MANAGERS: SHELBY M.C. DAVIS AND CHRISTOPHER C. DAVIS
DAVIS SELECTED ADVISERS, L.P.
- ----------------- -------------------------------------------------------------
MARKET REVIEW
-------------------------------------------------------------
The Venture Value Series ended the six months ended June
[PHOTO OF 30, 1996, with a total return of 7.71%, compared to the
SHELBY M.C. total return of the 10.2% posted by the S&P 500
DAVIS AND Index/20/ over the same period.
CHRISTOPHER In light of recent market activity and the market's
DAVIS APPEARS average volatility over the last twenty to thirty years,
HERE] investors should be prepared for a 1,000 point drop at any
time. Were this to happen, we'd stay the course while
looking for new opportunities to invest. Frankly, however,
we're more concerned that the underlying euphoria might
lead to a 1,000 upside market move--which would lead us to
reexamine our investment tactics and look for selling
opportunities.
----------------
But fundamentals remain positive for long term investors like us. There is
still little sign of recession and inflation remains moderate. In addition,
American companies are now more competitive in world markets, and have a lot
of opportunity both to export goods and services as well as to locate
facilities in high growth economies overseas. And while the market hovers near
all-time highs, its current average price-per-earnings ratio is only slightly
above its 50 year average--unlike several prior periods, when valuations
reached dangerous levels. We therefore intend to stay fairly fully invested,
riding out the inevitable ups and downs of the market. At the same time, we'll
remain alert for strong buying or selling opportunities triggered by wide
market swings.
- --------------------------------------------------------------------------------
OUTLOOK AND STRATEGY
- --------------------------------------------------------------------------------
As the market pushed to new highs, we asked ourselves again how to avoid
losing money while still trying to make money. We responded by redoubling our
efforts to control our portfolio's risk, first by continuing to focus on
companies with strong balance sheets, which enables them to weather changing
market conditions. Second, we've been increasing our holdings in world-class
domestic and multinational natural resource companies. These stocks have just
survived a 10-year depression in commodities prices, and now represent growth
opportunities. At the same time, they're also defensive in nature and
represent a bit of a hedge against inflation.
Looking at the bigger picture, however, our strategies remain the same. We
continue to emphasize four themes: financial companies with strong brand names
selling at discounts to the market; growth companies whose stock volatility
creates buying opportunities; high quality multinationals poised to benefit
from high growth economies overseas, and companies with strong cash flows
which are undergoing restructuring. To date, our investments in insurers and
investment banks, which have added a lot to our performance, while our
relatively low weighting in high technology stocks has helped us to avoid the
losses that the sector has generated.
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: Growth of capital.
Venture S&P START DATE: October 31, 1994
Value 500/20/
10/31/94 $10,000 $10,000 SIZE: $63 million as of June 30,
12/31/94 9,650 9,794 1996
12/31/95 13,441 13,461
06/30/96 14,477 14,818 MANAGERS: Shelby M.C. Davis has
served as portfolio manager
since the Series' inception in
Average Annual Return 1994 and has served as portfolio
manager of Davis New York
Venture Lipper Variable Growth Venture Fund since 1968 and of
Value and Income Fund/12/ Selected American Shares since
6 mos.* 7.71% 9.48% May, 1993. He also managed the
1 year 22.20% 23.55% Selected Special Fund from May,
Since 1993 through October, 1994 and
inception 24.87% n/a the Davis Financial Fund from
*not annualized May, 1991 through May, 1995.
Christopher C. Davis has co-
managed the Series since
October, 1995 and has been an
assistant portfolio manager and
research analyst at Davis
Selected since 1989.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
30
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--84.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
AEROSPACE--0.1%
1,000 Boeing Co. ............................................... $ 87,125
-----------
AGRICULTURE--0.1%
4,600 Archer-Daniels-Midland Co. ............................... 87,975
-----------
AUTOMOTIVE--2.1%
21,800 General Motors Corp. ..................................... 1,141,775
2,400 General Motors Corp., Class H............................. 144,300
-----------
1,286,075
-----------
BANKS AND SAVINGS & LOANS--11.6%
26,860 Banc One Corp. ........................................... 913,240
7,300 Barnett Banks, Inc. ...................................... 445,300
18,580 Citicorp.................................................. 1,535,173
20,800 First Bank Systems, Inc. ................................. 1,206,400
300 First Union Corp. ........................................ 18,263
11,600 Golden West Financial Corp. .............................. 649,600
4,200 Signet Banking Corp. ..................................... 97,650
18,700 State Street Boston Corp. ................................ 953,700
6,400 Wells Fargo & Co. ........................................ 1,528,800
-----------
7,348,126
-----------
COMPUTER PRODUCTS AND SERVICES--7.3%
11,900 Adobe Systems, Inc. ...................................... 426,913
17,100 Hewlett-Packard Co. ...................................... 1,703,588
28,900 Intel Corp. .............................................. 2,122,345
9,300 Novellus Systems, Inc.(c)................................. 334,800
-----------
4,587,646
-----------
CONSUMER PRODUCTS--6.2%
600 American Brands, Inc. .................................... 27,225
400 American Home Products Corp. ............................. 24,050
32,000 Coca Cola Company......................................... 1,564,000
1,000 General Electric Co. ..................................... 86,500
8,400 The Gillette Co. ......................................... 523,950
48,900 Guinness PLC.............................................. 355,415
3,400 Kimberly-Clark Corp....................................... 262,650
9,900 Nestle SA (Switzerland) (ADR)(d).......................... 565,142
800 Philip Morris Companies, Inc. ............................ 83,200
10,900 The Seagram Co., Ltd. .................................... 366,513
-----------
3,858,645
-----------
DIVERSIFIED FINANCIAL SERVICES--6.8%
48,900 American Express Co. ..................................... 2,182,163
16,700 Dean Witter, Discover & Co. .............................. 956,075
13,500 Federal Home Loan Mortgage Corporation.................... 1,154,250
-----------
4,292,488
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
ELECTRONICS--0.7%
15,200 Applied Materials, Inc.(c)................................ $ 463,600
-----------
ENERGY--5.3%
13,700 Amerada Hess Corp. ....................................... 734,663
200 Amoco Corp. .............................................. 14,475
400 Atlantic Richfield Co. ................................... 47,400
27,900 Burlington Resources, Inc. ............................... 1,199,700
1,200 Chevron Corp. ............................................ 70,800
8,500 Energy Venture, Inc.(c)................................... 276,250
1,900 Exxon Corp. .............................................. 165,062
4,700 Halliburton Co. .......................................... 260,850
200 Mobil Corp. .............................................. 22,425
4,500 Noble Affiliates, Inc. ................................... 169,875
3,500 Schlumberger, Ltd. ....................................... 294,875
300 Sonat, Inc. .............................................. 13,500
1,900 Unocal Corp. ............................................. 64,125
-----------
3,334,000
-----------
ENTERTAINMENT--0.8%
8,500 Walt Disney Co. .......................................... 534,437
-----------
FOOD & RESTAURANT--2.7%
28,200 McDonald's Corp. ......................................... 1,318,350
14,700 Tyson Foods Inc., Class A................................. 402,413
-----------
1,720,763
-----------
FREIGHT--0.4%
9,400 Illinois Central Corp..................................... 266,725
-----------
INTERNATIONAL CLOSED-END INVESTMENT COMPANY--1.0%
50,534 Morgan Stanley Asia Pacific Fund, Inc. ................... 606,407
-----------
INVESTMENT FIRMS--4.7%
18,900 Donaldson Lufkin & Jenrette, Inc. ........................ 585,900
11,700 J.P. Morgan & Co., Inc. .................................. 990,113
28,800 Morgan Stanley Group, Inc. ............................... 1,414,800
-----------
2,990,813
-----------
LIFE INSURANCE--4.1%
54,800 Equitable Companies, Inc. ................................ 1,363,150
21,500 SunAmerica, Inc. ......................................... 1,214,750
-----------
2,577,900
-----------
MANUFACTURING--0.0%
100 Dow Chemical Co. ......................................... 7,600
600 Maytag Corp. ............................................. 12,525
-----------
20,125
-----------
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
PAPER PRODUCTS--1.6%
26,100 Fort Howard Corp.(c)...................................... $ 518,738
200 International Paper Co. .................................. 7,375
17,000 Jefferson Smurfit Corp.(c)................................ 184,875
6,000 The Mead Corp. ........................................... 311,250
300 Union Camp Corp. ......................................... 14,625
-----------
1,036,863
-----------
PHARMACEUTICAL AND HEALTH CARE--2.9%
200 Bristol-Myers Squibb Co. ................................. 18,000
8,800 Johnson & Johnson......................................... 435,600
5,100 Merck & Co., Inc. ........................................ 329,588
14,700 Pfizer, Inc. ............................................. 1,049,213
-----------
1,832,401
-----------
PHOTOGRAPHIC--1.3%
10,300 Eastman Kodak Co. ........................................ 800,824
-----------
PROPERTY/CASUALTY INSURANCE--14.8%
28,981 The Allstate Corp. ....................................... 1,322,259
5,900 American International Group, Inc. ....................... 581,888
18,900 W.R. Berkley Corp. ....................................... 789,075
25,600 Chubb Corp. .............................................. 1,276,800
10,500 General Re Corp. ......................................... 1,598,625
14,100 NAC Re Corp. ............................................. 472,350
5,800 National Re Corp. ........................................ 218,950
10,800 Progressive Corp. (Ohio).................................. 499,500
5,200 Transatlantic Holdings, Inc. ............................. 364,650
34,350 The Travelers Group, Inc. ................................ 1,567,219
20,600 20th Century Industries, Inc.(c).......................... 342,475
5,700 UNUM Corp. ............................................... 354,825
-----------
9,388,616
-----------
PUBLISHING--2.5%
14,900 Gannet Co., Inc. ......................................... 1,054,175
7,100 Tribune Co. .............................................. 515,638
-----------
1,569,813
-----------
REAL ESTATE--2.7%
7,400 Federal Realty Investment Trust(c)........................ 166,500
54,500 Host Marriott Corp.(c).................................... 715,313
1,600 Kimco Realty Corp. ....................................... 45,200
4,100 Mid-Atlantic Realty Trust................................. 40,744
4,600 Saul Centers, Inc. ....................................... 63,825
8,100 United Dominion Realty Trust, Inc. ....................... 116,437
11,800 Vornado Realty Trust...................................... 482,325
2,300 Weingarten Realty, Inc. .................................. 89,125
-----------
1,719,469
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
RETAIL--2.2%
20,600 Federated Department Stores, Inc.(c).................... $ 702,975
10,200 Harcourt General, Inc. ................................. 510,000
2,900 Home Depot, Inc. ....................................... 156,600
-----------
1,369,575
-----------
TELECOMMUNICATIONS--2.1%
23,200 Airtouch Communications(c).............................. 655,400
2,300 AT & T Corp. ........................................... 142,600
3,600 Cellular Communications, Inc.(c)........................ 191,250
11,900 MCI Communications Corp. ............................... 304,938
200 SBC Communications, Inc. ............................... 9,850
-----------
1,304,038
-----------
TRANSPORTATION--0.8%
7,300 Union Pacific Corp. .................................... 510,087
-----------
UTILITIES--0.0%
100 Carolina Power & Light Co. ............................. 3,800
200 Duke Power Co. ......................................... 10,250
200 Edison International.................................... 3,525
100 Enova Corp. ............................................ 2,312
100 Wisconsin Energy Corp. ................................. 2,888
-----------
22,775
-----------
Total Common Stocks
(Identified Cost $46,655,314).......................... 53,617,311
-----------
PREFERRED STOCK--1.5%
1,200 Banc One Corp., $3.50, Ser. C Conv. Pfd................. 80,100
42,900 The News Corp. Ltd., (ADR)(d)........................... 863,363
-----------
Total Preferred Stocks
(Identified Cost $775,260)............................. 943,463
-----------
BONDS--0.1%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
$39,000 Noble Affiliates, Inc., Conv. Sub. Notes, 4.25%,
11/01/03............................................... 42,998
-----------
Total Bonds (Identified Cost $40,005)................... 42,998
-----------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
SHORT TERM INVESTMENTS--14.7%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$5,835,000 Federal Farm Credit Bank, Discount Note, 5.27%,
7/09/96............................................ $ 5,828,167
3,495,000 Federal Home Loan Mortgage Association, Discount
Note, 5.24%, 7/01/96............................... 3,495,000
-----------
Total Short-Term Investment
(Identified Cost $9,323,167)....................... 9,323,167
-----------
Total Investments--101.1%
(Identified Cost $56,793,746)(b)................... 63,926,939
Other assets less liabilities(e).................... (679,242)
-----------
TOTAL NET ASSETS--100%.............................. $63,247,697
===========
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1996 the net unrealized appreciation
on investments based on cost of $56,793,746 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 7,543,853
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (410,660)
-----------
Net unrealized appreciation......................... $ 7,133,193
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
(e) Including deposits in foreign denominated currencies with a value of $7,146
and a cost of $6,964.
See accompanying notes to financial statements.
33
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $63,926,939
Cash................................................... 7,746
Foreign cash at value.................................. 7,146
Receivable for:
Fund shares sold....................................... 313,576
Securities sold........................................ 142,837
Dividends and interest................................. 67,724
Foreign withholding taxes.............................. 576
Prepaid expense........................................ 6,702
-----------
64,473,246
LIABILITIES
Payable for:
Securities purchased................................... $1,048,332
Fund shares redeemed................................... 91,492
Withholding taxes...................................... 245
Accrued expenses:
Management fees........................................ 43,143
Other expenses......................................... 42,337
----------
1,225,549
-----------
NET ASSETS.............................................. $63,247,697
===========
Net Assets consist of:
Capital paid in........................................ $55,733,438
Undistributed net investment income.................... 334,013
Accumulated net realized gains......................... 46,879
Unrealized appreciation on investments and foreign
currency.............................................. 7,133,367
-----------
NET ASSETS.............................................. $63,247,697
===========
Computation of offering price:
Net asset value and redemption price per share
($63,247,697 divided by 4,483,306 shares of beneficial
interest).............................................. $ 14.11
===========
Identified cost of investments.......................... $56,793,746
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 435,707(a)
Interest.............................................. 115,426
----------
551,133
EXPENSES
Management fees....................................... $184,191
Trustees' fees and expenses........................... 6,572
Custodian............................................. 46,187
Audit and tax services................................ 9,900
Legal................................................. 5,411
Printing.............................................. 8,983
Amortization of organization expenses................. 1,003
Miscellaneous......................................... 5,023
--------
Total expenses....................................... 267,270
Less expenses assumed by the investment adviser...... (46,239) 221,031
-------- ----------
NET INVESTMENT INCOME.................................. 330,102
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized loss on Investments--net..................... (36,497)
Unrealized appreciation on Investments--net........... 3,190,561
----------
Net gain on investment transactions.................... 3,154,064
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $3,484,166
==========
(a) Net of foreign taxes of: $3,936.
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 246,049 $ 330,102
Net realized gain (loss) on investments............. 600,646 (36,497)
Unrealized appreciation on investments and foreign
currency........................................... 3,966,150 3,190,561
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 4,812,845 3,484,166
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (244,485) 0
Net realized gain on investments.................... (517,278) 0
----------- -----------
(761,763) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 31,372,928 31,814,844
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 244,485 0
Distributions from net realized gain................ 517,278 0
----------- -----------
32,134,691 31,814,844
Cost of shares redeemed............................. (4,512,250) (7,096,280)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 27,622,441 24,718,564
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 31,673,523 28,202,730
NET ASSETS
Beginning of the period............................. 3,371,444 35,044,967
----------- -----------
End of the period................................... $35,044,967 $63,247,697
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 3,911
=========== ===========
End of the period................................... $ 3,911 $ 334,013
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 2,627,688 2,325,674
Issued in connection with the reinvestment of:
Distributions from net investment income............ 18,850 0
Distributions from net realized gain................ 39,883 0
----------- -----------
2,686,421 2,325,674
Redeemed............................................ (362,591) (516,790)
----------- -----------
Net change.......................................... 2,323,830 1,808,884
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994 (A) SIX MONTHS
THROUGH ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1994 1995 1996
-------------------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $10.00 $ 9.62 $ 13.10
------ ------- -------
Income From Investment Operations
Net Investment Income............ 0.03 0.10 0.17
Net Realized and Unrealized Gain
(Loss) on Investments........... (0.38) 3.68 0.84
------ ------- -------
Total From Investment Operations. (0.35) 3.78 1.01
------ ------- -------
Less Distributions
Distributions From Net Investment
Income.......................... (0.03) (0.10) 0.00
Distributions From Net Realized
Capital Gains................... 0.00 (0.20) 0.00
------ ------- -------
Total Distributions.............. (0.03) (0.30) 0.00
------ ------- -------
Net Asset Value, End of Period.... $ 9.62 $ 13.10 $ 14.11
====== ======= =======
TOTAL RETURN (%).................. (3.50)(c) 39.28 7.71 (c)
Ratio of Operating Expenses to
Average Net Assets (%)........... 0.90 (b) 0.90 0.90 (b)
Ratio of Net Investment Income to
Average Net Assets (%)........... 2.54 (b) 1.39 1.33 (b)
Portfolio Turnover Rate (%)....... 1 (b) 20 12 (b)
Average Commission Rate (d)....... -- -- $0.0423
Net Assets, End of Period (000)... $3,371 $35,045 $63,248
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
agreement described in Note 4 to
the Financial Statements would
have been (%).................... 3.97 (b) 1.51 1.09 (b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission per share for trades on which
commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
35
<PAGE>
ZENITH WESTPEAK VALUE GROWTH SERIES
PORTFOLIO MANAGERS: GERALD SCRIVER AND PHILIP COOPER;
WESTPEAK INVESTMENT ADVISORS, L.P.
- ----------------- ------------------ MARKET REVIEW
The first six months of 1996 held
[PHOTO OF GERALD [PHOTO OF PHILIP few surprises for us in terms of the
SCRIVER APPEARS COOPER APPEARS overall economic environment and its
HERE] HERE] effects on the Westpeak Value Growth
Series. We anticipated rising interest
rates throughout 1996, as well as a
rise in inflation; thus far, our
expectations have been accurate.
In the shadow of 1995's bull market,
- ----------------- ------------------ both the stock market and the economy
have remained strong. However, we do not expect the current growth rates to
continue through the second half of this year. Therefore, we have positioned the
portfolio for a weaker market environment by placing a stronger emphasis on
value stocks, which tend to outperform growth investments in uncertain market
environments.
For the first half of 1996 the Series' total return was 4.70%. While the
Series underperformed its benchmark, the S&P 500/20/, in the first six
months of the year, its long-term track record remains strong. As of June 30,
1996, a $10,000 investment in the Westpeak Value Growth Series since inception
on April 30, 1993 would have grown to $16,125. This is a hypothetical value
attributable to the Series since inception and does not include variable
annuity and life insurance contract charges and expenses.
We believe the Series' relative underperformance for the first six months of
this year was due, in part, to our own early anticipation of a changing market
environment--one we believe will ultimately favor value stocks over growth
stocks.
The momentum of the stock market this year has been characterized by
strength in highly volatile, smaller companies. Consistent with our strategy,
we've focused the Series' investments on large, highly liquid companies with
low price to earnings (P/E) ratios. Low P/E stocks, such as Exxon, Sears and
General Motors, carry relatively low risk, but have in many cases shown the
potential to achieve consistent growth over time.
While these large capitalization stocks have been relatively ignored during
the last six to eight months, we believe that they are about to come back into
favor, especially if interest rates rise and investors become more concerned
with the effects of this economic change on small cap investments. Recently,
the NASDAQ and Russell 2000/19/ indexes, benchmarks for small company stock
performance, have become more volatile. This trend may indicate that small cap
stocks may underperform in the second half of the year.
With this in mind, over the past two or three months we have been shifting
the Series' focus toward a value-based investment strategy, increasing our
emphasis on defensive, low P/E stocks to help offset the volatility of smaller
company stocks.
Currently, the Series' portfolio is overweighted in the energy sector. This
was beneficial in the first half of the year, as energy stocks responded well
to rising interest rates. We'll maintain this position in anticipation of
continued rising rates.
OUTLOOK AND STRATEGY
As we enter the third quarter of 1996, we believe the outlook for stocks and
bonds is fairly unfriendly. We believe the economy is going to experience
several more quarters of above-potential growth. This will result in the
perception of an increase in inflationary pressures and the distinct
possibility of tightening in Fed interest rate policy. Bonds appear to offer
decent value relative to stocks, but yields are likely to rise further as
investors raise their outlook for economic growth. We expect the Long
Government bond yield to reach 7.50-7.75% during this cycle.
Westpeak's measures of speculation, valuation and monetary environment
indicate the market (as measured by the Russell 1000/18/) is high-risk
territory. An equity bear phase should emerge this summer. A market downturn
will shift relative performance to value stocks and away from growth stocks.
36
<PAGE>
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: Long-term total
return through investment
in equity securities.
Value
Growth S&P START DATE: May 1, 1993
Series 500/20/
4/30/93 $10,000 $10,000 SIZE: $62 million as of
12/31/93 11,424 10,819 June 30, 1996
12/31/94 11,286 10,966
12/31/95 15,402 15,072 MANAGERS: Gerald Scriver
06/30/96 16,125 16,592 and Philip Cooper. Mr.
Scriver and Mr. Cooper
Average Annual Return have managed the Series
since its inception in
Value Lipper Variable Growth 1993; they also have
Growth and Income Fund Average/12/ managed Westpeak Stock
6 mos.* 4.70% 9.48% Index Series since August,
1 year 18.57% 23.55% 1993 and New England
Since Growth Opportunities Fund
inception 16.28% n/a since May 1, 1995. Mr.
*not annualized Scriver joined Westpeak in
July, 1991 and Mr. Cooper
joined Westpeak in
December, 1991.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
37
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--97.0% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
AEROSPACE--1.4%
6,200 Lockheed Martin Corp...................................... $ 520,800
2,800 United Technologies Corp.................................. 322,000
-----------
842,800
-----------
AGRICULTURE & FOOD--3.3%
18,100 CPC International, Inc.................................... 1,303,200
27,800 IBP, Inc.................................................. 767,975
-----------
2,071,175
-----------
AIRLINES--0.8%
3,700 AMR Corp.(c).............................................. 336,700
2,800 UAL, Inc.(c).............................................. 150,500
-----------
487,200
-----------
ALUMINUM--0.4%
4,100 Aluminum Company of America............................... 235,237
-----------
APPAREL--1.6%
9,600 Nike, Inc................................................. 986,400
-----------
BANKS--4.3%
13,800 Banponce Corp. New........................................ 621,000
7,000 Citicorp.................................................. 578,375
17,900 NationsBank Corp.......................................... 1,478,988
-----------
2,678,363
-----------
BEVERAGE--1.2%
15,200 Coca Cola Co.............................................. 742,900
-----------
BUSINESS MACHINES--4.3%
2,900 Cabletron Systems, Inc.(c)................................ 199,013
5,500 Gateway 2000, Inc.(c)..................................... 187,000
10,200 Hewlett Packard Co........................................ 1,016,175
12,200 Seagate Technology(c)..................................... 549,000
1,400 Sun Microsystems, Inc.(c)................................. 82,425
24,800 Western Digital Corp.(c).................................. 647,900
-----------
2,681,513
-----------
CHEMICAL--1.2%
4,500 Albemarle Corp............................................ 82,125
10,800 Cabot Corp................................................ 264,600
32,000 Terra Industries, Inc..................................... 396,000
-----------
742,725
-----------
COMPUTER SOFTWARE & SERVICES--2.3%
26,600 Comdisco, Inc............................................. 708,225
3,600 Compuware Corp.(c)........................................ 142,200
8,000 Sterling Software, Inc.(c)................................ 616,000
-----------
1,466,425
-----------
COSMETICS--3.6%
40,600 Johnson & Johnson......................................... 2,009,700
2,700 Procter & Gamble Co....................................... 244,688
-----------
2,254,388
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE(A)
<C> <S> <C>
DRUGS--4.6%
6,200 Amgen, Inc.(c)............................................ $ 334,800
5,900 Bristol Myers & Squibb Co................................. 531,000
10,100 Eli Lilly and Co.......................................... 656,500
7,500 Merck & Company, Inc...................................... 484,687
3,900 Rhone Poulenc Rorer, Inc.................................. 261,788
9,400 Schering Plough Corp...................................... 589,850
-----------
2,858,625
-----------
ELECTRIC UTILITIES--3.1%
15,200 Consolidated Edison Co. of New York....................... 444,600
29,000 Pinnacle West Capital Corp................................ 880,875
21,500 Unicom Corp............................................... 599,313
-----------
1,924,788
-----------
ELECTRONICS--5.1%
5,200 Kemet Corp.(c)............................................ 104,000
26,500 KLA Instruments Corp.(c).................................. 616,125
18,900 Komag, Inc.(c)............................................ 498,487
19,900 Novellus Systems, Inc.(c)................................. 716,400
17,800 Raytheon Co............................................... 918,925
5,100 Tellabs, Inc.(c).......................................... 341,063
-----------
3,195,000
-----------
ENTERTAINMENT--0.2%
3,800 Grand Casinos, Inc.(c).................................... 97,850
-----------
FINANCIAL SERVICES--2.3%
19,110 Bear Stearns Companies, Inc............................... 451,474
41,200 Lehman Brothers Holdings, Inc............................. 1,019,700
-----------
1,471,174
-----------
GAS UTILITIES--2.3%
4,800 Nicor, Inc................................................ 136,200
19,900 Oneok..................................................... 497,500
16,200 Williams Companies, Inc................................... 801,900
-----------
1,435,600
-----------
HEALTHCARE--2.0%
19,700 Abbott Labs............................................... 856,950
5,600 Millipore Corp............................................ 234,500
2,000 Pacificare Health Systems, Inc.(c)........................ 135,500
-----------
1,226,950
-----------
HOTEL & RESTAURANT--0.2%
3,000 McDonalds Corp............................................ 140,250
-----------
INSURANCE--OTHER--2.9%
14,400 Bankers Life Holdings Corp................................ 318,600
14,600 Loews Corp................................................ 1,151,575
16,350 Old Republic International Corp........................... 351,525
-----------
1,821,700
-----------
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
INTERNATIONAL OIL--6.7%
3,600 Chevron Corp.............................................. $ 212,400
27,500 Exxon Corp................................................ 2,389,063
14,200 Mobil Corp................................................ 1,592,175
-----------
4,193,638
-----------
MEDIA--0.1%
1,000 King World Productions(c)................................. 36,375
-----------
METALS--1.4%
11,100 Asarco, Inc............................................... 306,637
8,700 Phelps Dodge Corp......................................... 542,663
-----------
849,300
-----------
MISCELLANEOUS--0.2%
2,700 American Water Works, Inc................................. 108,674
-----------
MORTGAGE--0.5%
500 Federal Home Loan Mortgage Corp........................... 42,750
8,400 Green Tree Financial Corp................................. 262,500
-----------
305,250
-----------
MOTOR VEHICLES--5.1%
22,600 Chrysler Corp............................................. 1,401,200
30,400 General Motors Corp....................................... 1,592,200
3,500 Paccar, Inc............................................... 171,500
-----------
3,164,900
-----------
OIL REFINEMENT/DISTRIBUTION--1.2%
4,700 Royal Dutch Petroleum Co.................................. 722,625
2,000 Ultramar Corp............................................. 58,000
-----------
780,625
-----------
OIL SERVICE--2.3%
12,300 Ensco International, Inc.(c).............................. 399,750
2,800 Halliburton Co............................................ 155,400
15,000 IPL Energy, Inc........................................... 378,750
10,400 Sonat Offshore Drilling, Inc.............................. 525,200
-----------
1,459,100
-----------
OIL RESERVES--3.4%
23,000 Amoco Corp................................................ 1,664,625
200 NGC Corp.................................................. 3,000
12,000 Phillips Petroleum Company................................ 502,500
-----------
2,170,125
-----------
PAPER--0.6%
8,900 Champion International Corp............................... 371,575
-----------
PHOTOGRAPHY--0.8%
6,100 Eastman Kodak............................................. 474,274
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PRODUCER OF GOODS--6.9%
8,000 Applied Materials, Inc.(c)................................ $ 244,000
5,300 Case Corp................................................. 254,400
12,200 Caterpillar Tractor Co.................................... 826,550
22,900 Dover Corp................................................ 1,056,263
13,600 Harsco Corp............................................... 914,600
8,000 Illinois Tool Works, Inc.................................. 541,000
8,600 Lam Research Corp.(c)..................................... 223,600
4,800 Varian Associates, Inc.................................... 248,400
-----------
4,308,813
-----------
PUBLISHING--0.3%
3,700 Reynolds & Reynolds....................................... 197,024
-----------
RETAIL--6.3%
16,200 Eckerd Jack Corp. Del(c).................................. 366,525
10,300 Gap, Inc.................................................. 330,888
4,100 Kroger Co.(c)............................................. 161,950
18,600 May Department Stores Co.................................. 813,750
1,800 Mercantile Stores Co., Inc................................ 105,525
28,400 Sears Roebuck and Co...................................... 1,380,950
3,400 Tiffany & Co. New......................................... 248,200
9,000 TJX Companies, Inc........................................ 303,750
8,000 Waban, Inc.(c)............................................ 191,000
-----------
3,902,538
-----------
SERVICES--2.9%
11,500 Gtech Holdings Corp.(c)................................... 340,688
2,800 Omnicom Group............................................. 130,200
22,800 PHH Corp.................................................. 1,299,600
1,000 Primark Corp.(c).......................................... 32,625
-----------
1,803,113
-----------
SOAPS--2.1%
13,800 Clorox Co................................................. 1,223,025
2,500 First Brands Corp......................................... 67,500
-----------
1,290,525
-----------
TELEPHONE--7.5%
27,100 Ameritech Corp............................................ 1,609,063
23,800 Bell Atlantic Corp........................................ 1,517,250
21,700 Bell South Corp........................................... 919,537
5,100 SBC Communications, Inc................................... 251,175
9,600 Sprint Corp............................................... 403,200
-----------
4,700,225
-----------
THRIFT--0.4%
7,200 Standard Federal Bancorporation........................... 277,200
-----------
TIRES AND RUBBER GOODS--1.2%
14,900 Goodyear Tire & Rubber Company............................ 718,924
-----------
Total Common Stocks
(Identified Cost $54,977,247)............................ 60,473,261
-----------
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
SHORT-TERM INVESTMENT--2.8%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$1,717,000 Repurchase agreement with State Street Bank & Trust
Company dated 6/28/96 at 4.75% to be repurchased at
$1,717,680 on 7/1/96. Collaterized by $1,800,000
U.S Treasury Bills due 12/19/96 with a value of
$1,754,672......................................... $ 1,717,000
-----------
Total Short-Term Investment
(Identified cost $1,717,000)....................... 1,717,000
-----------
Total Investments--99.8%
(Identified cost $56,694,247)(b)................... 62,190,261
Other assets less liabilities....................... 141,160
-----------
TOTAL NET ASSETS--100%.............................. $62,331,421
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30,1996 the net unrealized appreciation on investments based on cost
of $56,694,247 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 7,278,606
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (1,782,592)
-----------
Net unrealized appreciation......................... $ 5,496,014
===========
(c) Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value...................................... $62,190,261
Cash...................................................... 953
Receivable for:
Securities sold........................................... 33,600
Fund shares sold.......................................... 117,149
Dividends and interest.................................... 77,556
-----------
62,419,519
LIABILITIES
Payable for:
Fund shares redeemed...................................... $ 4,952
Foreign withholding taxes................................. 497
Miscellaneous............................................. 471
Accrued expenses:
Management fees........................................... 44,869
Deferred trustees' fees................................... 655
Other expenses............................................ 36,654
-------
88,098
-----------
NET ASSETS................................................. $62,331,421
===========
Net Assets consist of:
Capital paid in........................................... $51,849,730
Undistributed net investment income....................... 394,186
Accumulated net realized gains............................ 4,591,491
Unrealized appreciation on
investments.............................................. 5,496,014
-----------
NET ASSETS................................................. $62,331,421
===========
Computation of offering price:
Net asset value and redemption price per share ($62,331,421
divided by 421,289 shares of beneficial interest)......... $ 147.95
===========
Identified cost of investments............................. $56,694,247
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................ $ 554,012(a)
Interest............................................. 62,260
-----------
616,272
EXPENSES
Management fees...................................... $194,314
Trustees' fees and expenses.......................... 6,668
Custodian............................................ 27,207
Audit and tax services............................... 5,700
Legal................................................ 5,163
Printing............................................. 16,324
Miscellaneous........................................ 3,194
--------
Total expenses...................................... 258,570
Less expenses assumed by the investment adviser..... (22,619) 235,951
-------- -----------
NET INVESTMENT INCOME................................. 380,321
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net.................... 4,109,596
Unrealized depreciation on investments--net.......... (2,154,870)
-----------
Net gain on investment transactions................... 1,954,726
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............ $ 2,335,047
===========
(a) Net of foreign taxes of $3,607.
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 563,717 $ 380,321
Net realized gain on investments.............. 2,941,365 4,109,596
Unrealized appreciation (depreciation) on
investments.................................. 6,907,865 (2,154,870)
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS........ 10,412,947 2,335,047
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... (549,852) 0
Paid in capital............................... (1,825,459) 0
----------- -----------
(2,375,311) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................. 22,945,280 17,241,926
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income...... 549,852 0
Distributions from net realized gain.......... 1,825,459 0
----------- -----------
25,320,591 17,241,926
Cost of shares redeemed....................... (8,163,352) (5,374,589)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................... 17,157,239 11,867,337
----------- -----------
TOTAL INCREASE IN NET ASSETS.................. 25,194,875 14,202,384
NET ASSETS
Beginning of the period....................... 22,934,162 48,129,037
----------- -----------
End of the period............................. $48,129,037 $62,331,421
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period....................... $ 0 $ 13,865
=========== ===========
End of the period............................. $ 13,865 $ 394,186
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 175,593 117,244
Issued in connection with the reinvestment of:
Distributions from net investment income...... 3,932 0
Distributions from net realized gain.......... 13,054 0
----------- -----------
192,579 117,244
Redeemed...................................... (62,314) (36,558)
----------- -----------
Net change.................................... 130,265 80,686
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, 1993(A) SIX MONTHS
THROUGH ENDED
DECEMBER 31, YEAR ENDED YEAR ENDED JUNE 30,
1993 1994 1995 1996
----------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $100.00 $112.32 $109.03 $141.31
------- ------- ------- -------
Income From Investment
Operations
Net Investment Income..... 0.92 1.90 1.77 0.90
Net Realized and
Unrealized Gain (Loss) on
Investments.............. 13.33 (3.25) 37.91 5.74
------- ------- ------- -------
Total From Investment
Operations............... 14.25 (1.35) 39.68 6.64
------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income........ (0.92) (1.92) (1.71) 0.00
Distributions From Net
Realized Capital Gains... (1.00) 0.00 (5.69) 0.00
Distributions in Excess of
Net Realized Capital
Gains.................... (0.01) 0.00 0.00 0.00
Distributions From Paid-in
Capital.................. 0.00 (0.02) 0.00 0.00
------- ------- ------- -------
Total Distributions....... (1.93) (1.94) (7.40) 0.00
------- ------- ------- -------
Net Asset Value, End of
Period.................... $112.32 $109.03 $141.31 $147.95
======= ======= ======= =======
TOTAL RETURN (%)........... 14.24(c) (1.21) 36.46 4.70(c)
Ratio of Operating Expenses
to Average Net Assets (%). 0.85(b) 0.85 0.85 0.85(b)
Ratio of Net Investment
Income to Average Net
Assets (%)................ 2.16(b) 2.30 1.63 1.37(b)
Portfolio Turnover Rate
(%)....................... 49(b) 133 92 116(b)
Average Commission Rate
(d)....................... -- -- -- $0.0373
Net Assets, End of Period
(000)..................... $ 9,082 $22,934 $48,129 $62,331
The ratios of expenses to
average net assets without
giving effect to the
voluntary expense
agreement described in
Note 4 to the Financial
Statements would have been
(%)....................... 0.94(b) 0.86 1.06 0.93(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
42
<PAGE>
ZENITH WESTPEAK STOCK INDEX SERIES
PORTFOLIO MANAGERS: GERALD H. SCRIVER AND PHILIP J. COOPER;
WESTPEAK INVESTMENT ADVISORS, L.P.
- ---------------- ------------------ -----------------------------------------
MARKET REVIEW
-----------------------------------------
The Westpeak Stock Index Series
[PHOTO OF GERALD [PHOTO OF PHILIP returned 9.9%, compared to 10.2%
H. SCRIVER J. COOPER APPEARS posted by the S&P 500 Index/20/ for
APPEARS HERE] HERE] the six months ended June 30, 1996.
The Series is managed so as to track
the performance of the S&P 500
Index/20/. Westpeak's approach is to
seek and emulate the S&P 500
Index/20/ by owning a majority of
- ---------------- ------------------ the stocks in the Index in the same
proportion as the Index. This process seeks to minimize the tracking error (the
difference between the performance of the Series and the Index). For example,
during the second quarter the Series returned 4.42% while the S&P 500 Index
returned 4.52%.
- --------------------------------------------------------------------------------
OUTLOOK AND STRATEGY
- --------------------------------------------------------------------------------
As we enter the third quarter of 1996, we believe the outlook for stocks and
bonds is fairly unfriendly. We believe the economy is going to experience
several more quarters of above-potential growth. This will result in the
perception of an increase in inflationary pressures and the distinct
possibility of tightening in Fed interest rate policy. Bonds appear to offer
decent value relative to stocks, but yields are likely to rise further as
investors raise their outlook for economic growth. We expect the Long
Government bond yield to reach 7.50-7.75% during this cycle.
Westpeak's measures of speculation, valuation and monetary environment
indicate the market (as measured by the Russell 1000/18/) is high-risk
territory. An equity bear phase should emerge this summer. A market downturn
will shift relative performance to value stocks and away from growth stocks.
A $10,000 Investment Compared to an Index FUND FACTS
GOAL: Investment results that
[GRAPH APPEARS HERE] correspond to the composite
price and yield performance of
United States publicly traded
Stock common stocks.
Index S&P
Series 500/20/ START DATE: May 1, 1987
4/30/87 $10,000 $10,000
12/31/87 8,780 8,770 SIZE: $68 million as of June
12/31/88 10,215 10,216 30, 1996
12/31/89 13,294 13,444
12/31/90 12,743 13,025 MANAGERS: Gerald Scriver and
12/31/91 16,614 16,976 Philip Cooper. Mr. Scriver and
12/31/92 17,826 18,268 Mr. Cooper have managed the
12/31/93 19,560 20,101 Series since 1993; they have
12/31/94 19,783 20,374 also managed Westpeak Value
12/31/95 27,079 28,003 Growth Series since August,
06/30/96 29,752 30,825 1993 and New England Growth
Opportunities Fund since May 1,
1995. Mr. Scriver joined
Westpeak in July, 1991 and Mr.
Cooper joined Westpeak in
December, 1991.
Average Annual Return
Stock Index Lipper Variable S&P 500
Series Fund Index Average/18/
6 mos.* 9.87% 9.95%
1 year 25.30% 25.45%
5 years 15.31% 15.19%
Since
inception 12.63% n/a
*not annualized
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
43
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--98.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.9%
4,100 Allied Signal, Inc. ...................................... $ 234,213
4,500 Boeing Co. ............................................... 392,062
900 General Dynamics Corp. ................................... 55,800
2,815 Lockheed Martin Corp. .................................... 236,460
3,000 McDonnell Douglas Corp. .................................. 145,500
400 Northrop Grumman Corp. ................................... 27,250
900 Teledyne, Inc. ........................................... 32,513
1,600 United Technologies Corp. ................................ 184,000
-----------
1,307,798
-----------
AGRICULTURE AND FOOD--2.8%
6,596 Archer-Daniels-Midland Co. ............................... 126,149
3,300 Campbell Soup Company..................................... 232,650
3,050 Conagra, Inc. ............................................ 138,394
2,100 CPC International, Inc. .................................. 151,200
2,200 General Mills, Inc. ...................................... 119,900
4,800 H.J. Heinz Co. ........................................... 145,800
1,200 Hershey Foods Corp. ...................................... 88,050
2,900 Kellogg Co. .............................................. 212,425
800 Pioneer Hi Bred International, Inc. ...................... 42,300
1,600 Quaker Oats Co. .......................................... 54,600
6,000 Sara Lee Corp. ........................................... 194,250
2,200 Unilever N.V. ............................................ 319,275
1,800 William Wrigley Jr. Co. .................................. 90,900
-----------
1,915,893
-----------
AIR TRANSPORT--0.4%
900 AMR Corp.(c).............................................. 81,900
900 Delta Airlines, Inc. ..................................... 74,700
700 Federal Express Corp.(c).................................. 57,400
1,600 Southwest Airlines Co. ................................... 46,600
900 US Air Group, Inc.(c)..................................... 16,200
-----------
276,800
-----------
ALUMINUM--0.3%
2,400 Alcan Aluminum, Ltd. ..................................... 73,200
2,000 Aluminum Company of America............................... 114,750
900 Reynolds Metals Co. ...................................... 46,912
-----------
234,862
-----------
APPAREL--0.6%
100 Brown Group, Inc. ........................................ 1,738
1,000 Fruit of the Loom, Inc. .................................. 25,500
600 Liz Claiborne, Inc. ...................................... 20,775
2,400 Nike, Inc. ............................................... 246,600
1,200 Reebok International Ltd. ................................ 40,350
300 Russell Corp. ............................................ 8,288
100 Springs Industries, Inc................................... 5,050
400 Stride Rite Corp.......................................... 3,300
1,000 VF Corp................................................... 59,625
-----------
411,226
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BANKS--6.7%
5,475 Banc One Corp. ........................................... $ 186,150
1,800 Bank of Boston Corp. ..................................... 89,100
2,200 Bank of New York, Inc. ................................... 112,750
4,928 BankAmerica Corp. ........................................ 373,296
900 Bankers Trust New York Corp. ............................. 66,487
1,100 Barnett Banks of Florida, Inc. ........................... 67,100
2,000 Boatmens Bancshares, Inc. ................................ 80,250
5,570 Chase Manhattan Corp. .................................... 393,381
6,700 Citicorp(c)............................................... 553,587
1,500 Comerica, Inc. ........................................... 66,938
2,800 Core States Financial Corp. .............................. 107,800
1,300 Fifth Third Bancorp. ..................................... 70,200
2,200 First Bank Systems, Inc. ................................. 127,600
4,510 First Chicago Corp. ...................................... 176,454
3,450 First U.N. Corp. ......................................... 210,019
3,662 Fleet Financial Group, Inc. .............................. 159,297
2,400 J.P. Morgan & Co., Inc. .................................. 203,100
3,100 Keycorp................................................... 120,125
1,750 Mellon Bank Corp. ........................................ 99,750
2,700 National City Corp. ...................................... 94,838
3,816 Nationsbank Corp. ........................................ 315,297
4,600 Norwest Corp. ............................................ 160,425
4,400 PNC Bank Corp. ........................................... 130,900
700 Republic New York Corp. .................................. 43,575
2,200 Suntrust Banks, Inc. ..................................... 81,400
1,900 U.S. Bancorp. ............................................ 68,638
1,900 Wachovia Corp. ........................................... 83,125
1,333 Wells Fargo & Co. ........................................ 318,420
-----------
4,560,002
-----------
BEVERAGES--3.5%
33,200 Coca Cola Co. ............................................ 1,622,650
20,200 PepsiCo, Inc. ............................................ 714,575
1,300 Whitman Corp. ............................................ 31,363
-----------
2,368,588
-----------
BUSINESS MACHINES--4.4%
2,100 3Com Corp. ............................................... 96,075
1,400 Amdahl Corporation(c)..................................... 15,050
1,900 Apple Computer, Inc. ..................................... 39,900
2,500 Bay Networks, Inc. ....................................... 64,375
1,000 Cabletron Systems, Inc.(c)................................ 68,625
7,200 Cisco Systems, Inc. ...................................... 407,700
3,300 Compaq Computer Corp.(c).................................. 162,525
300 Data General Corp.(c)..................................... 3,900
1,800 Digital Equipment Corp.(c)................................ 81,000
3,000 EMC Corp. ................................................ 55,875
6,800 Hewlett-Packard Co. ...................................... 677,450
7,300 International Business Machines Corp. .................... 722,700
1,700 Pitney Bowes, Inc. ....................................... 81,175
2,200 Silicon Graphics, Inc.(c)................................. 52,800
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BUSINESS MACHINES--(CONTINUED)
2,800 Sun Microsystems, Inc.(c)................................. $ 164,850
1,800 Tandem Computers, Inc.(c)................................. 22,275
2,200 Unisystems, Corp.(c)...................................... 15,675
4,500 Xerox Corp. .............................................. 240,750
-----------
2,972,700
-----------
CHEMICALS--3.3%
1,500 Air Products and Chemicals, Inc. ......................... 86,625
800 Ashland, Inc. ............................................ 31,700
900 Avery Dennison Corp. ..................................... 49,388
600 B.F. Goodrich Co. ........................................ 22,425
3,050 Dow Chemical Co. ......................................... 231,800
1,300 Eastman Chemical Co. ..................................... 79,138
7,900 E.I. Du Pont de Nemours & Co. ............................ 625,087
300 FMC Corp.(c).............................................. 19,575
800 Great Lakes Chemical Corp. ............................... 49,800
1,400 Hercules, Inc. ........................................... 77,350
8,700 Monsanto Company.......................................... 282,750
2,100 Morton International, Inc. ............................... 78,225
1,000 Nalco Chemical Co. ....................................... 31,500
3,300 Occidental Petroleum Corp. ............................... 81,675
2,800 PPG Industries, Inc. ..................................... 136,500
2,000 Praxair, Inc. ............................................ 84,500
1,000 Rohm & Haas Co. .......................................... 62,750
1,000 Sigma-Aldrich Corp. ...................................... 53,500
1,700 Union Carbide Corp. ...................................... 67,575
1,200 W.R. Grace & Co. ......................................... 85,050
-----------
2,236,913
-----------
CONSTRUCTION--0.2%
800 Armstrong World Industries, Inc. ......................... 46,100
700 Centex Corp. ............................................. 21,788
900 Fluor Corp. .............................................. 58,838
700 Sherwin Williams Co. ..................................... 32,550
100 Skyline Corp. ............................................ 2,500
-----------
161,776
-----------
CONSUMER DURABLES--0.4%
1,000 Black & Decker Corp. ..................................... 38,625
2,000 Masco Corp. .............................................. 60,500
800 Maytag Corp. ............................................. 16,700
2,800 Tenneco, Inc. ............................................ 143,150
1,000 Whirlpool Corp. .......................................... 49,625
-----------
308,600
-----------
CONTAINERS--0.2%
200 Ball Corp. ............................................... 5,750
400 Bemis, Inc. .............................................. 14,000
1,800 Crown Cork & Seal, Inc.(c) ............................... 81,000
900 Temple Inland, Inc. ...................................... 42,075
-----------
142,825
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
COSMETICS--2.6%
200 Alberto Culver Co. ........................................ $ 9,275
1,600 Avon Products, Inc. ....................................... 72,200
17,400 Johnson & Johnson ......................................... 861,300
9,060 Procter & Gamble Co. ...................................... 821,062
----------
1,763,837
----------
DOMESTIC OIL RESERVES--0.8%
2,000 Atlantic Richfield Co. .................................... 237,000
1,600 Burlington Resources, Inc. ................................ 68,800
400 Louisiana Land & Exploration............................... 23,050
800 Pennzoil Company........................................... 37,000
3,900 Phillips Petroleum Company................................. 163,312
1,711 Santa Fe Energy Research, Inc.(c).......................... 20,318
----------
549,480
----------
DRUGS & MEDICINE--6.1%
700 Allergan, Inc. ............................................ 27,475
1,600 Alza Corp.(c) ............................................. 43,800
8,400 American Home Products Corp. .............................. 505,050
3,800 Amgen, Inc.(c) ............................................ 205,200
6,640 Bristol Myers & Squibb Co. ................................ 597,600
7,200 Eli Lilly & Co. ........................................... 468,000
600 Mallinckrodt Group, Inc. .................................. 23,325
16,200 Merck & Co., Inc. ......................................... 1,046,925
8,500 Pfizer, Inc. .............................................. 606,687
6,680 Pharmacia & Upjohn, Inc. .................................. 296,425
4,600 Schering-Plough Corp. ..................................... 288,650
----------
4,109,137
----------
ELECTRIC UTILITIES--3.2%
2,500 American Electric Power Co., Inc. ......................... 106,562
2,100 Baltimore Gas & Electric Co. .............................. 59,588
2,200 Carolina Power & Light Co. ................................ 83,600
2,500 Central & South West Corp. ................................ 72,500
2,111 Cinergy Corp. ............................................. 67,552
3,100 Consolidated Edison Co. of New York ....................... 90,675
2,050 Dominion Resources, Inc. .................................. 82,000
2,100 DTE Energy Co. ............................................ 64,838
2,800 Duke Power Co. ............................................ 143,500
5,700 Edison International ...................................... 100,462
3,200 Entergy Corp. ............................................. 90,800
2,300 FPL Group, Inc. ........................................... 105,800
1,500 General Public Utilities Corp. ............................ 52,875
4,000 Houston Industries, Inc. .................................. 98,500
2,000 Niagara Mohawk Power Corp. ................................ 15,500
500 Northern States Power Co. ................................. 24,688
2,100 Ohio Edison Co. ........................................... 45,938
5,600 Pacific Gas & Electric Corp. .............................. 130,200
4,000 Pacificorp ................................................ 89,000
2,900 PECO Energy Co. ........................................... 75,400
2,000 P.P. & L Res, Inc. ........................................ 47,250
3,200 Public Service Enterprise Group ........................... 87,600
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ELECTRIC UTILITIES--(CONTINUED)
8,800 Southern Co. ............................................. $ 216,700
2,500 Texas Utilities Company .................................. 106,875
2,700 Unicom Corp. ............................................. 75,263
1,300 Union Electric Co. ....................................... 52,325
-----------
2,185,991
-----------
ELECTRONICS--3.9%
1,700 Advanced Micro Devices, Inc.(c) .......................... 23,163
3,056 AMP, Inc. ................................................ 122,622
1,087 Andrew Corp.(c) .......................................... 58,426
1,300 Cooper Industries, Inc. .................................. 53,950
1,800 DSC Communications Corp.(c) .............................. 54,225
300 Harris Corp. ............................................. 18,300
1,400 Honeywell, Inc. .......................................... 76,300
11,200 Intel Corp. .............................................. 822,500
2,000 LSI Logic Corp.(c) ....................................... 52,000
3,400 Micron Technology, Inc. .................................. 87,975
7,800 Motorola, Inc. ........................................... 490,425
1,800 National Semiconductor Corp.(c) .......................... 27,900
3,100 Northern Telecom, Ltd. ................................... 168,562
300 Raychem Corp. ............................................ 21,563
2,600 Raytheon Co. ............................................. 134,225
3,500 Rockwell International Corp. ............................. 200,375
1,100 Scientific Atlanta, Inc. ................................. 17,050
200 Tektronix, Inc. .......................................... 8,950
1,100 Tellabs, Inc.(c) ......................................... 73,563
2,500 Texas Instruments, Inc. .................................. 124,687
200 Thomas & Betts Corp. ..................................... 7,500
-----------
2,644,261
-----------
FINANCE--1.8%
6,400 American Express Co. ..................................... 285,600
400 Beneficial Corp. ......................................... 22,450
2,402 Dean Witter, Discover & Co. .............................. 137,514
1,200 Household International, Inc. ............................ 91,200
2,325 MBNA Corp. ............................................... 66,263
2,300 Merrill Lynch & Co., Inc. ................................ 149,787
2,000 Morgan Stanley Group, Inc. ............................... 98,250
1,200 Salomon, Inc. ............................................ 52,800
6,576 Travelers Group, Inc. .................................... 300,030
-----------
1,203,894
-----------
FOREIGN OIL RESERVES--0.1%
900 Kerr McGee Corp. ......................................... 54,788
-----------
FOREST PRODUCTS--0.0%
1,300 Louisiana Pacific Corp. .................................. 28,763
-----------
GAS UTILITIES--0.8%
900 Columbia Gas System, Inc.(c).............................. 46,913
1,100 Consolidated Natural Gas Co. ............................. 57,475
700 Eastern Enterprises....................................... 23,275
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
3,200 Enron Corp. .............................................. $ 130,800
700 Ensearch Corporation...................................... 15,225
400 Nicor, Inc. .............................................. 11,350
1,300 Noram Energy Corp. ....................................... 14,138
200 Oneok, Inc. .............................................. 5,000
1,100 Pacific Enterprises, Ltd. ................................ 32,588
1,829 PanEnergy Corp. .......................................... 60,128
300 Peoples Energy Corp. ..................................... 10,050
1,000 Sonat, Inc. .............................................. 45,000
1,600 Williams Companies, Inc. ................................. 79,200
-----------
531,142
-----------
HEALTH CARE--3.2%
11,000 Abbott Laboratories, Inc. ................................ 478,500
400 Bausch & Lomb, Inc. ...................................... 17,000
3,400 Baxter International, Inc. ............................... 160,650
600 Becton Dickinson & Co. ................................... 48,150
1,300 Beverly Enterprises, Inc.(c).............................. 15,600
1,300 Biomet, Inc.(c)........................................... 18,688
2,600 Boston Scientific Corp.(c)................................ 117,000
5,791 Columbia Healthcare Corp. ................................ 309,095
1,300 Community Psychiatric Centers(c).......................... 12,350
3,300 Corning, Inc. ............................................ 126,637
400 C.R. Bard, Inc. .......................................... 13,600
2,100 Humana, Inc.(c)........................................... 37,537
400 Manor Care, Inc. ......................................... 15,750
3,600 Medtronics, Inc. ......................................... 201,600
400 Millipore Corp. .......................................... 16,750
1,100 St. Jude Medical, Inc.(c)................................. 36,850
3,000 Tenet Healthcare Corp.(c)................................. 64,125
2,600 U.S. Healthcare, Inc. .................................... 143,000
2,300 United Healthcare Corp. .................................. 116,150
700 United States Surgical Corp. ............................. 21,700
3,800 Warner-Lambert Company.................................... 209,000
-----------
2,179,732
-----------
HOTELS AND RESTAURANTS--1.2%
600 Bally Entertainment Group(c).............................. 16,500
2,200 Darden Restaurants, Inc.(c)............................... 23,650
1,750 Harrahs Entertainment, Inc. .............................. 49,437
400 Hilton Hotels Corp. ...................................... 45,000
1,300 ITT Corp. New............................................. 86,125
200 Luby's Cafeterias, Inc. .................................. 4,700
1,700 Marriott Corporation...................................... 91,375
10,100 McDonald's Corp. ......................................... 472,175
400 Ryans Family Steak Houses(c).............................. 3,700
800 Shoney's, Inc.(c)......................................... 8,700
1,400 Wendys International, Inc. ............................... 26,075
-----------
827,437
-----------
INTERNATIONAL OIL--4.2%
8,300 Chevron Corporation....................................... 489,700
16,300 Exxon Corporation......................................... 1,416,062
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
INTERNATIONAL OIL--(CONTINUED)
5,400 Mobil Corporation......................................... $ 605,475
1,200 Oryx Energy Corp.(c)...................................... 19,500
3,700 Texaco, Inc. ............................................. 310,337
-----------
2,841,074
-----------
LEISURE--0.3%
1,200 Brunswick Corp. .......................................... 24,000
1,400 Hasbro, Inc. ............................................. 50,050
3,750 Mattel, Inc. ............................................. 107,344
100 Outboard Marine Corp. .................................... 1,813
-----------
183,207
-----------
LIFE INSURANCE--0.4%
2,600 American General Corp. ................................... 94,575
525 Jefferson Pilot Corp. .................................... 27,103
1,400 Providian Corp. .......................................... 60,025
1,100 Transamerica Corp. ....................................... 89,100
1,050 USLife Corp. ............................................. 34,519
-----------
305,322
-----------
LIQUOR--0.7%
300 Adolph Coors Co. ......................................... 5,363
3,300 Anheuser-Busch Companies, Inc. ........................... 247,500
1,100 Brown Forman Corp. "B".................................... 44,000
5,100 Seagram Company, Ltd. .................................... 171,487
-----------
468,350
-----------
MEDIA--2.0%
2,600 Comcast Corp. ............................................ 48,100
1,600 General Instrument Corp. ................................. 46,200
250 King World Productions(c)................................. 9,094
2,300 Loral Space & Communications.............................. 31,338
8,500 Tele-Communications A(c).................................. 154,062
5,000 Time-Warner, Inc. ........................................ 196,250
1,000 Tribune Co. .............................................. 72,625
4,857 Viacom, Inc.(c)........................................... 188,815
9,998 Walt Disney Co. .......................................... 628,624
-----------
1,375,108
-----------
MISCELLANEOUS MINING--0.2%
800 Asarco, Inc. ............................................. 22,100
1,050 Cyprus Amax Minerals Co. ................................. 23,756
1,400 Inco, Ltd. ............................................... 45,150
1,000 Phelps Dodge Corp. ....................................... 62,375
-----------
153,381
-----------
MORTGAGE--1.1%
2,400 Federal Home Loan Mortgage Corp. ......................... 205,200
14,500 Federal National Mortgage Association..................... 485,750
1,800 Green Tree Acceptance Corp. .............................. 56,250
-----------
747,200
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
MOTOR VEHICLES--2.3%
5,300 Chrysler Corp. ........................................... $ 328,600
1,300 Dana Corp. ............................................... 40,300
400 Echlin, Inc. ............................................. 15,150
800 Fleetwood Enterprises, Inc. .............................. 24,800
16,700 Ford Motor Co. ........................................... 540,662
10,100 General Motors Corp. ..................................... 528,987
100 Nacco Industries, Inc. ................................... 5,538
1,220 Navistar International Corp., Inc.(c)..................... 12,048
345 Paccar, Inc. ............................................. 16,905
500 Varity Corp.(c)........................................... 24,063
-----------
1,537,053
-----------
OIL REFINING--2.8%
1,200 Amerada Hess Corp. ....................................... 64,350
6,400 Amoco Corp. .............................................. 463,200
1,400 Coastal Corp. ............................................ 58,450
7,000 Royal Dutch Petroleum Co. ADR(d).......................... 1,076,250
800 Sun, Inc. ................................................ 24,300
3,000 Unocal Corp. ............................................. 101,250
4,000 USX Marathon Group........................................ 80,500
-----------
1,868,300
-----------
OIL SERVICES--0.7%
2,000 Baker Hughes, Inc......................................... 65,750
1,300 Halliburton Co............................................ 72,150
300 Helmerich & Payne, Inc.................................... 10,987
1,100 Rowan Companies, Inc.(c).................................. 16,225
3,100 Schlumberger, Ltd......................................... 261,175
300 Western Atlas, Inc.(c).................................... 17,475
-----------
443,762
-----------
OTHER INSURANCE--3.0%
1,200 Aetna Life and Casualty Company........................... 85,800
5,686 Allstate Corp............................................. 259,424
6,312 American International Group, Inc......................... 622,521
1,400 Aon Corp.................................................. 71,050
3,000 Chubb Corp................................................ 149,625
1,000 CIGNA Corp................................................ 117,875
1,300 General Reinsurance Corp.................................. 197,925
1,300 ITT Hartford Group, Inc................................... 69,225
1,200 Lincoln National Corp., Inc. ............................. 55,500
1,400 Loews Corp................................................ 110,425
1,000 Safeco Corp............................................... 35,375
600 St. Paul Companies, Inc................................... 32,100
1,450 Torchmark, Inc............................................ 63,438
1,700 UNUM Corp................................................. 105,825
2,100 USF&G Corp. .............................................. 34,388
-----------
2,010,496
-----------
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PAPER--1.4%
1,600 Alco Standard Corp........................................ $ 72,400
633 Boise Cascade Corp........................................ 23,184
1,100 Champion International Corp............................... 45,925
1,200 Georgia Pacific Corp...................................... 85,200
3,910 International Paper Co. .................................. 144,181
900 James River Corp.......................................... 23,737
3,806 Kimberly Clark Corp....................................... 294,013
900 Mead Corp. ............................................... 46,688
200 Potlatch Corp............................................. 7,825
1,100 Stone Container Corp...................................... 15,125
500 Union Camp Corp........................................... 24,375
675 Westvaco Corporation...................................... 20,166
2,500 Weyerhaeuser Co........................................... 106,250
700 Willamette Industries, Inc................................ 41,650
-----------
950,719
-----------
PHOTOGRAPHY--0.6%
4,950 Eastman Kodak Co.......................................... 384,862
800 Polaroid Corp............................................. 36,500
-----------
421,362
-----------
POLLUTION CONTROL--0.5%
2,800 Browning-Ferris Industries, Inc........................... 81,200
3,200 Laidlaw, Inc.............................................. 32,400
700 Safety Kleen Corp......................................... 12,250
6,300 WMX Technologies, Inc. ................................... 206,325
-----------
332,175
-----------
PRECIOUS METALS--0.7%
4,300 Barrick Gold Corp......................................... 116,637
1,800 Echo Bay Mines, Ltd....................................... 19,350
1,425 Engelhard Corp............................................ 32,775
2,700 Freeport McMoran Copper & Gold............................ 86,063
1,800 Homestake Mining Co. ..................................... 30,825
1,124 Newmont Mining Corp....................................... 55,498
3,000 Placer Dome, Inc.......................................... 71,625
2,200 Santa Fe Pacific Gold Corp................................ 31,075
-----------
443,848
-----------
PRODUCER GOODS--6.2%
2,300 Applied Materials, Inc.(c) ............................... 70,150
700 Briggs & Stratton Corp. .................................. 28,788
1,000 Case Equipment Corp. ..................................... 48,000
2,900 Caterpillar Tractor Co. .................................. 196,475
700 Cincinnati Milacron, Inc. ................................ 16,800
200 Crane Co. ................................................ 8,200
700 Cummins Engine, Inc. ..................................... 28,263
4,200 Deere & Co. .............................................. 168,000
2,000 Dover Corporation......................................... 92,250
1,600 Dresser Industries, Inc. ................................. 47,200
1,000 Eaton Corp. .............................................. 58,625
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
3,100 Emerson Electric Co. ..................................... $ 280,162
300 Foster Wheeler Corp. ..................................... 13,463
22,700 General Electric Co. ..................................... 1,963,550
500 General Signal Corp. ..................................... 18,937
1,400 Genuine Parts Company..................................... 64,050
400 Giddings & Lewis, Inc. ................................... 6,500
800 Harnischfeger Industries, Inc. ........................... 26,600
1,300 Illinois Tool Works, Inc. ................................ 87,912
1,200 Ingersoll Rand Co. ....................................... 52,500
1,300 ITT Industries Inc. ...................................... 32,662
300 Johnson Controls, Inc. ................................... 20,850
600 McDermott International, Inc. ............................ 12,525
5,300 Minnesota Mining & Mfg. Co. .............................. 365,700
400 National Services Industries, Inc. ....................... 15,650
800 Owens Corning Fiberglas Co.(c) ........................... 34,400
1,400 Pall Corp. ............................................... 33,775
600 Parker Hannifin Corp. .................................... 25,425
800 Perkin Elmer Corp. ....................................... 38,600
300 Snap-On Tools Corp. ...................................... 14,213
600 Stanley Works............................................. 17,850
1,000 Textron, Inc. ............................................ 79,875
200 Timken Co. ............................................... 7,750
700 Trinova Corp. ............................................ 23,363
1,000 TRW, Inc. ................................................ 89,875
2,000 TYCO International Ltd. .................................. 81,500
900 W.W. Grainger, Inc. ...................................... 69,750
-----------
4,240,188
-----------
PROPERTY--0.0%
300 Kaufman & Broad Home Corp. ............................... 4,350
200 Pulte Corp. .............................................. 5,350
-----------
9,700
-----------
PUBLISHING--1.0%
1,100 American Greetings Corp. ................................. 30,113
2,100 Gannet Co., Inc. ......................................... 148,575
300 John H. Harland Co. ...................................... 7,387
800 Jostens, Inc. ............................................ 15,800
600 Knight-Ridder, Inc. ...................................... 43,500
800 McGraw-Hill Companies, Inc. .............................. 36,600
200 Meredith Corp. ........................................... 8,350
1,200 Moore Corp., Ltd. ........................................ 22,650
1,000 New York Times Co. ....................................... 32,625
1,700 R.R. Donnelley & Sons Co. ................................ 59,288
1,900 Time Mirror Co. .......................................... 82,650
5,600 U.S. West Media Group, Inc.(c)............................ 178,500
-----------
666,038
-----------
RAILROADS--1.0%
2,122 Burlington Northern, Inc. ................................ 171,617
1,300 Conrail, Inc. ............................................ 86,288
2,600 CSX Corporation........................................... 125,450
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RAILROADS--(CONTINUED)
1,500 Norfolk Southern Corp. ................................... $ 127,125
2,300 Union Pacific Corp. ...................................... 160,712
-----------
671,192
-----------
RETAIL--FOOD--0.7%
2,800 Albertson's, Inc. ........................................ 115,850
2,100 American Stores Co. ...................................... 86,625
300 Fleming Companies, Inc. .................................. 4,313
600 Giant Foods, Inc. ........................................ 21,525
800 Great Atlantic & Pacific Tea Company, Inc. ............... 26,300
1,400 Kroger Co.(c)............................................. 55,300
1,300 SuperValu Stores, Inc. ................................... 40,950
2,700 Sysco Corp. .............................................. 92,475
1,200 Winn-Dixie Stores, Inc. .................................. 42,450
-----------
485,788
-----------
RETAIL--OTHER--4.3%
1,400 Charming Shoppes, Inc.(c)................................. 9,887
1,200 Circuit City Stores, Inc. ................................ 43,350
800 Dayton Hudson Corp. ...................................... 82,500
1,700 Dillard Department Stores, Inc. .......................... 62,050
2,600 Federated Department Stores............................... 88,725
600 Harcourt General, Inc. ................................... 30,000
6,349 Home Depot, Inc. ......................................... 342,846
2,500 J.C. Penney Company, Inc. ................................ 131,250
5,900 KMart Corp.(c)............................................ 73,012
200 Longs Drug Stores Corp. .................................. 8,925
2,400 Lowes Companies, Inc. .................................... 86,700
2,700 May Department Stores Co. ................................ 118,125
1,100 Melville Corporation...................................... 44,550
250 Mercantile Stores Co., Inc. .............................. 14,656
1,400 Nordstrom, Inc. .......................................... 62,300
432 Payless Shoesource, Inc. ................................. 13,716
900 Pep Boys: Manny, Moe & Jack............................... 30,600
2,239 Price Costco.(c).......................................... 48,418
900 Rite Aid Corp. ........................................... 26,775
5,300 Sears, Roebuck & Co. ..................................... 257,712
1,200 Tandy Corp. .............................................. 56,850
5,200 The Gap, Inc. ............................................ 167,050
3,593 The Limited, Inc. ........................................ 77,250
1,300 TJX Companies, Inc. ...................................... 43,875
3,475 Toys R Us, Inc.(c)........................................ 99,037
3,200 Walgreen Co. ............................................. 107,200
30,200 Wal-Mart Stores, Inc. .................................... 766,325
1,800 Woolworth Corp.(c)........................................ 40,500
-----------
2,934,184
-----------
SERVICES--4.2%
800 Alexander & Alexander Services............................ 15,800
600 Autodesk, Inc. ........................................... 17,925
4,000 Automatic Data Processing, Inc. .......................... 154,500
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
900 Ceridian Corp.(c)......................................... $ 45,450
3,000 Computer Associates International, Inc. .................. 213,750
700 Computer Sciences Corp.(c)................................ 52,325
2,100 CUC International, Inc.(c)................................ 74,550
1,000 De Luxe Corp. ............................................ 35,500
1,200 Dow Jones & Co., Inc. .................................... 50,100
2,320 Dun & Bradstreet Corp. ................................... 145,000
400 EG & G, Inc. ............................................. 8,550
3,100 First Data Corp. ......................................... 246,837
1,200 H & R Block, Inc. ........................................ 39,150
600 Intergraph Corp.(c)....................................... 7,275
800 Interpublic Group Companies, Inc. ........................ 37,500
1,000 Marsh & McLennan Companies................................ 96,500
7,800 Microsoft Corp.(c)........................................ 936,975
5,000 Novell, Inc.(c)........................................... 69,375
300 Ogden Corp. .............................................. 5,437
8,625 Oracle Systems Corp.(c)................................... 340,148
800 Ryder Systems, Inc. ...................................... 22,500
1,550 Service Corporation International......................... 89,125
200 Shared Medical System..................................... 12,850
5,400 Westinghouse Electric Corp. .............................. 101,250
-----------
2,818,372
-----------
SOAPS--1.5%
400 Clorox Co. ............................................... 35,450
2,200 Colgate Palmolive Co. .................................... 186,450
1,100 Dial Corp. ............................................... 31,487
700 Ecolab, Inc. ............................................. 23,100
5,800 Gillette Co. ............................................. 361,775
1,600 International Flavours & Fragrances, Inc. ................ 76,200
1,900 Newell Co. ............................................... 58,187
800 Premark International, Inc. .............................. 14,800
1,800 Ralston Purina Co. ....................................... 115,425
2,200 Rubbermaid, Inc. ......................................... 59,950
800 Tupperware Corp. ......................................... 33,800
-----------
996,624
-----------
STEEL & IRON--0.2%
1,300 Armco, Inc.(c)............................................ 6,500
1,200 Bethlehem Steel Corp.(c).................................. 14,250
300 Inland Steel Industries, Inc. ............................ 5,887
1,000 Nucor Corp. .............................................. 50,625
1,020 USX US Steel Corp. ....................................... 28,942
1,200 Worthington Industries, Inc. ............................. 25,050
-----------
131,254
-----------
TELEPHONE--7.4%
6,400 Airtouch Communications................................... 180,800
2,400 ALLTEL Corp. ............................................. 73,800
6,900 Ameritech Corp. .......................................... 409,687
21,135 AT & T Corp. ............................................. 1,310,370
5,600 Bell Atlantic Corp. ...................................... 357,000
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
TELEPHONE--(CONTINUED)
13,000 BellSouth Corp. .......................................... $ 550,875
12,500 GTE Corp. ................................................ 559,375
8,900 MCI Communications Corp. ................................. 228,062
5,600 NYNEX Corp. .............................................. 266,000
5,100 Pacific Telesis Group..................................... 172,125
7,900 SBC Communications, Inc. ................................. 389,075
6,700 Sprint Corp. ............................................. 281,400
5,600 U.S. West, Inc.(c)........................................ 102,200
2,500 Worldcom, Inc. ........................................... 138,437
-----------
5,019,206
-----------
THRIFT--0.2%
700 Golden West Financial Corp. .............................. 39,200
1,450 Great Western Financial Corp. ............................ 34,619
1,800 H.F. Ahmanson & Co. ...................................... 48,600
-----------
122,419
-----------
TIRES AND RUBBER GOODS--0.1%
1,100 Cooper Tire & Rubber Co. ................................. 24,475
1,600 Goodyear Tire & Rubber Company............................ 77,200
-----------
101,675
-----------
TOBACCO--2.1%
2,600 American Brands, Inc. .................................... 117,975
11,400 Philip Morris Companies, Inc. ............................ 1,185,600
3,000 UST, Inc. ................................................ 102,750
-----------
1,406,325
-----------
TRUCKING AND FREIGHT--0.0%
300 Caliber Systems, Inc. .................................... 10,200
300 Consolidated Freightways, Inc. ........................... 6,337
300 Yellow Corp.(c)........................................... 3,975
-----------
20,512
-----------
Total Common Stocks
(Identified cost $46,062,484)............................ 66,681,279
-----------
</TABLE>
SHORT-TERM INVESTMENT--2.7%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$1,825,000 Repurchase Agreement with State Street Bank & Trust
Co. dated 6/28/96 at 4.750% to be repurchased at
$1,825,722, on 7/01/96 collateralized by
$1,910,000, U.S. Treasury Bills due 12/12/96, with
a value of $1,861,902.............................. $ 1,825,000
-----------
Total Short Term Investment
(Identified cost $1,825,000)....................... 1,825,000
-----------
Total Investments--100.9%
(Identified cost $47,887,484)(b)................... 68,506,279
Other assets less liabilities....................... (632,593)
-----------
TOTAL NET ASSETS--100%.............................. $67,873,686
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on cost
of $47,887,484 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $21,333,863
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (715,068)
-----------
Net unrealized appreciation......................... $20,618,795
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States or Canada.
50
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $68,506,279
Cash..................................................... 167
Receivable for:
Fund shares sold......................................... 78,010
Dividends and interest................................... 99,418
-----------
68,683,874
LIABILITIES
Payable for:
Securities purchased..................................... $704,877
Fund shares redeemed..................................... 21,225
Miscellaneous............................................ 24,290
Accrued expenses:
Management fees.......................................... 16,187
Deferred trustees' fees.................................. 33,492
Other expenses........................................... 10,117
--------
810,188
-----------
NET ASSETS................................................ $67,873,686
===========
Net Assets consist of:
Capital paid in.......................................... $46,517,888
Undistributed net investment income...................... 611,031
Accumulated net realized gains........................... 125,972
Unrealized appreciation on investments................... 20,618,795
-----------
NET ASSETS................................................ $67,873,686
===========
Computation of offering price:
Net asset value and redemption price per share
($67,873,686 divided by 617,209 shares of beneficial
interest)................................................ $ 109.97
===========
Identified cost of investments............................ $47,887,484
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 688,228(a)
Interest.............................................. 29,368
----------
717,596
EXPENSES
Management fees....................................... $ 79,263
Trustees' fees and expenses........................... 9,245
Custodian............................................. 38,946
Audit and tax services................................ 5,700
Legal................................................. 3,864
Printing.............................................. 18,437
Miscellaneous......................................... 5,540
--------
Total expenses....................................... 160,995
Less expenses assumed by the investment adviser...... (34,175) 126,820
-------- ----------
NET INVESTMENT INCOME.................................. 590,776
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net..................... 158,516
Unrealized appreciation on investments--net........... 5,183,707
----------
Net gain on investment transactions.................... 5,342,223
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $5,932,999
==========
(a) Net of foreign taxes of: $5,057
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 1,070,362 $ 590,776
Net realized gain on investments.................... 775,273 158,516
Unrealized appreciation on investments.............. 13,212,050 5,183,707
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 15,057,685 5,932,999
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (1,050,107) 0
Net realized gain on investments.................... (673,888) 0
----------- -----------
(1,723,995) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 17,851,781 9,418,797
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 1,050,107 0
Distributions from net realized gain................ 673,888 0
----------- -----------
19,575,776 9,418,797
Cost of shares redeemed............................. (11,403,132) (6,148,732)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 8,172,644 3,270,065
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 21,506,334 9,203,064
NET ASSETS
Beginning of the period............................. 37,164,288 58,670,622
----------- -----------
End of the period................................... $58,670,622 $67,873,686
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 20,255
=========== ===========
End of the period................................... $ 20,255 $ 611,031
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 202,803 89,553
Issued in connection with the reinvestment of:
Distributions from net investment income............ 10,562 0
Distributions from net realized gain................ 6,778 0
----------- -----------
220,143 89,553
Redeemed............................................ (127,215) (58,517)
----------- -----------
Net change.......................................... 92,928 31,036
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09
------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income.. 3.56 8.35 1.54 1.80 1.88 0.96
Net Realized and
Unrealized Gain (Loss)
on Investments........ 29.29 2.02 5.18 (0.92) 25.89 8.92
------- ------- ------- ------- ------- -------
Total From Investment
Operations............ 32.85 10.37 6.72 0.88 27.77 9.88
------- ------- ------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... (3.56) (8.35) (1.36) (1.82) (1.85) 0.00
Distributions in Excess
of Net Investment
Income................ 0.00 0.00 (0.18) 0.00 0.00 0.00
Distributions From Net
Realized Capital
Gains................. (0.39) (67.41) (0.55) (0.16) (1.18) 0.00
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 (0.15) 0.00 0.00 0.00
Distributions From
Paid-in Capital....... 0.00 0.00 0.00 (0.03) 0.00 0.00
------- ------- ------- ------- ------- -------
Total Distributions.... (3.95) (75.76) (2.24) (2.01) (3.03) 0.00
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09 $109.97
======= ======= ======= ======= ======= =======
TOTAL RETURN (%)........ 30.37 7.30 9.72 1.14 36.88 9.87(b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.36 0.35 0.34 0.33 0.40 0.40(a)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.86 2.63 2.52 2.59 2.20 1.87(a)
Portfolio Turnover Rate
(%).................... 2 17 12 2 5 2(a)
Average Commission Rate
(c).................... -- -- -- -- -- $0.0353
Net Assets, End of
Period (000)........... $20,496 $10,172 $28,817 $37,164 $58,671 $67,874
The ratios of expenses
to average net assets
without giving effect
to the voluntary
expense agreement
described in Note 4 to
the Financial
Statements would have
been (%)............... -- -- -- -- 0.54 0.51
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
52
<PAGE>
ZENITH LOOMIS SAYLES BALANCED SERIES
PORTFOLIO MANAGERS: DOUG RAMOS, MERI ANNE BECK
LOOMIS, SAYLES & COMPANY, L.P.
- ------------------ ----------------- MARKET REVIEW
[PHOTO OF DOUG [PHOTO OF MERI At the outset of 1996, most
RAMOS APPEARS ANNE BECK APPEARS investors were expecting economic
HERE] HERE] growth to start slowly and quicken as
the year progressed. Some pessimistic
souls even discussed the possibility
of a recession. At the time this all
seemed very reasonable; economic
growth had slowed dramatically in the
fourth quarter of 1995, the East Coast
was struck by a severe blizzard and
the federal government's partial
shutdown all pointed to a weak first
- ------------------ ----------------- quarter.
However, the economic picture began to change in February and March.
Unexpectedly strong reports on employment and light vehicle sales suggested
that the economy was not as weak as expected. Fixed-income investors started
questioning the prospect of further Federal Reserve easing. Stock investors
became concerned that the Federal Reserve would raise interest rates to rein
in economic growth and keep inflation from gaining momentum. Rising interest
rates halted the stock market rally that began on January 11.
These developments produced mixed results for the Loomis Sayles Balanced
Series in the first six months of 1996. In this environment, bond market
performance was negative. As measured by the Lehman Government Corporate
Index/4/, bonds returned -1.88% for the first six months of the year. While
the initial rally in stocks was stopped in February by the rise in interest
rates, renewed economic growth and the prospects for stronger earnings growth
in the second half of the year helped stocks trade marginally higher in May
and June. For the first two quarters of 1996, stocks within the S&P 500/20/
produced a total return of +10.2%. Fortunately, on average, 62% of the Series'
assets were invested in common stocks during this period. Overall the Series
returned 4.27% during the first six months of the year.
BONDS. The Series' purchase of corporate bonds in the consumer, insurance,
finance and technology sectors was beneficial as spreads tightened on good
credit and financial news. Individual bonds, such as Federated Department
Stores and La Quinta Inns, were positive consumer holdings in an improving
sector. Sears Roebuck and Delta Airlines received ratings upgrades causing
spreads to narrow versus Treasury bonds. Bankers Trust lagged in performance
due to a pending lawsuit regarding derivative usage, but improved after a
settlement was reached.
An intermediate maturity and an emphasis on current or higher coupon bonds
were beneficial both on a current income and price performance basis in an
environment of declining bond prices. Due to historically narrow corporate
bond spreads, high quality discount coupon mortgage securities continue to be
purchased.
STOCKS. The equity markets continued to exhibit a positive bias toward large
capitalization growth stocks, while low P/E ("value") and mid capitalization
stocks continued to lag. Perhaps reversing a long-term trend, small
capitalization stocks are staging an impressive comeback. However, the Series'
medium to large capitalization value bias continued to be a drag on
performance compared with the S&P 500/20/.
The Series' financial sector holdings did very well, especially in the first
quarter. In the banking industry, holdings in Chase Manhattan, Nationsbank and
First Interstate--now part of Wells Fargo--performed very well. Significant
positive returns were also recorded by Green Tree Financial and Ace Ltd.
In the basic materials sector, chemical holdings in Dupont and Praxair did
well. Energy was the best performing sector, completely reversing last year's
results, with El Paso Natural Gas and Ultramar providing significant returns.
Finally, technology performed well with handsome returns generated by Intel
Corporation, EMC Corporation, and IBM, which was recently sold from the
portfolio. The one poor performer in the portfolio was the utility sector,
which was hurt by the rise in interest rates.
53
<PAGE>
OUTLOOK AND STRATEGY
In anticipation of continued potential for economic growth through the end
of the year, as well as continued signs of an increase in the rate of
corporate earnings growth, we are increasing the Series' weighting in stocks
to 65%. We continue to invest in stocks with below average P/E ratios and
above average long-term growth potential. Stock selection remains a critical
element in determining performance for "value" portfolios. We believe that the
market's current bias toward large capitalization growth stocks will reverse
itself, though it may take an acceleration in earnings growth rates.
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: Reasonable long-term
investment return from a
Zenith Stock S&P Leh/gov't combination of long-term capital
Index 500/20/ corp./4/ appreciation and moderate
10/31/94 $10,000 $10,000 $10,000 current income.
12/31/94 9,990 9,794 10,048
12/31/95 12,467 13,461 11,981 START DATE: October 31, 1994
06/30/96 12,998 14,818 11,756
SIZE: $35 million as of June 30,
1996
Average Annual Return
Lipper Variable MANAGERS: Douglas Ramos and Meri
Balanced Balanced Anne Beck have managed the
Series Fund Average/8/ Series since its inception. Mr.
6 mos.* 4.27% 4.14% Ramos serves as portfolio co-
1 year 12.37% 16.47% manager of New England Balanced
Since Fund and New England Value Fund.
inception 17.07% n/a Ms. Beck also serves as
*not annualized portfolio co-manager of New
England Balanced Fund. Mr. Ramos
joined Loomis Sayles in 1985 and
Ms. Beck joined Loomis Sayles in
1986.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
54
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--57.3% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--3.0%
5,300 Lockheed Martin Corp. .. $ 445,200
7,200 Northrop Grumman Corp. . 490,500
2,600 Raytheon Co. ........... 134,225
-----------
1,069,925
-----------
AUTOMOBILES--2.3%
6,800 Chrysler Corp. ......... 421,600
7,600 General Motors Corp. ... 398,050
-----------
819,650
-----------
BANKS--4.0%
6,300 Chase Manhattan Corp. .. 444,937
5,500 NationsBank Corp. ...... 454,438
11,700 Norwest Corp. .......... 408,038
466 Wells Fargo & Co. ...... 111,316
-----------
1,418,729
-----------
CHEMICALS--3.7%
E.I. Du Pont de Nemours
5,600 & Co. ................. 443,100
8,600 PPG Industries, Inc. ... 419,250
10,600 Praxair, Inc. .......... 447,850
-----------
1,310,200
-----------
COMPUTER & BUSINESS
EQUIPMENT--1.0%
19,500 EMC Corp. .............. 363,187
-----------
CONGLOMERATES--1.9%
7,900 Allied Signal, Inc. .... 451,288
6,600 Philips NV (ADR)(d)..... 215,325
-----------
666,613
-----------
ELECTRIC UTILITIES--1.3%
26,700 Edison International.... 470,587
-----------
ELECTRONIC COMPONENTS--
1.9%
6,700 Intel Corp. ............ 492,031
3,700 Texas Instruments,
Inc. .................. 184,538
-----------
676,569
-----------
FINANCIAL SERVICES--3.7%
5,000 Federal Home Loan
Mortgage Corp. ........ 427,500
13,700 Federal National
Mortgage Association... 458,950
13,000 Green Tree Financial
Corp. ................. 406,250
-----------
1,292,700
-----------
FOOD--AGRIBUSINESS--1.3%
13,900 Penenergy Corp. ........ 456,962
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
FOOD & BEVERAGE--1.4%
17,100 IBP, Inc. ............................................... $ 472,387
-----------
FREIGHT--TRANSPORTATION--3.9%
5,200 Burlington Northern Santa Fe............................. 420,550
21,000 Canadian Pacific Ltd. ................................... 462,000
5,900 Federal Express Corp.(c)................................. 483,800
-----------
1,366,350
-----------
GAS & PIPELINE UTILITIES--0.5%
4,500 El Paso Natural Gas Co. ................................. 173,250
-----------
HEALTH CARE--DRUGS--0.8%
10,700 Glaxo Wellcome PLC (ADR)(d).............................. 286,225
-----------
HEALTH CARE--SERVICES--1.1%
32,300 Beverly Enterprises, Inc.(c)............................. 387,600
-----------
HOUSING & BUILDING MATERIALS--3.5%
7,500 Armstrong World Industries, Inc. ........................ 432,187
10,100 Black & Decker Corp. .................................... 390,113
13,900 Masco Corp. ............................................. 420,475
-----------
1,242,775
-----------
HOUSEHOLD PRODUCTS--1.4%
8,200 Premark International, Inc. ............................. 151,700
8,200 Tupperware Corp. ........................................ 346,450
-----------
498,150
-----------
INSURANCE--4.6%
9,400 ACE Ltd. ................................................ 441,800
8,800 Chubb Corp. ............................................. 438,900
11,600 Everest Reinsurance Holdings............................. 300,150
10,400 Providian Corp. ......................................... 445,900
-----------
1,626,750
-----------
LEISURE TIME--2.5%
15,600 American Greetings Corp. ................................ 427,050
16,100 Carnival Corp. .......................................... 464,887
-----------
891,937
-----------
OIL--2.0%
8,800 Repsol S.A., (ADR)(d).................................... 305,800
13,400 Ultramar Corp. .......................................... 388,600
-----------
694,400
-----------
PACKAGING--1.2%
9,500 Crown Cork & Seal, Inc. ................................. 427,500
-----------
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RETAIL--FOOD & DRUG--3.6%
18,500 Eckerd Corp. Delaware................................... $ 418,563
10,600 Kroger Co. ............................................. 418,700
11,000 Melville Corp. ......................................... 445,500
-----------
1,282,763
-----------
TELECOMMUNICATIONS--3.5%
12,500 DSC Communications Corp. (Rights)(c).................... 376,563
8,700 GTE Corp. .............................................. 389,325
13,400 Pacific Telesis Group................................... 452,250
-----------
1,218,138
-----------
TOBACCO--3.2%
5,200 Loews Corp. ............................................ 410,150
2,800 Philip Morris Companies, Inc. .......................... 291,200
12,400 UST, Inc. .............................................. 424,700
-----------
1,126,050
-----------
Total Common Stocks
(Identified Cost $18,657,639).......................... 20,239,397
-----------
MEDIUM & LONG TERM BONDS & NOTES--34.4%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
AEROSPACE--0.9%
$330,000 Lockheed Martin Corporation 6.550%, 5/15/99............. 329,455
-----------
BANKS--3.8%
100,000 Bankers Trust, NY Corp. 8.125%, 4/01/02................. 104,271
350,000 Capital One Bank 6.830%, 5/17/99........................ 349,422
50,000 Chase Manhattan Corp. 9.050%, 2/01/02................... 50,716
475,000 Household Bank FSB 6.250%, 4/01/99...................... 470,241
310,000 Mellon Bank NA 7.000%, 3/15/06.......................... 302,148
50,000 Norwest Corp. 7.650%, 3/15/05........................... 51,476
-----------
1,328,274
-----------
CABLE & MEDIA--1.0%
350,000 TCI Communications, Inc. 7.250%, 6/15/99................ 350,815
-----------
COMPUTER--0.8%
300,000 Comdisco, Inc. 5.760%, 1/19/99.......................... 294,360
-----------
ENERGY--0.4%
125,000 Coastal Corp. 8.125%, 9/15/02........................... 130,324
25,000 Standard Oil Co. 9.000%, 6/01/19........................ 26,147
-----------
156,471
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FINANCE--4.9%
$ 125,000 Associates Corp. NA 8.350%, 12/22/98................. $ 130,422
115,000 Avalon Properties, Inc. 7.375%, 9/15/02.............. 113,242
200,000 Ford Motor Credit Corp.
6.850%, 8/15/00..................................... 200,332
244,000 General Motors Acceptance Corp. 5.500%, 12/15/01..... 225,502
350,000 Great Western Financial Corp. 6.125%, 6/15/98........ 347,767
50,000 International Lease Finance Corp. 8.040%, 12/01/97... 51,296
100,000 Secured Finance Investment, Inc. 9.05%, 12/15/04..... 110,119
50,000 Standard Credit Card 8.625%, 1/07/02................. 50,990
300,000 WFS Financial 6.950%, 11/20/03....................... 301,968
200,000 World Omni Automobile Lease 6.550%, 6/25/02.......... 199,360
-----------
1,730,998
-----------
GOVERNMENT AGENCY--6.5%
350,000 Federal Home Loan Banks 7.151%, 9/13/05.............. 341,702
30,000 Federal National Mortgage Association Zero Coupon
10/10/01............................................ 29,433
25,000 United States Treasury Notes 8.250%, 7/15/98......... 25,988
175,000 United States Treasury Notes 5.500%, 4/15/00......... 169,750
105,000 United States Treasury Notes 6.125%, 7/31/00......... 103,836
1,670,000 United States Treasury Notes 6.250%, 2/15/03......... 1,640,508
-----------
2,311,217
-----------
HEALTH CARE--0.1%
50,000 Columbia/HCA Healthcare Corp. 8.020%, 8/5/02......... 52,242
-----------
INDUSTRIALS--2.2%
325,000 Amerco 7.850%, 5/15/03............................... 326,313
68,000 Anheuser Busch Companies, Inc. 8.500%, 3/01/17....... 70,818
200,000 Martin Marietta Corp. 6.500%, 4/15/03................ 194,002
200,000 Tektronix, Inc. 7.625%, 8/15/02...................... 201,280
-----------
792,413
-----------
INSURANCE--0.8%
275,000 Travelers Aetna 6.750%, 4/15/01...................... 272,998
-----------
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
LEISURE & LODGING--1.1%
$100,000 Carnival Corp. 7.050%, 5/15/05.......................... $ 97,628
300,000 La Quinta Inns, Inc. 7.400%, 9/15/05.................... 285,000
-----------
382,628
-----------
MORTGAGE--2.4%
375,000 Federal Home Loan Mortgage 6.500%, 7/15/10.............. 357,836
390,220 Federal Home Loan Mortgage 6.000%, 8/15/22.............. 335,344
200,000 Federal National Mortgage Association 6.000%, 2/25/24... 165,340
-----------
858,520
-----------
MORTGAGE BACKED--1.8%
200,000 Federal Home Loan Mortgage 8.000%, 7/15/21.............. 201,874
50,000 G.E. Capital Mortgage Inc. 10.000%, 3/25/24............. 52,500
75,000 PaineWebber CMO Tr.
9.000%, 10/20/03....................................... 76,945
75,000 Westam Mortgage Financial Corp. 8.950%, 8/01/18......... 80,038
200,000 Westam Mortgage Financial Corp. 9.400%, 12/01/18........ 215,936
-----------
627,293
-----------
RETAIL STORE--1.4%
335,000 Federated Department Stores, Inc. 8.500%, 6/15/03....... 336,186
170,000 Sears Overseas Finance Zero Coupon 7/12/98.............. 148,856
-----------
485,042
-----------
SECURITIES--3.3%
225,000 Alex Brown, Inc. 7.625%, 8/15/05........................ 225,367
200,000 Donaldson Lufkin & Jennrette 6.875%, 11/01/05........... 189,540
100,000 Lehman Bros. Inc. 5.750%, 11/15/98...................... 97,855
200,000 Lehman Bros. Inc. 7.375%, 5/15/07....................... 202,686
100,000 Merrill Lynch & Co. 8.375%, 2/09/00..................... 104,409
145,000 Salomon, Inc 7.500%, 2/01/03............................ 144,037
200,000 Smith Barney Holdings, Inc. 5.500%, 1/15/99............. 194,734
-----------
1,158,628
-----------
TECHNOLOGY--0.6%
200,000 Digital Equipment Corp. 8.625%, 11/01/12................ 201,514
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
TELECOMMUNICATIONS--0.6%
$ 200,000 Southern Bell Telephone & Telegraph Co. 7.625%,
3/15/13............................................ $ 197,698
-----------
TRANSPORTATION--0.4%
25,000 American Airlines 10.180%, 1/02/13.................. 28,624
100,000 AMR Corp 10.290%, 3/08/21........................... 121,457
-----------
150,081
-----------
UTILITIES--1.3%
250,000 Cincinnati Gas & Electric Co. 7.375%, 11/01/01...... 251,057
195,000 Detroit Edison Co. 6.340%, 3/15/00.................. 191,166
-----------
442,223
-----------
YANKEE/SUPRANATIONAL--0.1%
50,000 SKF Aktiebolaget AB 7.625%, 7/15/03................. 50,160
-----------
Total Bonds & Notes
(Identified Cost $12,211,390)...................... 12,173,030
-----------
SHORT-TERM INVESTMENTS--7.7%
1,528,000 Repurchase Agreement with State Street Bank & Trust
Co. dated 6/28/96 at 4.750% to be repurchased at
$1,528,605 on 7/01/96. Collateralized by $1,600,000
U.S. Treasury Bill due 12/19/96, with a value of
$1,559,709......................................... 1,528,000
1,200,000 Associates Corp. of North America 5.450%, 7/01/96... 1,200,000
-----------
Total Short-Term Investments
(Identified Cost $2,728,000)....................... 2,728,000
-----------
Total Investments--99.4%
(Identified Cost $33,597,029(b))................... 35,140,427
Other assets less liabilities....................... 204,642
-----------
TOTAL NET ASSETS--100%.............................. $35,345,069
===========
(a) See Note 1a.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on cost
of $33,597,029 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 1,888,840
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (345,442)
-----------
Net unrealized appreciation......................... $ 1,543,398
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
57
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $35,140,427
Cash..................................................... 646
Receivable for:
Fund shares sold......................................... 79,480
Securities sold.......................................... 152,004
Dividends and interest................................... 206,861
Foreign taxes............................................ 275
Due from advisor......................................... 86
Unamortized organization expense......................... 6,703
-----------
35,586,482
LIABILITIES
Payable for:
Securities purchased..................................... $137,992
Fund shares redeemed..................................... 58,246
Accrued expenses:
Management fees.......................................... 13,270
Other expenses........................................... 31,905
--------
241,413
-----------
NET ASSETS................................................ $35,345,069
===========
Net Assets consist of:
Capital paid in.......................................... $33,113,070
Undistributed net investment income...................... 446,272
Accumulated net realized gains........................... 242,329
Unrealized appreciation on investments................... 1,543,398
-----------
NET ASSETS................................................ $35,345,069
===========
Computation of offering price:
Net asset value and redemption price per share
($35,345,069 divided by 2,837,644 shares of beneficial
interest)................................................ $ 12.46
===========
Identified cost of investments............................ $33,597,029
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 174,405(a)
Interest.............................................. 385,392
----------
559,797
EXPENSES
Management fees....................................... $ 94,346
Trustees' fees and expenses........................... 6,453
Custodian............................................. 26,323
Audit and tax services................................ 10,347
Legal................................................. 5,411
Printing.............................................. 3,056
Amortization of organization expenses................. 1,003
Miscellaneous......................................... 4,971
--------
Total expenses....................................... 151,910
Less expenses assumed by the investment adviser...... (37,335) 114,575
-------- ----------
NET INVESTMENT INCOME.................................. 445,222
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 103,879
Unrealized appreciation on investments--net........... 515,612
----------
Net gain on investment transactions.................... 619,491
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $1,064,713
==========
</TABLE>
(a)Net of foreign taxes of: $2,749.
See accompanying notes to financial statements.
58
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 382,625 $ 445,222
Net realized gain on investments.................... 426,765 103,879
Unrealized appreciation on investments.............. 1,029,622 515,612
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 1,839,012 1,064,713
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (382,625) 0
In excess of net investment income.................. (1,297) 0
Net realized gain on investments.................... (288,315) 0
----------- -----------
(672,237) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 18,594,352 18,604,691
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 383,922 0
Distributions from net realized gain................ 288,315 0
----------- -----------
19,266,589 18,604,691
Cost of shares redeemed............................. (4,333,030) (3,147,011)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 14,933,559 15,457,680
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 16,100,334 16,522,393
NET ASSETS
Beginning of the period............................. 2,722,342 18,822,676
----------- -----------
End of the period................................... $18,822,676 $35,345,069
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 251 $ 1,050
=========== ===========
End of the period................................... $ 1,050 $ 446,272
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 1,626,505 1,518,994
Issued in connection with the reinvestment of:
Distributions from net investment income............ 32,426 0
Distributions from net realized gain................ 24,351 0
----------- -----------
1,683,282 1,518,994
Redeemed............................................ (382,082) (256,443)
----------- -----------
Net change.......................................... 1,301,200 1,262,551
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR SIX MONTHS
THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------------- ------------ ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $10.00 $ 9.94 $ 11.95
------ ------- -------
Income From Investment Operations
Net Investment Income............ 0.05 0.26 0.41
Net Realized and Unrealized Gain
(Loss) on Investments........... (0.06) 2.20 0.10
------ ------- -------
Total From Investment Operations. (0.01) 2.46 0.51
------ ------- -------
Less Distributions
Distributions From Net Investment
Income.......................... (0.05) (0.26) 0.00
Capital Gains.................... 0.00 (0.19) 0.00
------ ------- -------
Total Distributions.............. (0.05) (0.45) 0.00
------ ------- -------
Net Asset Value, End of Period.... $ 9.94 $ 11.95 $ 12.46
====== ======= =======
TOTAL RETURN (%).................. (0.10)(c) 24.79 4.27(c)
Ratio of Operating Expenses to
Average Net Assets (%)........... 0.85 (b) 0.85 0.85(b)
Ratio of Net Investment Income to
Average Net Assets (%)........... 4.16 (b) 4.03 3.26(b)
Portfolio Turnover Rate (%)....... 0 (b) 72 63(b)
Average Commission Rate (d)....... -- -- $0.0095
Net Assets, End of Period (000)... $2,722 $18,823 $35,345
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
agreement described in Note 4 to
the Financial Statements would
have been (%).................... 3.73 (b) 1.85 1.13(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
59
<PAGE>
ZENITH BACK BAY ADVISORS MANAGED SERIES
PORTFOLIO MANAGER: PETER PALFREY;
BACK BAY ADVISORS(R), L.P.
- ------------------ MARKET REVIEW
[PHOTO OF PETER The Back Bay Advisors Managed Series ended the first six
PALFREY APPEARS months of 1996 nominally behind its peer group of Lipper
HERE] "Flexible Funds", with a total return of 5.24%, versus the
comparable Lipper average of 5.41%--an underperformance of
17 basis points. For the 12-month period ended June 30,
1996, the Series remained well ahead of its peer group,
with a top quartile performance of 18.22% versus 15.24%
for the Lipper averages--an outperformance of 298 basis
points. During the first half of 1996, the Series' asset
allocation moved to a slightly greater overweight position
in stocks--from 67% to 69%; this was achieved through a
combination of bond sales and the greater relative market
- ------------------ appreciation of stock holdings. During this same period, the
duration on the bond portfolio was reduced by 0.7 years to 6.58 years and the
portfolio weighting in bonds was reduced from 33% to 29%. At the end of the
second quarter, the allocation to stocks was trimmed modestly, raising cash and
bringing equity exposure down to 69.4%.
Despite being a relatively volatile period, stocks managed to extend their
bull market advance, with the S&P 500 Index/20/ (including reinvestment of
dividends) up 10.2% through June 30. Solid fundamentals (good corporate
earnings growth, improved economic outlook), coupled with record capital
inflows served to push equities to consecutive new highs, despite investor
concern over "full" valuations and increasing interest rates. Bonds, in
contrast, declined sharply over the same period, with the Lehman
Government/Corporate Index/4/ down 1.88% through June 30. The weakness in
fixed income markets reflected investor concern over the sharp rebound in U.S.
economic growth (from the somewhat anemic pace of growth in late 1995), marked
by strong payroll gains and higher than expected energy and commodity prices.
While inflation has remained below 3% on a year-over-year basis, investors
fear that tighter labor markets could lead to increased wage pressures,
answered by a corresponding shift to a more restrictive monetary policy by the
Federal Reserve Board.
OUTLOOK AND STRATEGY
Recent volatility in equity and fixed income markets during early July
reflects increased investor uncertainty over the sustainability of the current
economic growth cycle. The depth and extent of the present stock market
correction will depend on investor reaction to the remaining second quarter
earnings announcements and on management comments about the prospects for
subsequent quarters. While it may take some time to work through this current
correction, with market conditions expected to be quite choppy through the
summer, I remain constructive on the equity market on a longer term basis.
During periods of greater investor uncertainty, larger capitalization, high
quality stocks, such as those favored by the Series, tend to outperform as
investors seek relative safety.
In the credit markets, investor interest in bonds has been perked by recent
weakness in stocks, with many market pundits talking of a major asset
allocation shift. Interestingly, the equity sell off has not translated into
any meaningful, lasting support for bonds thus far. This is most likely due to
investor fear that the economy may not slow sufficiently through the remainder
of 1996 to avert Federal Reserve action and/or a pickup in inflationary
pressures. However, I expect that Gross Domestic Product (GDP) growth will
likely slow from the current 4-4.5% pace to a more sustainable 3% average pace
during the second half of the year. This is due primarily to the dampening
effect on consumer spending (housing, auto) from the 100 basis point increase
in rates thus far this year. Given that the bond market has already "priced-
in" 50 basis points of Federal Reserve monetary tightening between now and
year-end, any signs of moderating economic growth, coupled with continued
benign inflation, should be more positively received by credit market
participants. Accordingly, I have begun to position the bond portion of the
Series more aggressively, with issues that potentially perform best in a
stable to falling interest rate environment.
60
<PAGE>
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: A favorable total
return through investment in
Zenith diversified portfolio. The
Managed S&P Leh/gov't Series' portfolio is expected
Series 500/20/ corp./4/ to include a mix of
5/01/87 $10,000 $10,000 $10,000 (1) common stocks, (2) notes
12/31/87 9,935 8,770 10,357 and bonds and (3) money
12/31/88 10,877 10,216 11,142 market instruments.
12/31/89 12,952 13,444 12,729
12/31/90 13,369 13,025 13,782 START DATE: May 1, 1987
12/31/91 16,085 16,976 16,001
12/31/92 17,142 18,268 17,213 SIZE: $151 million as of June
12/31/93 18,968 20,101 19,117 30, 1996
12/31/94 18,756 20,374 18,447
12/31/95 24,620 28,003 21,997 MANAGER: Peter Palfrey has
06/30/96 25,911 30,825 21,583 managed the Series since
January, 1994 and joined Back
Bay Advisors in 1993. Mr.
Average Annual Return Palfrey also manages several
other fixed income and
Zenith Lipper Variable Flexible separate accounts.
Managed Series Portfolio Fund Average/9/
6 mos.* 5.24% 5.41%
1 year 18.26% 15.24%
5 years 12.67% 12.12%
Since
inception 10.95% n/a
*not annualized
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would be
lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
61
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--69.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.0%
5,025 Boeing Co................................................. $ 437,803
14,600 Rockwell International Corp............................... 835,850
2,500 United Technologies Corp.................................. 287,500
-----------
1,561,153
-----------
APPAREL--0.2%
7,400 Melville Corp............................................. 299,700
-----------
AUTOMOBILE & RELATED--1.4%
15,432 Chrysler Corp............................................. 956,784
4,600 Ford Motor Co............................................. 148,925
12,500 General Motors Corp....................................... 654,687
6,750 Genuine Parts Co.......................................... 308,813
-----------
2,069,209
-----------
BANKS--3.5%
32,186 Banc One Corp............................................. 1,094,324
10,144 Bank America Corp......................................... 768,408
5,400 Bankers Trust New York Corp. ............................. 398,925
19,000 Citicorp.................................................. 1,569,875
10,900 J.P. Morgan & Co., Inc.................................... 922,413
7,200 Nations Bank Corp......................................... 594,900
-----------
5,348,845
-----------
BUSINESS MACHINES--1.4%
8,500 Apple Computer............................................ 178,500
28,400 Digital Equipment Corp.(c)................................ 1,278,000
5,900 International Business Machines Corp...................... 584,100
-----------
2,040,600
-----------
BUSINESS SERVICES--1.4%
28,500 Browning Ferris Industries, Inc........................... 826,500
10,000 Dun & Bradstreet Corp..................................... 625,000
9,200 H & R Block, Inc.......................................... 300,150
9,500 WMX Technologies, Inc..................................... 311,125
-----------
2,062,775
-----------
CHEMICALS--3.4%
14,200 Allied-Signals, Inc....................................... 811,175
8,200 Dow Chemical Co........................................... 623,200
13,700 E.I. Du Pont de Nemours & Co.............................. 1,084,012
56,000 Monsanto Co............................................... 1,820,000
15,600 PPG Industries, Inc....................................... 760,500
-----------
5,098,887
-----------
COMMUNICATION--5.3%
15,500 Airtouch Communications, Inc. ............................ 437,875
35,200 Ameritech Corp. .......................................... 2,090,000
27,261 AT & T Co. ............................................... 1,690,182
12,200 Bell Atlantic Corp. ...................................... 777,750
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
16,200 Bellsouth Corp. .......................................... $ 686,475
10,600 GTE Corp. ................................................ 474,350
14,600 NYNEX Corp. .............................................. 693,500
15,500 Pacific Telesis Group..................................... 523,125
7,200 SBC Comunications, Inc. .................................. 354,600
9,700 US West, Inc. ............................................ 309,188
-----------
8,037,045
-----------
CONGLOMERATES--0.7%
2,200 ITT Corp. ................................................ 145,750
13,800 Minnesota Mining & Manufacturing.......................... 952,200
-----------
1,097,950
-----------
CONSTRUCTION--1.3%
28,600 Home Depot, Inc. ......................................... 1,544,400
14,900 Masco Corp. .............................................. 450,725
-----------
1,995,125
-----------
CONSUMER DURABLES--0.0%
800 Whirlpool Corp. .......................................... 39,700
-----------
DOMESTIC OIL--1.7%
2,400 Amoco Corp. .............................................. 173,700
2,700 Atlantic Richfield Co. ................................... 319,950
3,600 Halliburton Co. .......................................... 199,800
69,300 Oryx Energy Co. .......................................... 1,126,125
934 Santa Fe Energy, Inc.(c).................................. 11,091
3,601 Sun, Inc. ................................................ 109,380
800 Tenneco, Inc. ............................................ 40,900
15,600 Unocal Corp. ............................................. 526,500
-----------
2,507,446
-----------
DRUGS & MEDICINE--6.2%
8,800 Abbott Laboratories....................................... 382,800
22,000 American Home Products Corp. ............................. 1,322,750
37,100 Baxter International, Inc. ............................... 1,752,975
15,200 Eli Lilly & Co. .......................................... 988,000
31,500 Merck & Co., Inc. ........................................ 2,035,687
19,200 Pfizer Inc. .............................................. 1,370,400
18,705 Pharmacia & Upjohn, Inc. ................................. 830,034
10,800 Schering Plough Corp. .................................... 677,700
-----------
9,360,346
-----------
ELECTRONICS--4.0%
43,200 AMP, Inc. ................................................ 1,733,400
9,400 Emerson Electric Co. ..................................... 849,525
22,400 Hewlett-Packard........................................... 2,231,600
6,400 Motorola, Inc. ........................................... 402,400
15,400 Raytheon Co. ............................................. 795,025
-----------
6,011,950
-----------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ENERGY & UTILITIES--2.8%
18,300 American Electric Power, Inc. ............................ $ 780,037
11,700 Consolidated Edison Co. .................................. 342,225
40,200 Edison International...................................... 708,525
45,700 Pacific Gas & Electric Co. ............................... 1,062,525
7,700 Public Service Enterprise Group........................... 210,788
10,200 Southern Co. ............................................. 251,175
8,900 Texas Utilities Co. ...................................... 380,475
17,300 Unicom Corp. ............................................. 482,237
-----------
4,217,987
-----------
ENERGY RAW MATERIALS--1.1%
58,800 Occidental Petroleum Corp. ............................... 1,455,300
3,200 Schlumberger Ltd. ........................................ 269,600
-----------
1,724,900
-----------
ENTERTAINMENT--0.0%
2,200 ITT Industry, Inc. ....................................... 55,275
-----------
FINANCE--2.1%
25,000 American Express Co. ..................................... 1,115,625
4,449 Dean Witter, Discover & Co. .............................. 254,705
11,600 Federal Home Loan Mortgage Corp. ......................... 991,800
16,900 Salomon, Inc. ............................................ 743,600
-----------
3,105,730
-----------
FOOD & AGRICULTURE--4.8%
39,800 Coca Cola Co. ............................................ 1,945,225
5,000 General Mills, Inc. ...................................... 272,500
41,850 H. J. Heinz Co. .......................................... 1,271,194
24,600 Kellogg Co. .............................................. 1,801,950
16,200 PepsiCo, Inc. ............................................ 573,075
13,300 Ralston Purina Co. ....................................... 852,862
16,000 Sara Lee Corp. ........................................... 518,000
-----------
7,234,806
-----------
GOLD--0.2%
18,434 Santa Fe Pacific Gold Corp. .............................. 260,380
-----------
INSURANCE--2.4%
11,500 Aetna Life & Casualty Co. ................................ 822,250
10,568 Allstate Corp. ........................................... 482,165
14,400 American General Corp. ................................... 523,800
6,468 American International Group, Inc. ....................... 637,907
2,700 CIGNA Corp. .............................................. 318,263
4,300 General Reinsurance Corp. ................................ 654,675
2,200 ITT Hartford Group, Inc. ................................. 117,150
-----------
3,556,210
-----------
INTERNATIONAL OIL--4.9%
11,000 Chevron Corp. ............................................ 649,000
9,400 Cooper Industries, Inc. .................................. 390,100
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
25,100 Exxon Corp. .............................................. $ 2,180,562
7,800 Mobil Corp. .............................................. 874,575
9,800 Royal Dutch Petroleum Co. ADR(d).......................... 1,506,750
21,200 Texaco, Inc. ............................................. 1,778,150
-----------
7,379,137
-----------
LIQUOR--0.4%
3,300 Anheuser-Busch Companies, Inc. ........................... 247,500
11,700 Seagram, Ltd. ............................................ 393,413
-----------
640,913
-----------
MEDIA--0.6%
3,000 Gannett Co. Inc. ......................................... 212,250
15,200 Tele-Communications, Inc. ................................ 275,500
7,200 Time Warner, Inc. ........................................ 282,600
9,700 US West, Inc. ............................................ 177,025
-----------
947,375
-----------
NON-FERROUS METALS--0.7%
8,075 Alcan Aluminum Ltd. ...................................... 246,288
14,000 Aluminum Company of America............................... 803,250
-----------
1,049,538
-----------
OFFICE EQUIPMENT--1.8%
50,700 Xerox Corp. .............................................. 2,712,450
-----------
OPTICAL PHOTO, EQUIPMENT--0.2%
3,600 Eastman Kodak Co. ........................................ 279,900
-----------
PAPER & FOREST PRODUCTS--1.3%
12,640 Burlington Northern Santa Fe.............................. 1,022,260
3,600 Georgia-Pacific Corp. .................................... 255,600
11,800 International Paper Co. .................................. 435,125
1,400 Kimberly Clark Corp. ..................................... 108,150
4,050 Weyerhaeuser Co. ......................................... 172,125
-----------
1,993,260
-----------
PRODUCER OF GOODS--2.9%
5,600 Caterpillar Inc. ......................................... 379,400
24,000 Deere & Co. .............................................. 960,000
34,400 General Electric Co. ..................................... 2,975,600
4,200 Westinghouse Electric Corp. .............................. 78,750
-----------
4,393,750
-----------
RAILROADS & SHIPPING--0.4%
4,500 Norfolk Southern Corp. ................................... 381,375
4,200 Union Pacific Corp. ...................................... 293,475
-----------
674,850
-----------
RESTAURANTS--0.3%
5,000 Darden Restaurants, Inc. ................................. 53,750
9,200 McDonald's Corp. ......................................... 430,100
-----------
483,850
-----------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RETAIL--3.3%
19,000 Albertsons, Inc. ......................................... $ 786,125
8,000 Dayton Hudson Corp. ...................................... 825,000
15,600 J.C. Penney Company, Inc. ................................ 819,000
38,900 Kmart Corp.(c)............................................ 481,388
7,800 May Department Stores Co. ................................ 341,250
11,400 Sears Roebuck & Co. ...................................... 554,325
5,400 The Limited, Inc. ........................................ 116,100
11,625 Toys R Us(c).............................................. 331,313
29,200 Wal-Mart Stores, Inc. .................................... 740,950
-----------
4,995,451
-----------
SOAPS & COSMETICS--3.3%
6,260 Bristol-Myers Squibb Co. ................................. 563,400
18,400 Gillette Co. ............................................. 1,147,700
10,400 Johnson & Johnson......................................... 514,800
10,300 Procter & Gamble Co. ..................................... 933,437
12,400 Unilever, N.V. ........................................... 1,799,550
-----------
4,958,887
-----------
STEEL--0.9%
64,700 USX Marathon Group........................................ 1,302,087
220 USX-US Steel Group........................................ 6,243
-----------
1,308,330
-----------
TOBACCO--1.2%
8,500 American Brands, Inc. .................................... 385,688
13,600 Philip Morris Companies, Inc. ............................ 1,414,400
-----------
1,800,088
-----------
TRAVEL & RECREATION--2.3%
55,735 Walt Disney Co. .......................................... 3,504,338
-----------
Total Common Stock
(Identified cost $67,194,984)............................ 104,808,136
-----------
</TABLE>
BONDS & NOTES--29.5%
<TABLE>
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
CORPORATE BONDS--16.5%
$ 3,000,000 360 Communications,
7.500%, 03/01/06..................................... 2,872,740
2,500,000 Banco de Comercio Exterior,
8.625%, 6/02/00...................................... 2,555,275
1,000,000 Boston Edison Co.,
7.800%, 5/15/10...................................... 942,060
2,000,000 Cemex SA,
8.875%, 6/10/98...................................... 2,010,420
2,000,000 Lehman Brothers Holdings, Inc.,
8.500%, 5/01/07...................................... 2,101,040
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 1,730,000 Lehman Brothers Holdings, Inc.,
8.800%, 3/01/15................................... $ 1,898,796
1,000,000 Maxus Energy Corp.,
9.375%, 11/01/03.................................. 965,000
1,000,000 Paramount Communications, Inc.,
8.250%, 8/01/22................................... 943,050
1,485,000 Public Service Electric & Gas Co.,
8.750%, 11/01/21.................................. 1,586,648
5,000,000 Tele-Communications, Inc.,
9.800%, 2/01/12................................... 5,402,400
10,000,000 Time Warner Inc.,
Zero Coupon, 12/17/12............................. 3,625,000
30,000 Viacom, Inc.,
8.000%, 7/07/06................................... 27,450
------------
24,929,879
------------
FOREIGN--4.9%
11,500,000 Government of Canada,
Zero Coupon, 12/01/20(e).......................... 1,138,216
8,500,000 Government of Canada,
8.000%, 06/01/23(e)............................... 6,151,029
------------
7,289,245
------------
YANKEE--6.9%
3,250,000 Argentina Republic,
9.250%, 2/23/01................................... 3,107,813
6,000,000 Hydro Quebec,
7.500%, 4/01/16................................... 5,830,800
1,500,000 United Mexican States,
9.750%, 2/06/01................................... 1,492,500
------------
10,431,113
------------
U.S. GOVERNMENT BONDS--1.2%
501,211 Government National Mortgage Association, 10.000%,
9/15/18........................................... 546,786
594,723 Government National Mortgage Association, 11.500%
with various maturities to 2013................... 668,994
1,500,000 United States Treasury Bond,
Zero Coupon, 7/07/06.............................. 587,790
------------
1,803,570
------------
Total Bonds & Notes
(Identified Cost $43,134,047)..................... 44,453,807
------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
SHORT-TERM INVESTMENT--0.5%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$825,000 American Express Credit Corp., 5.390%, 7/01/96....... $ 825,000
------------
Short-Term Investment
(Identified Cost $825,000).......................... 825,000
------------
Total Investments--99.4%
(Identified Cost $111,154,031)(b)................... 150,086,943
Other assets less liabilities........................ 863,155
------------
TOTAL NET ASSETS--100%............................... $150,950,098
============
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $111,154,031 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost....................................... $ 41,451,115
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value.......................................... (2,518,203)
------------
Net unrealized appreciation.......................... $ 38,932,912
============
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States or Canada.
(e) Denominated in Canadian dollars.
See accompanying notes to financial statements.
65
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $150,086,943
Cash................................................. 3,545
Receivable for:
Fund shares sold..................................... 45,938
Dividends and interest............................... 1,027,938
------------
151,164,364
LIABILITIES
Payable for:
Fund shares redeemed................................. $74,343
Foreign withholding taxes............................ 282
Miscellaneous........................................ 16,591
Accrued expenses:
Management fees...................................... 61,555
Deferred trustees' fees.............................. 30,097
Other expenses....................................... 31,398
-------
214,266
------------
NET ASSETS............................................ $150,950,098
============
Net Assets consist of:
Capital paid in...................................... $108,119,183
Undistributed net investment income.................. 2,793,804
Accumulated net realized gains....................... 1,104,183
Unrealized appreciation on investments............... 38,932,928
------------
NET ASSETS............................................ $150,950,098
============
Computation of offering price:
Net asset value and redemption price per share
($150,950,098 divided by 877,150 shares of
beneficial interest)................................ $ 172.09
============
Identified cost of investments....................... $111,154,031
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $1,286,210(a)
Interest............................................ 1,929,822
----------
3,216,032
EXPENSES
Management fees..................................... $ 372,228
Trustees' fees and expenses......................... 11,149
Custodian........................................... 43,055
Audit and tax services.............................. 7,700
Legal............................................... 6,150
Printing............................................ 22,909
Miscellaneous....................................... 4,967
----------
Total expenses..................................... 468,158
----------
NET INVESTMENT INCOME................................ 2,747,874
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments--net.................................... 793,554
Foreign currency transactions--net.................. (45,625)
----------
Total realized gain on investments and foreign
currency transactions............................. 747,929
----------
Unrealized appreciation on:
Investments--net.................................... 4,164,356
Foreign currency transactions--net.................. (88)
----------
Total unrealized appreciation on investments and
foreign currency transactions..................... 4,164,268
----------
Net gain on investment transactions.................. 4,912,197
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $7,660,071
==========
(a) Net of foreign taxes of: $10,837.
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 5,487,603 $ 2,747,874
Net realized gain on investments and foreign
currency transactions............................ 2,566,425 747,929
Unrealized appreciation on investments, and
foreign currency transactions.................... 28,568,247 4,164,268
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 36,622,275 7,660,071
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (5,487,603) 0
In excess of net investment income................ (212,274) 0
Net realized gain on investments.................. (764,206) 0
------------ ------------
(6,464,083) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 22,221,525 10,086,880
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 5,699,877 0
Distributions from net realized gain.............. 764,206 0
------------ ------------
28,685,608 10,086,880
Cost of shares redeemed........................... (33,185,396) (14,332,589)
------------ ------------
DECREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... (4,499,788) (4,245,709)
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 25,658,404 3,414,362
NET ASSETS
Beginning of the period........................... 121,877,332 147,535,736
------------ ------------
End of the period................................. $147,535,736 $150,950,098
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 85 $ 45,930
============ ============
End of the period................................. $ 45,930 $ 2,793,804
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 150,563 60,278
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 35,150 0
Distributions from net realized gain.............. 4,713 0
------------ ------------
190,426 60,278
Redeemed.......................................... (223,554) (85,395)
------------ ------------
Net change........................................ (33,128) (25,117)
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $112.79 $127.87 $ 130.26 $ 137.18 $ 130.30 $ 163.52
------- ------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 6.41 5.14 4.35 5.42 6.34 3.13
Net Realized and
Unrealized Gain (Loss)
on Investments........ 16.23 3.45 9.58 (6.92) 34.33 5.44
------- ------- -------- -------- -------- --------
Total From Investment
Operations............ 22.64 8.59 13.93 (1.50) 40.67 8.57
------- ------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... (6.41) (5.13) (4.36) (5.38) (6.34) 0.00
Distribution in Excess
of Net Investment
Income................ 0.00 0.00 0.00 0.00 (0.23) 0.00
Distributions From Net
Realized Capital
Gains................. (1.15) (1.07) (2.65) 0.00 (0.88) 0.00
------- ------- -------- -------- -------- --------
Total Distributions.... (7.56) (6.20) (7.01) (5.38) (7.45) 0.00
------- ------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $127.87 $130.26 $ 137.18 $ 130.30 $ 163.52 $ 172.09
======= ======= ======== ======== ======== ========
TOTAL RETURN (%)........ 20.17 6.70 10.65 (1.11) 31.26 5.24(b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.55 0.54 0.53 0.54 0.64 0.63(a)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 5.45 5.32 3.65 3.98 4.06 3.69(a)
Portfolio Turnover Rate
(%).................... 36 36 22 76 51 64(a)
Average Commission Rate
(c).................... -- -- -- -- -- $ 0.0555
Net Assets, End of
Period (000)........... $49,995 $77,575 $121,339 $121,877 $147,536 $150,950
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
See accompanying notes to financial statements.
67
<PAGE>
ZENITH SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
PORTFOLIO MANAGERS: STEVEN GUTERMAN, PETER WILBY AND DAVID SCOTT;
SALOMON BROTHERS ASSET MANAGEMENT INC
----------------------------------------
- ----------------- ----------------- MARKET REVIEW
----------------------------------------
[PHOTO OF STEVEN [PHOTO OF PETER The Series maintained its sector
GUTERMAN APPEARS WILBY APPEARS weightings in emerging market and high
HERE] HERE] yield debt securities throughout the
first six months of the year. Credit
quality continues to improve due to
further strides made by U.S.
corporations to strengthen balance
sheets by posting higher earnings and
paying down debt. The emerging markets
sector continues to be viewed
positively and the economic outlook
for Latin American countries appears
- ----------------- ----------------- to be especially attractive. Exposure to
- ----------------- Eastern European debt was reduced at the start of the
second quarter in order to reap profits from a strong
performance in the first quarter. The Series also took
some gains in the non-US investment grade sector by
shifting assets out of Canadian government bonds which had
[PHOTO OF rallied relative to US Treasuries on further strides
DAVID SCOTT towards budget deficit reduction at both the Federal and
APPEARS HERE] provincial level. The investment grade sector was
positioned defensively throughout most of the first six
months as interest rates tended to spike higher each month
with the release of strong monthly employment reports and
then rally back sporadically with other, more ambiguous
- ----------------- data.
- -------------------------------------------------------------------------------
OUTLOOK AND STRATEGY
- -------------------------------------------------------------------------------
Signs of U.S. economic strength emerged in the first half of the year,
suggesting that an accelerated pace of growth could be sustained into the
third quarter. Fueled by gains in consumption, housing, business investment
and net exports, the faster pace of growth pushed interest rates higher. We
continue to believe, however, that this stepped-up rebound will prove self-
limiting. GDP growth will likely peak and then slow toward trend levels in the
second half of the year. The high yield and emerging markets debt sectors
continue to offer attractive risk/reward opportunities and we expect to
maintain our allocations to those sectors. In the investment-grade portion of
the portfolio, we expect allocations to continue underweighting Treasuries and
overweighing mortgages and corporate bonds.
A $10,000 Investment Compared to an Index
[GRAPH APPEARS HERE]
Strategic Bond Lehman Aggregate FUND FACTS
Opp. Series Bond/3/
10/31/94 $10,000 $10,000 GOAL: A high level of total
12/31/94 9,860 10,047 return consistent with the
12/31/95 11,771 11,903 preservation of capital.
06/30/96 12,242 11,758
START DATE: October 31, 1994
Average Annual Return SIZE: $18 million as of June
30, 1996
Strategic Lipper Variable General
Bond Opp. Bond Fund Average/10/ MANAGERS: Steven Guterman,
6 mos.* 5.53% 0.70% Peter Wilby and David Scott
1 year 12.16% 7.56% have managed the Series
Since since its inception in
inception 13.91% n/a October 1994. Mr. Guterman,
*not annualized Mr. Wilby and Mr. Scott have
managed the Salomon Brothers
Investment Series--Strategic
Bond Series since March
1995, and the North American
Funds--Strategic Series
since March 1993. Mr. Wilby
also manages the Salomon
Brothers Investment Series--
High Yield Bond Series.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
68
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
BONDS & NOTES--91.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--36.8%
$ 125,000 Airplane Pass Thru Trust
10.875%, 3/15/19....... $ 130,313
150,000 Alvey Systems, Inc.
11.375%, 1/31/03....... 155,063
150,000 American Media
Operations
11.625%, 11/15/04...... 149,437
150,000 American Skiing Co.
12.000%, 7/15/06....... 148,125
150,000 Americold Corp. 12.875%,
5/01/08................ 153,375
200,000 Arch Communications
Group
0/10.875%, 3/15/08(q).. 105,750
150,000 Argosy Gaming Co.
13.250%, 6/01/04....... 153,375
100,000 Berry Plastics 12.250%,
4/15/04................ 108,125
150,000 Borg Warner Security
Corp.
9.125% 5/01/03......... 140,438
150,000 Cablevision Systems
Corp.
10.500%, 5/15/16....... 145,875
150,000 Clark Schwebel, Inc.
10.500%, 4/15/06....... 154,875
150,000 Cobb Theaters 10.625%,
3/01/03................ 153,750
150,000 Cole National Group,
Inc.
11.250%, 10/01/01...... 157,125
240,000 CS Wireless Systems,
Inc.
0/11.375%, 3/01/06(q).. 124,800
150,000 Empress River Casino
Financial Corp.
10.750%, 4/01/02....... 156,750
100,000 Excide Electronics
Group, Inc.
11.500%, 3/15/06....... 102,500
100,000 Finlay Fine Jewelry
Corp.
10.625%, 5/01/03....... 99,875
100,000 Flagstar Corp. 10.750%,
9/15/01................ 87,500
150,000 Four M Corp. 12.000%,
6/01/06................ 154,875
150,000 Hayes Wheels
International, Inc.
11.000%, 7/15/06....... 152,062
100,000 Herff Jones, Inc.
11.000%, 8/15/05....... 104,875
150,000 Hines Horticulture
11.750%, 10/15/05...... 155,438
150,000 HMH Properties, Inc.
9.500%, 5/15/05........ 143,625
125,000 In Flight Phone Corp.
14.000, 5/15/02(o)..... 45,000
125,000 Intelcom Group USA, Inc.
0/13.500%, 9/15/05(q).. 75,469
150,000 Jitney Jungle Stores
12.000%, 3/01/06....... 153,187
150,000 Jordan Industries, Inc.
10.375% 8/01/03........ 143,437
150,000 KCS Energy, Inc.
11.000%, 1/15/03....... 158,250
250,000 Marcus Cable Co.
Zero Coupon 12/15/05... 155,000
180,000 Mellon Financial Co.
9.750%, 6/15/01........ 201,191
150,000 Norcal Waste Systems,
Inc.
12.500%, 11/15/05...... 157,875
150,000 Paracelsus Healthcare
Corp.
9.875%, 10/15/03....... 151,125
250,000 Peoples Choice TV Corp.
0/13.125%, 6/01/04(q).. 147,500
150,000 Remington Product Co.
11.000%, 5/15/06....... 149,438
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 150,000 Renco Metals, Inc. 12.000%, 7/15/00.................. $ 169,313
150,000 Revlon Worldwide Corp.
Zero Coupon 3/15/98................................. 125,062
150,000 Rogers Cablesystems, LTD
10.000%, 3/15/05.................................... 150,000
150,000 Selmer, Inc. 11.000%, 5/15/05........................ 156,937
150,000 Smiths Food & Drug 11.250%, 5/15/07.................. 152,250
125,000 Southdown, Inc. 10.000%, 3/01/06..................... 123,438
150,000 Specialty Equipment Companies, Inc.
11.375% 12/01/03.................................... 156,562
100,000 Specialty Retailers, Inc.
11.000%, 8/15/03.................................... 102,000
150,000 Stone Container Corp.
10.750%, 10/01/02................................... 151,875
150,000 Talley Manufacturing & Technology, Inc. 10.750%,
10/15/03............................................ 152,062
150,000 Telex Communications, Inc.
12.000%, 7/15/04.................................... 159,750
150,000 Trump Atlantic City Associates
11.250%, 5/01/06.................................... 151,125
150,000 Twin Laboratories, Inc.
10.250%, 5/15/06.................................... 152,813
100,000 United States Leasing International
8.450%, 1/25/05..................................... 106,303
-----------
6,684,888
-----------
FOREIGN CORPORATE BONDS--5.0%
150,000 Algoma Steel, Inc.
12.375%, 7/15/02(e)................................. 147,000
250,000 Diamond Cable Communication 0/11.750%,
12/15/05(i)(q)...................................... 148,125
300,000 International Semi Tech.
Zero Coupon, 8/15/03(q)............................. 174,375
400,000 Korea Development Bank
9.600%, 12/01/00.................................... 440,588
-----------
910,088
-----------
FOREIGN GOVERNMENT BONDS--26.0%
940,500 Argentina (Republic of)
6.3125%, 3/31/05(c)................................. 720,423
186,000 Brazil (Federal Republic of)
6.375%, 1/01/01(d).................................. 168,098
595,336 Brazil (Federal Republic of) C Bonds 4.000%,
4/15/14(d).......................................... 368,066
500,000 Brazil (Federal Republic of)
6.500%, 4/15/06(d).................................. 404,375
250,000 Brazil (Federal Republic of)
5.000%, 4/15/24(d).................................. 137,812
60,000 Denmark (Kingdom of)
9.000%, 11/15/98(f)................................. 11,110
30,000 Denmark (Kingdom of)
7.000%, 12/15/04(f)................................. 5,067
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FOREIGN GOVERNMENT BONDS--(CONTINUED)
$ 50,000 Dutch Government
6.250%, 7/15/98(k).................................. $ 30,519
500,000 Ecuador (Republic of)
3.250%, 2/28/25(g).................................. 179,375
210,000 Germany (Federal Republic of)
6.000%, 2/20/98(h).................................. 142,297
1,150,000 Germany (Federal Republic of)
6.000%, 4/20/98(h).................................. 779,980
220,000 Germany (Federal Republic of)
6.000%, 2/16/06(h).................................. 138,902
500,000 Morocco (Kingdom of)
4.375%, 1/01/09..................................... 363,750
250,000 Philippines (Republic of)
6.250%, 12/01/17(l)................................. 200,312
200,000 Poland (Republic of) 3.750%, 10/27/14(m)............. 150,500
250,000 United Mexican States
6.250%, 12/31/19(j)................................. 161,875
430,000 United Mexican States
11.500%, 5/15/26.................................... 391,154
500,000 Venezuela (Republic of)
6.563%, 12/18/07(n)................................. 353,812
-----------
4,707,427
-----------
U.S. GOVERNMENT BONDS--23.3%
500,000 Federal Home Loan Bank
6.490%, 9/08/97..................................... 503,275
32,256 Federal National Mortgage Association 13.000%,
11/01/15............................................ 37,840
300,000 Federal National Mortgage Association 6.500%,
3/01/25............................................. 280,593
149,858 Federal National Mortgage Association 7.000%,
5/01/26............................................. 144,144
24,683 Government National Mortgage Association 7.000%,
4/15/24............................................. 23,688
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 574,560 Government National Mortgage Association 7.000%,
5/15/26............................................ $ 551,400
150,000 United States Treasury Bonds
6.875%, 8/15/25.................................... 148,476
90,000 United States Treasury Notes
6.125%, 5/31/97.................................... 90,300
960,000 United States Treasury Notes
5.625%, 2/28/01.................................... 927,754
100,000 United States Treasury Notes
6.250%, 4/30/01.................................... 99,088
1,400,000 United States Treasury Notes
6.875%, 5/15/06.................................... 1,415,316
-----------
4,221,874
-----------
Total Bonds & Notes
(Identified Cost $16,422,142)...................... 16,524,277
-----------
SHORT-TERM INVESTMENT--12.2%
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$2,211,000 Repurchase agreement with Merrill Lynch & Co. dated
6/28/96 at 5.300% to be repurchased at $2,211,977
on 7/1/96 collateralized by $2,205,000 U.S.
Treasury Bond 7.250% due 5/15/16 with a value of
$2,253,951......................................... 2,211,000
-----------
Total Short-Term Investment
(Identified Cost $2,211,000)....................... 2,211,000
-----------
Total Investments--103.3%
(Identified Cost $18,633,142)(b)................... 18,735,277
Other assets less liabilities(p).................... (598,047)
-----------
TOTAL NET ASSETS--100%.............................. $18,137,230
===========
</TABLE>
See accompanying notes to financial statements.
70
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
CURRENCY CONTRACTS OUTSTANDING AT JUNE 30, 1996
<TABLE>
<CAPTION>
LOCAL AGGREGATE UNREALIZED
CURRENCY DELIVERY CURRENCY FACE TOTAL APPRECIATION/
CONTRACT DATE AMOUNT VALUE VALUE DEPRECIATION
<S> <C> <C> <C> <C> <C>
Australian Dollar (bought) 07/22/96 26,824 $ 21,191 $ 21,049 $ (142)
Australian Dollar (sold) 07/22/96 27,689 21,542 21,729 (187)
Belgian Franc (sold) 07/22/96 115,822 3,780 3,706 74
Canadian Dollar (bought) 07/22/96 218,488 159,830 160,110 280
Canadian Dollar (sold) 07/22/96 216,635 158,939 158,752 187
Deutsche Mark (bought) 07/22/96 78,967 51,720 52,008 288
Deutsche Mark (bought) 07/22/96 1,034,620 680,000 681,412 1,412
Deutsche Mark (sold) 07/22/96 427,968 286,842 281,864 4,978
Deutsche Mark (sold) 07/22/96 108,112 71,692 71,204 488
Danish Krone (bought) 07/22/96 422,907 72,540 72,262 (278)
Danish Krone (sold) 07/22/96 552,452 95,845 94,398 1,447
Pound Sterling (bought) 07/22/96 167,397 258,963 259,916 953
Pound Sterling (sold) 07/22/96 153,141 234,719 237,780 (3,061)
Pound Sterling (sold) 07/22/96 43,864 66,673 68,107 (1,434)
Pound Sterling (sold) 07/22/96 78,089 117,680 121,247 (3,567)
Pound Sterling (sold) 07/22/96 58,493 87,447 90,821 (3,374)
Netherlands Guilder
(bought) 07/22/96 259,487 153,452 152,411 (1,041)
Netherlands Guilder (sold) 07/22/96 315,446 189,230 185,278 3,952
-------
Total Appreciation on Forward Currency contracts................ $ 975
=======
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized appreciation on investments based on
cost of $18,633,142 for federal income tax purposes was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost.............. $ 284,901
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (182,766)
---------
Net unrealized appreciation................................... $ 102,135
=========
</TABLE>
(c) Denominated in Argentinian australs.
(d) Denominated in Brazilian cruzerios.
(e) Denominated in Canadian dollars.
(f) Denominated in Danish kroner.
(g) Denominated in Ecuador sucre.
(h) Denominated in German marks.
(i) Denominated in Great British pound sterling.
(j) Denominated in Mexican pesos.
(k) Denominated in Netherland guilders.
(l) Denominated in Philippine pesos.
(m) Denominated in Polish zloty.
(n) Denominated in Venezuelan bolivar.
(o) Rights attached.
(p) Including deposits in foreign denominated currencies with a value of
$29,987 and a cost of $29,744.
(q) Step Bond; Coupon rate is zero or below market for an initial period then
increases to a higher coupon rate at a specified date and rate.
See accompanying notes to financial statements.
71
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $18,735,277
Cash................................................... 325
Foreign cash at value.................................. 29,987
Receivable for:
Fund shares sold....................................... 33,454
Securities sold........................................ 1,560,868
Open forward currency
contracts--net........................................ 975
Dividends and interest................................. 286,768
Foreign withholding taxes.............................. 432
Due from advisor....................................... 5,128
Unamortized organization expense....................... 6,706
-----------
20,659,920
LIABILITIES
Payable for:
Securities purchased................................... $2,460,332
Fund shares redeemed................................... 28,363
Accrued expenses:
Management fees........................................ 4,970
Other expenses......................................... 29,025
----------
2,522,690
-----------
NET ASSETS.............................................. $18,137,230
===========
Net Assets consist of:
Capital paid in........................................ $17,235,189
Undistributed net investment income.................... 592,640
Accumulated net realized gains......................... 206,169
Unrealized appreciation on investments, forward
contracts and foreign currency........................ 103,232
-----------
NET ASSETS.............................................. $18,137,230
===========
Computation of offering price:
Net asset value and redemption price per share
($18,137,230 divided by 1,584,503 shares of beneficial
interest).............................................. $ 11.45
===========
Identified cost of investments.......................... $18,633,142
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................. $ 150
Interest................................................... 599,545
--------
599,695
EXPENSES
Management fees............................................ $ 43,905
Trustees' fees and expenses................................ 6,384
Custodian.................................................. 29,606
Audit and tax services..................................... 9,900
Legal...................................................... 5,411
Printing................................................... 1,411
Amortization of organization expenses...................... 1,001
Miscellaneous.............................................. 5,302
--------
Total expenses............................................ 102,920
Less expenses assumed by the
investment adviser....................................... (45,511) 57,409
-------- --------
NET INVESTMENT INCOME....................................... 542,286
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments--net........................................... 172,540
Foreign currency transactions--net......................... 13,689
--------
Total realized gain on investments and foreign currency
transactions............................................. 186,229
--------
Unrealized appreciation (depreciation) on:
Investments--net........................................... (65,644)
Foreign currency transactions--net......................... 15,382
--------
Total unrealized depreciation on investments and foreign
currency transactions.................................... (50,262)
--------
Net gain on investment transactions......................... 135,967
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $678,253
========
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 460,904 $ 542,286
Net realized gain on investments and foreign
currency transactions........................ 248,441 186,229
Unrealized appreciation (depreciation) on in-
vestments, and foreign currency transactions. 208,090 (50,262)
---------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS........ 917,435 678,253
---------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... (435,233) 0
Net realized gain on investments.............. (170,001) 0
---------- -----------
(605,234) 0
---------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................. 9,873,846 10,055,378
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income...... 435,233 0
Distributions from net realized gain.......... 170,001 0
---------- -----------
10,479,080 10,055,378
Cost of shares redeemed....................... (4,757,322) (2,080,525)
---------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................... 5,721,758 7,974,853
---------- -----------
TOTAL INCREASE IN NET ASSETS.................. 6,033,959 8,653,106
NET ASSETS
Beginning of the period....................... 3,450,165 9,484,124
---------- -----------
End of the period............................. $9,484,124 $18,137,230
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period....................... $ 0 $ 50,354
========== ===========
End of the period............................. $ 50,354 $ 592,640
========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 919,222 895,511
Issued in connection with the reinvestment of:
Distributions from net investment income...... 40,562 0
Distributions from net realized gain.......... 15,844 0
---------- -----------
975,628 895,511
Redeemed...................................... (455,476) (185,485)
---------- -----------
Net change.................................... 520,152 710,026
========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED SIX MONTHS
THROUGH DECEMBER 31, ENDED
DECEMBER 31, 1994 1995 JUNE 30, 1996
------------------- ------------ -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $10.00 $ 9.74 $ 10.85
------ ------ -------
Income From Investment
Operations
Net Investment Income.......... 0.12 0.58 0.87
Net Realized and Unrealized
Gain (Loss) on Investments.... (0.26) 1.30 (0.27)
------ ------ -------
Total From Investment
Operations.................... (0.14) 1.88 0.60
------ ------ -------
Less Distributions
Distributions From Net
Investment Income............. (0.12) (0.55) 0.00
Distributions From Net Realized
Capital Gains................. 0.00 (0.22) 0.00
------ ------ -------
Total Distributions............ (0.12) (0.77) 0.00
------ ------ -------
Net Asset Value, End of Period.. $ 9.74 $10.85 $ 11.45
====== ====== =======
TOTAL RETURN (%) (1.40)(c) 19.38 5.53(c)
Ratio of Operating Expenses to
Average Net Assets (%)......... 0.85 (b) 0.85 0.85(b)
Ratio of Net Investment Income
to Average Net Assets (%)...... 7.05 (b) 8.39 7.91(b)
Portfolio Turnover Rate (%)..... 403 (b) 202 219(b)
Net Assets, End of Period (000). $3,450 $9,484 $18,137
The ratios of expenses to
average net assets without
giving effect to the voluntary
expense agreement described in
Note 4 to the Financial
Statements would have been (%). 2.01 (b) 2.44 1.52(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
See accompanying notes to financial statements.
73
<PAGE>
ZENITH BACK BAY BOND INCOME SERIES
PORTFOLIO MANAGER: CATHY BUNTING
BACK BAY ADVISORS(R), L.P.
- ---------------- MARKET REVIEW
[PHOTO OF CATHY
BUNTING APPEARS After rewarding investors with price gains for much of
HERE] 1995, the bond market reversed direction during the first
six months of 1996. Unexpected evidence of economic
strength fueled a climb in interest rates, tempering last
year's strong performance in the bond markets. Employment
data released in March were key among a host of indicators
signaling that the economy was growing at a surprisingly
strong pace. The good news is that inflation levels
- ---------------- remained tame in spite of the economy's vigor.
Though rising interest rates create challenging conditions for fixed income
investments, corporate bonds fared markedly better than government debt in the
first half of the year. The favorable economic landscape helped cushion price
declines of corporate issues in the face of rising interest rates. However,
the Series held its own returning -1.61% compared to the Lehman Brothers
Intermediate Government/Corporate Bond Index/4/ which returned -0.21% over the
same period.
The Series' focus on corporate bonds worked to its advantage during the past
six months. With 60%-70% of the portfolio devoted to corporate issues, the
Series managed to evade the steeper declines that beset government issues. All
corporate sectors benefited from the favorable economic environment and
institutional investors' increased participation in the corporate bond market,
helping to stabilize the prices of their debt.
The Series took advantage of opportunities in select sectors, namely
telephone and utilities. Increasingly competitive conditions in the utility
sector prompted consolidations and restructuring, rendering these bonds more
attractive. Meanwhile, with no new supply to speak of, the balance between
supply and demand shifted in favor of utilities. Supply, in fact, had been
shrinking as many utility companies repurchased their outstanding debt. The
lower quality, BBB rated bonds continue to offer good value in this sector.
The portfolio's Canadian holdings also worked well for the Series. Real
(inflation-adjusted) returns on Canadian bonds were attractive as the
inflation rate in Canada remained low. Further, the country's Quebec
Separatist referendum issue--a major source of volatility in Canada's
securities markets during 1995--has been postponed until 1998 or beyond,
improving overall investor sentiment. The sounder fiscal situation in Canada
added further to the fundamental merit of Canadian debt.
Also contributing positively to the Series' performance was the average
credit quality of the portfolio--slightly lower relative to the average
quality of the Lehman Aggregate Bond Index/3/. Taking a bit more credit risk
during the six months was amply rewarded, as lower-grade bonds generally
performed better than their higher-grade counterparts.
Positives aside, volatility in the cable sector took a toll on the Series'
six-month results. Specifically, Moody's--an independent bond rating agency--
unexpectedly downgraded the credit quality of TCI Communications to below
investment grade (bonds rated BBB and above are considered to be "investment
grade"). The sober effects reverberated throughout the sector, hampering the
performance of cable/media bonds as a group. We took advantage of the
consequent price weakness in the sector and added to our holdings of TCI.
As always, intensive credit-by-credit research precedes all our investment
decisions. One of the largest cable companies in the nation, TCI has
demonstrated its commitment to trying to regain investment grade ratings, it
has implemented some structural changes to help improve its balance sheet.
That said, we believe the investment viability of TCI issues, as well as other
select cable bonds, remain fundamentally intact.
During the period, the 5.8 year average duration of the Series was modestly
longer than the 4.8 year average of the Lehman Aggregate Bond Index/3/.
(Duration is a more precise measure than maturity of the sensitivity of bond
prices to changes in interest rates. Essentially, the longer a bond's or a
portfolio's duration, the more pronounced its reactions to interest rate
movements.) While the Series' longer duration boosted its performance last
year amidst falling interest rates, it hampered returns this year as rates
rose.
74
<PAGE>
On the other hand, the Series' duration structure helped boost its current
yield in a rising interest rate environment. During the second half, we plan
to maintain our current duration strategy, anticipating that economic growth
will slow, while inflation levels remain subdued.
- ----------------------------------------------------------------------------
OUTLOOK AND STRATEGY
- ----------------------------------------------------------------------------
Whether the recent pace of economic growth will translate into escalating
inflation rates is an open question. In fact, definitive signs have yet to
emerge indicating whether the recent pace of economic growth is sustainable.
Job growth--a key force behind the economy's strength--bears watching.
Though the direction of interest rates over the short term is unclear, a
portfolio of quality fixed-income investments can still provide income-
oriented investors with a reliable source of regular income. In the months
ahead, thorough credit research will remain key in helping us position the
Series in the securities with potential to deliver an attractive stream of
income and a steady share price.
A $10,000 Investment Compared to an Index FUND FACTS
[GRAPH APPEARS HERE] GOAL: A high level of current
income consistent with the
Bond Lehman Cost protection of capital and
Income Gov't/ of moderate investment risk.
Series Corp./4/ Living/1/
6/30/86 $10,000 $10,000 $10,000 START DATE: August 26, 1983
12/31/86 10,691 10,510 10,091 SIZE: $165.5 million as of June
12/31/87 10,843 10,896 10,539 30, 1996
12/31/88 11,751 11,635 11,005
12/31/89 13,196 13,119 11,516 MANAGER: Catherine Bunting,
12/31/90 14,263 14,322 12,219 since 1989; portfolio manager of
12/31/91 16,824 16,417 12,594 New England Bond Income Fund
12/31/92 18,201 17,594 12,959 since 1989, she joined Back Bay
12/31/93 20,496 19,129 13,315 Advisors in April 1987.
12/31/94 19,807 18,756 13,671
12/31/95 24,006 21,627 14,018
06/30/96 23,276 21,582 14,301
Average Annual Return
Zenith Lipper Variable A-Rated
Bond Income Corp. Bond Fund Avg./7/
6 mos.* -1.61% -2.18%
1 year 5.48% 4.48%
5 years 9.64% 8.29%
10 years 8.97% n/a
*not annualized
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
75
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
BONDS & NOTES--94.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS AND NOTES--69.9%
BROADCASTING--4.7%
$5,520,000 Continental Cablevision, Inc., 11.000%, 6/01/07..... $ 6,244,500
1,500,000 Continental Cablevision, Inc., 9.500%, 8/01/13...... 1,631,250
------------
7,875,750
------------
FINANCIAL--7.8%
4,000,000 American General Financing, 8.450%, 10/15/09........ 4,433,200
4,160,000 Associates Corp. of North America, 8.550%, 7/15/09.. 4,640,771
3,750,000 Toronto Dominion Bank, 7.875%, 8/15/04.............. 3,813,375
------------
12,887,346
------------
FOREIGN--6.7%
4,500,000 British Columbia Province Canada, 7.750%, 06/16/03.. 3,346,177
4,000,000 Government of Canada, 9.000%, 12/01/04(c)........... 3,192,851
2,250,000 Government of Canada, 7.500%, 09/01/00(c)........... 1,685,102
2,500,000 Government of Canada, 8.000%, 06/01/23(c)........... 1,809,126
1,300,000 Ontario Hydro, 8.875%, 10/25/05(c).................. 1,009,778
------------
11,043,034
------------
LEISURE--2.8%
4,500,000 Time Warrner Inc. 9.150%, 2/01/23................... 4,688,775
------------
OIL AND GAS--3.6%
3,290,000 Oryx Energy Co. 10.000%, 4/01/01.................... 3,578,467
2,250,000 Mitchell Energy & Development Corp., 9.250%,
1/15/02............................................ 2,391,143
------------
5,969,610
------------
PUBLISHING--3.0%
2,150,000 Golden Books Publishing, Inc., 7.650%, 9/15/02...... 1,838,250
2,800,000 News America Holdings, Inc., 9.500%, 7/15/24........ 3,097,276
------------
4,935,526
------------
RAILROADS--2.5%
4,000,000 Southern Pacific Rail Corp., 9.375%, 8/15/05........ 4,200,000
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
TELECOMMUNICATIONS--11.1%
$1,300,000 360 Communications, 7.125%, 3/01/03................. $ 1,249,027
4,250,000 AT&T Corp., 8.350%, 1/15/25......................... 4,450,388
3,000,000 Bellsouth Telecomm, Inc., 5.850%, 11/15/45.......... 2,925,480
1,500,000 MCI Communications Corp., 7.750%, 3/23/25........... 1,470,975
5,035,000 Tele-Communications, Inc., 9.250%, 1/15/03.......... 5,009,976
3,500,000 US West Communication, Inc., 7.200%, 11/10/26....... 3,237,675
------------
18,343,521
------------
UTILITIES--(DIVERSIFIED)--8.4%
2,200,000 Long Island Lighting Co., 8.900%, 7/15/19........... 1,992,474
2,250,000 Long Island Lighting Co., 9.000%, 11/01/22.......... 2,064,848
625,000 New York State Electric & Gas Co., 9.875%, 2/01/20.. 658,394
4,250,000 New York State Electric & Gas Co., 8.875%, 11/01/21. 4,445,755
5,000,000 Tennessee Valley Authority, 6.125%, 7/15/03......... 4,784,050
------------
13,945,521
------------
UTILITIES--(ELECTRIC)--8.2%
3,450,000 Alabama Power Co., 8.750%, 12/01/21................. 3,553,500
5,700,000 Arizona Public Service Co., 8.000%, 12/30/15........ 5,714,706
1,700,000 Texas Utilities Electric Co., 8.875%, 2/01/22....... 1,789,760
2,400,000 Texas Utilities Electric Co., 8.500%, 8/01/24....... 2,464,920
------------
13,522,886
------------
YANKEE--11.1%
1,500,000 Argentina Republic, 9.250%, 2/23/01................. 1,434,375
900,000 British Columbia Hydro & Power, 12.500%, 9/01/13.... 1,040,805
1,000,000 British Columbia Hydro & Power, 12.500%, 1/15/14.... 1,173,240
1,750,000 Canadian Pacific Limited, 8.850%, 06/01/22.......... 1,839,618
1,500,000 Finland Republic, 6.950%, 2/15/26................... 1,412,385
1,500,000 Hydro Quebec, 7.500%, 4/01/16....................... 1,457,700
1,000,000 Maxus Energy Corp., 11.500%, 11/15/15............... 1,043,750
</TABLE>
See accompanying notes to financial statements.
76
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
YANKEE--(CONTINUED)
$ 450,000 Petroleos Mexicanos,
5.788%, 4/07/97, 144A(d),(e)....................... $ 451,125
7,600,000 Petroleos Mexicanos, 8.625%, 12/01/23............... 5,782,308
2,500,000 Province of Quebec, 8.625%, 12/01/26................ 2,701,250
------------
18,336,556
------------
Total Corporate Bonds and Notes
(Identified Cost $101,828,372)..................... 115,748,525
------------
U.S. GOVERNMENT AND AGENCIES--24.9%
49,826 Federal Home Loan Bank, 9.000%, 5/01/01............. 51,508
18,974 Federal Home Loan Bank, 9.000%, 9/01/01............. 19,614
1,500,000 Federal National Mortgage Association, 7.850%,
9/10/04............................................ 1,513,560
8,286,789 Government National Mortgage Association,
7.000% with various maturities
to 2025............................................ 7,952,748
6,811,800 Government National Mortgage Association,
7.500% with various maturities
to 2025............................................ 6,718,138
2,116,083 Government National Mortgage Association,
8.5000% with various maturities
to 2022............................................ 2,177,576
244,829 Government National Mortgage Association,
9.000%, 10/15/16................................... 256,458
2,500,000 Student Loan Marketing Association, 7.820%,
10/14/99........................................... 2,508,575
1,500,000 U.S. Treasury Notes,
6.375%, 7/15/99.................................... 1,504,230
2,500,000 U.S. Treasury Notes,
8.500%, 11/15/00................................... 2,694,225
3,500,000 U.S. Treasury Notes,
8.000%, 5/15/01.................................... 3,723,335
7,000,000 U.S. Treasury Notes,
5.750%, 8/15/03.................................... 6,669,390
5,500,000 U.S. Treasury Notes,
6.500%, 8/15/05.................................... 5,425,255
------------
Total U.S. Government and Agencies (Identified Cost
$57,696,766)....................................... 41,214,612
------------
Total Bonds and Notes
(Identified Cost $159,525,138)..................... 156,963,137
------------
</TABLE>
SHORT-TERM INVESTMENT--3.2%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
COMMERCIAL PAPER--3.2%
$5,365,000 American Express Credit Corp. 5.000%, 1/02/96...... $ 5,365,000
------------
Total Short-Term Investment (Identified Cost
$5,365,000)....................................... 5,365,000
------------
Total Investments---98.1%
(Identified Cost $164,890,138)(b)................. 162,328,137
Other assets less liabilities...................... 3,211,141
------------
TOTAL NET ASSETS--100%............................. $165,539,278
============
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized depreciation on investments based on
cost of $164,890,138 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $ 748,907
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (3,310,908)
------------
Net unrealized depreciation........................ $ (2,562,001)
============
As of June 30, 1996, the Series had a net tax basis capital
loss carryforward as follows:
Expiring December 31, 2002......................... $ 362,321
(c) Denominated in Canadian dollars.
(d) Security exempt from registration under rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(e) Variable or floating rate security. Rate disclosed is as of June 30,
1996.
</TABLE>
See accompanying notes to financial statements.
77
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................ $162,328,137
Cash................................................ 5,913
Receivable for:
Fund shares sold.................................... 106,074
Securities sold..................................... 1,706,208
Dividends and interest.............................. 3,375,773
------------
167,522,105
LIABILITIES
Payable for:
Securities purchased................................ $1,687,271
Fund shares redeemed................................ 151,609
Withholding taxes................................... 158
Accrued expenses:
Management fees..................................... 53,544
Deferred trustees' fees............................. 33,695
Other expenses...................................... 56,550
----------
1,982,827
------------
NET ASSETS........................................... $165,539,278
============
Net Assets consist of:
Capital paid in..................................... $161,935,969
Undistributed net investment income................. 5,927,287
Accumulated net realized gains...................... 238,039
Unrealized depreciation on investments.............. (2,562,017)
------------
NET ASSETS.......................................... $165,539,278
============
Computation of offering price:
Net asset value and redemption price per share
($165,539,278 divided by 1,548,292 shares of
beneficial interest)................................ $ 106.92
============
Identified cost of investments....................... $164,890,138
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................ $ 6,299,952
EXPENSES
Management fees..................................... $ 324,600
Trustees' fees and expenses......................... 12,511
Custodian........................................... 38,188
Audit and tax services.............................. 7,550
Legal............................................... 5,088
Printing............................................ 33,055
Miscellaneous....................................... 4,969
-----------
Total expenses..................................... 425,961
-----------
NET INVESTMENT INCOME................................ 5,873,991
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments--net.................................... 575,446
Foreign currency transactions--net.................. 4,452
-----------
Total realized gain on investments................. 579,898
-----------
Unrealized depreciation on:
Investments--net.................................... (9,116,191)
Foreign currency transactions--net.................. 444
-----------
Total unrealized depreciation on investments and
foreign currency transactions..................... (9,115,747)
-----------
Net loss on investment transactions.................. (8,535,849)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS........... $(2,661,858)
===========
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 10,335,393 $ 5,873,991
Net realized gain on investments and foreign
currency transactions............................ 1,559,812 579,898
Unrealized appreciation (depreciation) on
investments, and foreign currency transactions... 15,392,179 (9,115,747)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 27,287,384 (2,661,858)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (9,888,438) 0
------------ ------------
(9,888,438) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 46,886,957 28,541,278
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 9,888,437 0
------------ ------------
56,775,394 28,541,278
Cost of shares redeemed........................... (37,696,007) (23,052,092)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 19,079,387 5,489,186
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 36,478,333 2,827,328
NET ASSETS
Beginning of the period........................... 126,233,617 162,711,950
------------ ------------
End of the period................................. $162,711,950 $165,539,278
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 0 $ 53,292
============ ============
End of the period................................. $ 53,292 $ 5,927,287
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 440,564 267,108
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 91,832 0
------------ ------------
532,396 267,108
Redeemed.......................................... (356,518) (216,057)
------------ ------------
Net change........................................ 175,878 51,051
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 97.61 $103.44 $ 103.47 $ 106.14 $ 95.53 $ 108.67
------- ------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 8.53 7.96 5.70 7.05 7.34 3.79
Net Realized and
Unrealized Gain (Loss)
on Investments........ 8.90 0.51 7.38 (10.61) 12.85 (5.54)
------- ------- -------- -------- -------- --------
Total From Investment
Operations............ 17.43 8.47 13.08 (3.56) 20.19 (1.75)
------- ------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... (9.47) (6.87) (6.20) (7.05) (7.05) 0.00
Distributions in Excess
of Net Investment
Income................ 0.00 0.00 (0.05) 0.00 0.00 0.00
Distributions From Net
Realized Capital
Gains................. (2.13) (1.57) (4.16) 0.00 0.00 0.00
------- ------- -------- -------- -------- --------
Total Distributions.... (11.60) (8.44) (10.41) (7.05) (7.05) 0.00
------- ------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $103.44 $103.47 $ 106.14 $ 95.53 $ 108.67 $ 106.92
======= ======= ======== ======== ======== ========
TOTAL RETURN (%)........ 17.96 8.18 12.61 (3.36) 21.20 (1.61)(b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.45 0.44 0.43 0.44 0.55 0.52 (a)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 8.27 7.70 6.47 6.75 7.22 7.22 (a)
Portfolio Turnover Rate
(%).................... 193 71 177 82 73 103 (a)
Net Assets, End of
Period (000)........... $49,369 $83,057 $131,242 $126,234 $162,712 $165,539
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
As of January 1, 1993, the Bond Income Series discontinued the use of
equalization accounting.
See accompanying notes to financial statements.
79
<PAGE>
ZENITH SALOMON BROTHERS U.S. GOVERNMENT SERIES
PORTFOLIO MANAGERS: STEVEN GUTERMAN AND ROGER LAVAN;
SALOMON BROTHERS ASSET MANAGEMENT INC
- ------------------ ------------------ MARKET REVIEW
[PHOTO OF STEVEN [PHOTO OF ROGER Signs of U.S. economic strength
GUTTERMAN APPEARS LAVAN APPEARS emerged in the first half of the year,
HERE] HERE] suggesting that an accelerated pace of
growth could be sustained into the
third quarter. Fueled by gains in
consumption, housing, business
investment, and net exports, the
faster pace of growth pushed interest
rates higher. We continue to believe,
however, that this stepped-up rebound
will prove self-limiting. GDP growth
will likely peak and then slow toward
trend levels in the second half of the
- ------------------ ------------------ year.
The Series reported negative returns in the first half of the year due to
the sharp rise in interest rates. Portfolio duration varied between 3 and 4.5
years over the period while the average life was generally centered around 7
years. Portfolio holdings in the first half were mainly in U.S. Treasuries and
U.S. Agency mortgage securities. The relative weighting to mortgage securities
increased throughout the first half of the year.
OUTLOOK AND STRATEGY
In anticipation of high yields in the short-run, we positioned the Series
defensively with a neutral duration to our benchmark. During the second
quarter, the Series overweighted mortgage-backed securities. Mortgages
continue to look attractive as higher interest rates have reduced the
incentive for homeowners to refinance their mortgages. Barring a significant
rally, mortgages will continue to perform well in the coming months and will
be favored over Treasuries in the Series. Recent economic data such as new
home sales and the employment report continue to point to strong economic
growth and a possible increase in inflation. Therefore, we remain defensive on
the market with a short to neutral duration bias in the Series.
A $10,000 Investment Compared to an Index
[GRAPH APPEARS HERE]
Salomon Lehman Intermediate FUND FACTS
US Gov't Government/5/
10/31/94 $10,000 $10,000 GOAL: a high level of current
12/31/94 10,060 9,989 income consistent with the
12/31/95 11,571 11,430 preservation of capital and
06/30/96 11,445 11,446 maintenance of liquidity.
START DATE: October 31, 1994
Average Annual Return
Lipper Variable SIZE: $10.8 million as of June
US Gov't US Mortgage 30, 1996
Series and GNMA Average/17/
6 mos.* -1.09% -0.52% MANAGERS: Steven Guterman and
1 year 3.96% 4.69% Roger Lavan have managed the
Since Series since its inception in
inception 8.44% n/a October, 1994. Mr. Guterman and
*not annualized Mr. Lavan have also managed the
Salomon Bothers Investment
Series--U.S. Government Income
Series since March, 1995 and the
North American U.S. Government
Securities Fund since January,
1992. They both joined Salomon
Brothers Asset Management Inc in
1990.
Performance numbers are net of all Series expenses but do not include any
insurance, sales or administrative charges of the variable annuity or life
insurance contracts; if these charges were included, the returns shown would
be lower.
This information represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
80
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
BONDS & NOTES--92.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FEDERAL AGENCY--71.6%
$ 250,000 Federal Home Loan Banks
6.490%, 9/08/97..................................... $ 251,637
300,000 Federal Home Loan Banks
5.940%, 6/13/00..................................... 293,199
374,127 Federal Home Loan Mortgage
6.000%, 10/01/10.................................... 354,254
75,473 Federal Home Loan Mortgage
11.750%, 12/01/13................................... 84,789
46,855 Federal Home Loan Mortgage
11.750%, 12/01/13................................... 52,639
1,949,264 Federal National Mortgage Association 6.500%,
12/01/10............................................ 1,885,913
46,457 Federal National Mortgage Association 14.500%,
11/01/14............................................ 56,736
22,784 Federal National Mortgage Association 12.500%,
8/01/15............................................. 26,387
111,968 Federal National Mortgage Association 12.500%
9/01/15............................................. 130,233
104,117 Federal National Mortgage Association 13.000%,
11/01/15............................................ 122,143
53,586 Federal National Mortgage Association 12.000%,
1/01/16............................................. 61,640
33,261 Federal National Mortgage Association 11.500%,
4/01/19............................................. 37,419
113,770 Federal National Mortgage Association 11.500%,
8/01/20............................................. 127,814
170,366 Federal National Mortgage Association 9.500%,
8/01/22............................................. 182,398
448,192 Federal National Mortgage Association 6.500%,
3/01/26............................................. 419,198
1,000,000 Federal National Mortgage Association
Pool 6.500%, 1/1/2099............................... 936,560
28,949 Government National Mortgage Association 7.000%,
4/15/24............................................. 27,782
38,868 Government National Mortgage Association 7.000%,
3/16/26............................................. 37,300
2,130,165 Government National Mortgage Association 7.000%,
5/15/26............................................. 2,044,298
350,000 Government National Mortgage Association 7.000%,
12/15/2098.......................................... 335,345
300,000 Student Loan Marketing Association 7.500%, 3/08/00... 308,565
-----------
7,776,249
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
U.S. TREASURY--21.1%
$ 1,000,000 U.S. Treasury Notes 6.125%, 5/31/97................ $ 1,003,330
500,000 U.S. Treasury Notes 5.625%, 2/28/01................ 483,575
250,000 U.S. Treasury Notes 6.500%, 5/31/01................ 250,188
450,000 U.S. Treasury Notes 6.625%, 6/30/01................ 452,883
100,000 U.S. Treasury Notes 6.875%, 5/15/06................ 101,094
-----------
2,291,070
-----------
Total Bonds & Notes
(Identified Cost $10,157,140)..................... 10,067,319
-----------
SHORT-TERM INVESTMENT--23.2%
$ 2,514,000 Repurchase agreement with Merrill Lynch dated
6/28/96 at 5.300% to be repurchased $2,515,110 on
7/1/96 collateralized by $2,505,000 U.S. Treasury
Bond 7.250% due 5/15/16 valued at $2,558,357...... 2,514,000
-----------
Total Short-Term Investment
(Identified Cost $2,514,000)...................... 2,514,000
-----------
Total Investments--115.9%
(Identified Cost $12,671,140)(b).................. 12,581,319
Other assets less liabilities...................... (1,728,675)
-----------
TOTAL NET ASSETS--100%............................. $10,852,644
===========
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1996 the net unrealized depreciation on investments based on
cost of $12,671,140 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $ 31,287
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (121,108)
-----------
Net unrealized depreciation........................ $ (89,821)
===========
</TABLE>
See accompanying notes to financial statements.
81
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $12,581,319
Cash.................................................. 980
Receivable for:
Fund shares sold...................................... 22,343
Dividends and interest................................ 72,046
Due from advisor...................................... 10,752
Prepaid expense....................................... 6,706
-----------
12,694,146
LIABILITIES
Payable for:
Securities purchased.................................. $1,709,699
Fund shares redeemed.................................. 104,211
Accrued expenses:
Management fees....................................... 1,978
Other expenses........................................ 25,614
----------
1,841,502
-----------
NET ASSETS............................................. $10,852,644
===========
Net Assets consist of:
Capital paid in....................................... $10,728,424
Undistributed net investment income................... 280,229
Accumulated net realized losses....................... (66,188)
Unrealized depreciation on investments................ (89,821)
-----------
NET ASSETS............................................. $10,852,644
===========
Computation of offering price:
Net asset value and redemption price per share
($10,852,644 divided by 993,945 shares of beneficial
interest)............................................. $ 10.92
===========
Identified cost of investments......................... $12,671,140
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 312,162
---------
312,162
EXPENSES
Management fees........................................... $25,664
Trustees' fees and expenses............................... 6,369
Custodian................................................. 21,456
Audit and tax services.................................... 9,850
Legal..................................................... 5,412
Printing.................................................. 745
Amortization of organization expenses..................... 1,001
Miscellaneous............................................. 4,985
-------
Total expenses........................................... 75,482
Less expenses assumed by the investment adviser.......... (42,814) 32,668
------- ---------
NET INVESTMENT INCOME...................................... 279,494
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss on:
Investments--net......................................... (80,877)
Unrealized depreciation on:
Investments--net......................................... (284,185)
---------
Net loss on investment transactions........................ (365,062)
---------
NET DECREASE IN NET ASSETS FROM OPERATIONS................. $ (85,568)
=========
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 214,389 $ 279,494
Net realized gain (loss) on investments............. 71,273 (80,877)
Unrealized appreciation (depreciation) on invest-
ments.............................................. 195,460 (284,185)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS... 481,122 (85,568)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (214,389) 0
In excess of net investment income.................. (1,001) 0
Net realized gain on investments.................... (50,946) 0
----------- -----------
(266,336) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 7,348,256 5,096,310
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 215,390 0
Distributions from net realized gain................ 50,946 0
----------- -----------
7,614,592 5,096,310
Cost of shares redeemed............................. (2,299,033) (1,700,134)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 5,315,559 3,396,176
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 5,530,345 3,310,608
NET ASSETS
Beginning of the period............................. 2,011,691 7,542,036
----------- -----------
End of the period................................... $ 7,542,036 $10,852,644
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 0 $ 735
=========== ===========
End of the period................................... $ 735 $ 280,229
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 671,863 466,417
Issued in connection with the reinvestment of:
Distributions from net investment income............ 19,652 0
Distributions from net realized gain................ 4,648 0
----------- -----------
696,163 466,417
Redeemed............................................ (214,709) (155,934)
----------- -----------
Net change.......................................... 481,454 310,483
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR SIX MONTHS
THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------------- ------------ ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Pe-
riod............................ $10.00 $ 9.96 $ 11.04
------ ------ -------
Income From Investment Operations
Net Investment Income........... 0.10 0.33 0.28
Net Realized and Unrealized Gain
(Loss) on Investments.......... (0.04) 1.16 (0.40)
------ ------ -------
Total From Investment Opera-
tions.......................... 0.06 1.49 (0.12)
------ ------ -------
Less Distributions
Distributions From Net Invest-
ment Income.................... (0.10) (0.33) 0.00
Distributions From Net Realized
Capital Gains.................. 0.00 (0.08) 0.00
------ ------ -------
Total Distributions............. (0.10) (0.41) 0.00
------ ------ -------
Net Asset Value, End of Period... $ 9.96 $11.04 $ 10.92
====== ====== =======
TOTAL RETURN (%)................. 0.60(c) 15.02 (1.09)(c)
Ratio of Operating Expenses to
Average Net Assets (%).......... 0.70(b) 0.70 0.70(b)
Ratio of Net Investment Income to
Average Net Assets (%).......... 5.70(b) 5.62 5.96(b)
Portfolio Turnover Rate (%)...... 1,409(b) 415 421(b)
Net Assets, End of Period (000).. $2,012 $7,542 $10,853
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
agreement described in Note 4 to
the Financial Statements would
have been (%)................... 2.54(b) 2.90 1.62(b)
</TABLE>
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Not computed on an annualized basis.
See accompanying notes to financial statements.
83
<PAGE>
ZENITH BACK BAY ADVISORS MONEY MARKET SERIES*
PORTFOLIO MANAGER: JOHN DONOVAN;
BACK BAY ADVISORS(R), L.P.
- ----------------- MARKET REVIEW
[PHOTO OF JOHN The interest rate environment during the first half of
DONOVAN APPEARS 1996 was notable for its high level of volatility, as the
HERE] economic releases presented conflicting views as to the
strength of the domestic economy, and political events in
Washington raised hopes of imminent fiscal policy reform
but subsequently caused them to fade away.
Based on a fourth quarter 1995 Gross Domestic Product
(GDP) of only 0.5% and a January economy plagued by severe
winter storms, the Federal Reserve Board lowered short
term interest rates by 25 basis points to 5.25% in late
- ----------------- January, pushing the three-month treasury bill yield to 4.89%
and the one-year treasury bill yield to 4.79% by mid-February on market
expectations of further rate cuts. However, with the return of milder weather
and the end of the General Motors strike, economic activity picked up
significantly, resulting in a respectable first quarter GDP growth rate of 2.2%.
At this point, the market's outlook for Federal Reserve policy turned to neutral
with the three-month and one-year bill yields backing up to 5.13% and 5.41%
respectively.
The second quarter saw continued expansion as the important housing and
automobile sectors remained strong despite the pressures of higher interest
rates. Job growth was surprisingly solid in spite of the ongoing trend toward
downsizing in many prominent corporations, and wage pressures began to appear
in certain industries and certain areas of the country. In addition,
expectations of a fiscal drag on the economy through a balanced budget
agreement evaporated as Washington returned to politics as usual. With second
quarter GDP growth rate expected to exceed 4%, the interest rate outlook has
come full circle to where participants are now expecting an imminent Federal
Reserve tightening and have significantly backed up rates to a point where the
three-month and one-year bills are yielding 5.30% and 5.95%.
The Series is using a barbell strategy to achieve an average maturity of 63
days as of the end of June. Fifty four percent of the Series is invested in
securities with maturities shorter than one month. This may give the Series
flexibility to invest in higher yielding securities quickly if the Federal
Reserve Board pushes up rates. As a hedge against the Federal Reserve Board
not tightening credit and because of the higher yield opportunities in the
longer end of the curve, 15% of the Series is invested in securities longer
than 4 months.
OUTLOOK AND STRATEGY
The short term interest rate picture remains murky as we enter the second
half of 1996. Although concerns have arisen about a strong economy leading to
increased inflation, it is unclear whether the Federal Reserve will
necessarily have to raise rates aggressively to slow down economic growth. The
market has already priced in about 50 basis points of Federal Reserve
tightening but could certainly anticipate more if inflation concerns persist.
At present, the Series is well-positioned to take advantage of the backup in
rates.
* Money Market Funds are not insured or guaranteed by the U.S. Government.
There can be no assurance that the Series will maintain a stable net asset
value of $100.00 per share. All performance information represents past
performance and is not indicative of future results. Investment return and
principal value may fluctuate so that shares may be worth more or less than
original cost.
FUND FACTS
BACK BAY ADVISORS MONEY MARKET SERIES
GOAL: The highest possible level of current income consistent with the
preservation of capital.
START DATE: August 1, 1993
SIZE: $100.9 million as of June 30, 1996
MANAGER: John Donovan has served as portfolio manager since 1995. Mr. Donovan
joined Back Bay Advisors in 1992.
84
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISERS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1996
INVESTMENTS--98.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
CERTIFICATE OF DEPOSIT--10.9%
$2,000,000 Societe Generale New York......... 5.320% 07/01/96 $ 2,000,000
1,000,000 Dresdner U.S. Finance, Inc. ...... 5.320% 07/05/96 1,000,032
2,000,000 Morgan Guaranty Trust London...... 5.350% 07/15/96 2,000,008
1,000,000 Banque National de Paris.......... 5.240% 07/30/96 1,000,039
2,000,000 Union Bank of Switzerland......... 5.300% 10/04/96 2,000,966
1,000,000 Banque National de Paris.......... 5.460% 11/14/96 1,000,052
1,000,000 Banque National de Paris.......... 5.550% 12/02/96 1,000,000
1,000,000 Societe Generale New York......... 5.650% 04/01/97 999,228
------------
11,000,325
------------
Total Certificate of Deposit (Cost
$11,000,325)..................... 11,000,325
------------
CERTIFICATE OF DEPOSIT
(EURODOLLAR)--1.0%
1,000,000 Toronto Dominion Bank............. 5.170% 01/17/97 1,000,491
------------
Total Certificate of Deposit
(Eurodollar) (Cost $1,000,491)... 1,000,491
------------
COMMERCIAL PAPER--88.0%
AUTOMOTIVE--9.9%
425,000 Ford Motor Credit Corp. .......... 5.450% 07/05/96 424,743
1,100,000 Ford Motor Credit Corp. .......... 5.290% 07/08/96 1,098,869
1,200,000 General Motors Acceptance Corp. .. 5.320% 07/09/96 1,198,581
1,500,000 American Honda Finance............ 5.350% 07/16/96 1,496,656
1,000,000 General Motors Acceptance Corp. .. 5.390% 07/19/96 997,305
195,000 Ford Motor Credit Corp. .......... 5.280% 07/26/96 194,285
1,200,000 General Motors Acceptance Corp. .. 5.400% 07/31/96 1,194,600
1,320,000 Ford Motor Credit Corp. .......... 5.340% 08/01/96 1,314,322
1,000,000 General Motors Acceptance Corp. .. 5.410% 08/12/96 993,688
1,045,000 Ford Motor Credit Corp. .......... 5.400% 10/17/96 1,028,071
------------
9,941,120
------------
BANKING--13.8%
330,000 Royal Bank of Canada.............. 5.090% 07/01/96 330,000
1,000,000 Societe General North America..... 4.900% 07/22/96 997,142
2,000,000 ABN Amro North.................... 5.100% 07/24/96 1,993,483
2,000,000 Dresdner US Finance............... 5.320% 10/01/96 1,972,809
500,000 J.P. Morgan....................... 5.300% 11/01/96 490,946
1,500,000 ABN Amro North.................... 5.290% 11/07/96 1,471,566
1,000,000 Banque National de Paris.......... 5.310% 11/21/96 978,908
1,500,000 J.P. Morgan....................... 5.370% 12/02/96 1,465,542
1,000,000 Dresdner US Finance............... 5.410% 12/05/96 976,406
1,235,000 Swiss Bank Corp. New York......... 5.430% 12/27/96 1,201,656
First National Bank North
2,000,000 Carolina......................... 5.300% 06/03/97 2,000,000
------------
13,878,458
------------
DRUGS--4.3%
1,000,000 American Home Products Corp. ..... 5.350% 07/09/96 998,811
1,500,000 American Home Products Corp. ..... 5.370% 07/26/96 1,494,406
900,000 American Home Products Corp. ..... 5.400% 08/05/96 895,275
1,000,000 American Home Products Corp. ..... 5.400% 08/13/96 993,550
------------
4,382,042
------------
</TABLE>
See accompanying notes to financial statements.
85
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1996
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
FINANCE--26.0%
$ 150,000 American Express.................. 5.360% 07/02/96 $ 149,978
1,000,000 UBS Finance....................... 5.390% 07/02/96 999,850
1,300,000 Avco Financial Services........... 5.340% 07/10/96 1,298,267
2,000,000 Household Finance................. 5.360% 07/18/96 1,994,938
Associates Corporation North
1,500,000 America.......................... 5.250% 07/22/96 1,495,406
1,000,000 Avco Financial Services........... 5.370% 07/29/96 995,823
1,500,000 Avco Financial Services........... 5.390% 08/07/96 1,491,690
Associates Corporation North
1,000,000 America.......................... 5.290% 08/09/96 994,269
885,000 American Express.................. 5.270% 09/13/96 875,413
1,300,000 American Express.................. 5.270% 09/17/96 1,285,156
1,000,000 Transamerica Finance Group........ 5.220% 09/18/96 988,545
1,500,000 Transamerica Finance Group........ 5.300% 09/20/96 1,482,113
1,000,000 CIT Group Hold.................... 5.100% 09/27/96 987,533
820,000 CIT Group Hold.................... 5.100% 09/30/96 809,429
900,000 American Express.................. 5.280% 10/10/96 886,668
1,000,000 Transamerica Finance Group........ 5.300% 10/15/96 984,394
1,000,000 American Express.................. 5.270% 10/28/96 982,580
710,000 Transamerica Finance Group........ 5.290% 11/12/96 696,020
International Lease Finance
1,500,000 Corp. ........................... 5.440% 11/13/96 1,469,400
1,000,000 General Electric Capital Corp. ... 4.940% 11/26/96 979,691
1,000,000 General Electric Capital Corp. ... 5.230% 12/13/96 976,029
1,000,000 General Electric Capital Corp. ... 5.600% 02/21/96 963,445
500,000 General Electric Capital Corp. ... 5.620% 03/07/97 480,564
2,000,000 Household Finance................. 5.460% 05/22/97 2,000,000
------------
26,267,201
------------
FOOD & TOBACCO--2.0%
1,040,000 BAT Capital Corp. ................ 5.280% 07/02/96 1,039,847
1,000,000 PepsiCo, Inc. .................... 5.280% 09/03/96 990,613
------------
2,030,460
------------
FORESTRY--1.6%
1,600,000 Weyerhaeuser MTG.................. 5.380% 07/25/96 1,594,261
------------
INSURANCE--4.4%
1,840,000 MetLife Funding, Inc. ............ 5.380% 07/09/96 1,837,800
1,500,000 Prudential Funding Corp. ......... 5.340% 07/17/96 1,496,440
1,175,000 Prudential Funding Corp. ......... 5.490% 12/30/96 1,142,388
------------
4,476,628
------------
OIL & GAS--1.0%
1,000,000 Chevron Oil Finance Co. .......... 5.000% 10/11/96 985,833
------------
POLLUTION CONTROL--3.4%
1,270,000 WMX Technologies, Inc. ........... 5.340% 08/16/96 1,261,334
290,000 WMX Technologies, Inc. ........... 5.280% 11/05/96 284,598
1,000,000 WMX Technologies, Inc. ........... 5.420% 01/24/97 968,535
500,000 WMX Technologies, Inc. ........... 5.630% 02/04/97 482,964
500,000 WMX Technologies, Inc ............ 5.630% 03/04/97 480,764
------------
3,478,195
------------
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1996
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
RETAIL--4.0%
$1,530,000 Sears Roebuck Corp. ............... 5.300% 07/11/96 $ 1,527,748
1,500,000 Sears Roebuck Corp. ............... 5.350% 07/12/96 1,497,548
1,000,000 Sears Roebuck Corp. ............... 5.390% 08/15/96 993,262
------------
4,018,558
------------
SECURITIES--16.8%
2,000,000 Goldman Sachs Group................ 5.650% 07/01/96 2,000,000
460,000 Lehman Brothers, Inc. ............. 5.420% 07/01/96 460,000
500,000 Merrill Lynch, Inc. ............... 5.280% 07/02/96 499,927
1,520,000 Lehman Brothers, Inc. ............. 5.350% 07/03/96 1,519,548
1,131,000 Merrill Lynch, Inc. ............... 5.400% 07/03/96 1,130,661
1,215,000 Smith Barney, Inc. ................ 5.280% 07/03/96 1,214,644
1,445,000 Smith Barney, Inc. ................ 5.300% 07/05/96 1,444,149
1,500,000 Smith Barney, Inc. ................ 5.370% 07/08/96 1,498,434
1,310,000 Lehman Brothers, Inc. ............. 5.370% 07/09/96 1,308,437
1,000,000 Lehman Brothers, Inc. ............. 5.370% 07/10/96 998,657
1,060,000 Merrill Lynch, Inc. ............... 5.450% 07/19/96 1,057,112
625,000 Merrill Lynch, Inc. ............... 5.380% 07/22/96 623,039
900,000 Merrill Lynch, Inc. ............... 5.370% 07/24/96 896,912
1,000,000 Morgan Stanley Group............... 5.060% 08/02/96 995,502
1,300,000 Goldman Sachs Group................ 5.370% 11/22/96 1,272,076
------------
16,919,098
------------
TELECOMMUNICATIONS--0.8%
825,000 Bell Atlantic Services............. 5.380% 07/23/96 822,288
------------
Total Commercial Paper
(Cost $88,794,142)................ 88,794,142
------------
Total Investments--98.7%
(Cost $100,794,958) (b)........... 100,794,958
Other assets less liabilities...... 100,962
------------
TOTAL NET ASSETS--100%............. $100,895,920
============
</TABLE>
(a) See Note 1A.
(b) The aggregate cost for federal income tax purposes was $100,794,958.
See accompanying notes to financial statements.
87
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $100,794,958
Cash.................................................... 3,804
Receivable for:
Fund shares sold........................................ 682,617
Dividends and interest.................................. 227,388
------------
101,708,767
LIABILITIES
Payable for:
Fund shares redeemed.................................... $330,537
Dividends declared...................................... 357,184
Miscellaneous........................................... 23,792
Accrued expenses:
Management fees......................................... 59,938
Deferred trustees' fees................................. 28,188
Other expenses.......................................... 13,208
--------
812,847
------------
NET ASSETS............................................... $100,895,920
============
Net Assets consist of:
Capital paid in......................................... $100,895,920
------------
NET ASSETS............................................... $100,895,920
============
Computation of offering price:
Net asset value and redemption price per share
($100,895,920 divided by 1,008,959 shares of beneficial
interest)............................................... $ 100.00
============
Cost of investments...................................... $100,794,958
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $2,581,876
EXPENSES
Management fees........................................... $163,887
Trustees' fees and expenses............................... 9,477
Custodian................................................. 29,996
Audit and tax services.................................... 5,762
Legal..................................................... 4,065
Printing.................................................. 15,976
Miscellaneous............................................. 4,971
--------
Total expenses............................................ 234,134
----------
NET INVESTMENT INCOME...................................... 2,347,742
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................. $2,347,742
==========
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................ $ 4,403,095 $ 2,347,742
------------- ------------
Increase in net assets from operations........... 4,403,095 2,347,742
------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................ (4,403,095) (2,347,742)
------------- ------------
(4,403,095) (2,347,742)
------------- ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares..................... 141,012,985 105,256,018
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income......... 4,331,085 2,347,742
------------- ------------
145,344,070 107,603,760
Cost of shares redeemed.......................... (129,156,304) (96,855,999)
------------- ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS.................................... 16,187,766 10,747,761
------------- ------------
TOTAL INCREASE IN NET ASSETS..................... 16,187,766 10,747,761
NET ASSETS
Beginning of the period.......................... 73,960,393 90,148,159
------------- ------------
End of the period................................ $ 90,148,159 $100,895,920
============= ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................... 1,410,130 1,052,681
Issued in connection with the reinvestment of:
Distributions from net investment income......... 43,311 23,357
------------- ------------
1,453,441 1,076,038
Redeemed......................................... (1,291,563) (968,561)
------------- ------------
Net change....................................... 161,878 107,477
============= ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $100.00 $100.00 $100.00 $100.00 $100.00 $ 100.00
------- ------- ------- ------- ------- --------
Income From Investment
Operations
Net investment income.. 6.03 3.73 2.93 3.89 5.50 2.33
------- ------- ------- ------- ------- --------
Total from Investment
Operations............ 6.03 3.73 2.93 3.89 5.50 2.33
Distributions from net
investment income..... (6.03) (3.73) (2.93) (3.89) (5.50) (2.33)
------- ------- ------- ------- ------- --------
Total Distributions.... (6.03) (3.73) (2.93) (3.89) (5.50) (2.33)
------- ------- ------- ------- ------- --------
Net asset value at end
of period.............. $100.00 $100.00 $100.00 $100.00 $100.00 $ 100.00
======= ======= ======= ======= ======= ========
TOTAL RETURN (%)........ 6.20 3.79 2.97 4.01 5.64 2.51(b)
Ratio of operating
expenses to average net
assets (%)............. 0.38 0.38 0.38 0.40 0.50 0.50(a)
Ratio of net investment
income to average net
assets (%)............. 6.01 3.71 2.93 3.89 5.50 2.33(a)
Net Assets, End of
Period (000)........... $58,614 $61,607 $59,044 $73,960 $90,148 $100,896
The ratios of expenses
to average net assets
without giving effect
to the voluntary
expense agreement
described in Note 4 to
the Financial
Statements would have
been (%)............... -- -- -- -- 0.51 0.50(a)
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
See accompanying notes to financial statements.
89
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996 (UNAUDITED)
1. New England Zenith Fund (the "Fund") is organized as a Massachusetts
business trust under the laws of the Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated December 16, 1986. The Fund
succeeded to the operations of The New England Zenith Fund, Inc. on February
27, 1987. The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
Shares in the Fund are not offered directly to the general public and,
currently, are available only to certain separate accounts established by New
England Variable Life Insurance Company ("NEVLICO"), New England Mutual Life
Insurance Company ("The New England") or its subsidiaries as an investment
vehicle for variable life insurance or variable annuity products, although not
all Series are available to all such separate accounts. In the future, shares
may be offered to separate accounts of insurance companies unaffiliated with
NEVLICO or The New England.
The Fund's Agreement and Declaration of Trust permits the issuance of an
unlimited number of shares of beneficial interest, no par value, in separate
Series, with shares of each Series representing interests in a separate
portfolio of assets. Each Series is separately managed and has its own
investment objective and policies. The Fund (or its predecessor) began
offering shares of the Series on the dates set forth below:
<TABLE>
<S> <C>
Bond Income Series...... August 26, 1983
Capital Growth Series... August 26, 1983
Money Market Series..... August 26, 1983
Stock Index Series...... March 30, 1987
Managed Series.......... May 1, 1987
Avanti Growth Series.... April 30, 1993
Value Growth Series..... April 30, 1993
</TABLE>
<TABLE>
<S> <C>
Small Cap Series......... May 1, 1994
Balanced Series.......... October 31, 1994
International Equity Se-
ries.................... October 31, 1994
U.S. Government Series... October 31, 1994
Strategic Bond Opportuni-
ties Series............. October 31, 1994
Venture Value Series..... October 31, 1994
Equity Growth Series..... October 31, 1994
</TABLE>
The following is a summary of significant accounting policies followed by the
Fund in the preparation of the Financial Statements of the Series. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION
MONEY MARKET SERIES--The Money Market Series employs the amortized cost
method of security valuation which, in the opinion of the Board of
Trustees, represents the fair market value of the particular security. The
Board monitors the deviations between the Series' net asset value per
share, as determined by using available market quotations, and its
amortized cost price per share. If the deviation exceeds 1/2 of 1%, the
Board will consider what action, if any, should be initiated to provide
fair valuation of the Series.
BOND INCOME, MANAGED, BALANCED, U.S. GOVERNMENT AND STRATEGIC BOND
OPPORTUNITIES SERIES--Debt securities (other than short-term obligations)
are valued on the basis of valuations furnished by a pricing service,
authorized by the Board of Trustees, which service determines valuations
for normal, institutional-size trading units of such securities using
market information, transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Short-term notes are stated at amortized cost which
approximates market value.
CAPITAL GROWTH, MANAGED, STOCK INDEX, AVANTI GROWTH, VALUE GROWTH, SMALL
CAP, BALANCED, INTERNATIONAL EQUITY, VENTURE VALUE AND EQUITY GROWTH
SERIES--Equity securities are valued on the basis of market valuations
furnished by a pricing service, authorized by the Board of Trustees. The
pricing service provides the last reported sale price for securities listed
on a national securities exchange or on the NASDAQ National Market System,
or if there is no reported sale during the day, and in the case of over-
the-counter securities not so listed, the last bid price. Securities for
which current market quotations are not readily available are taken at fair
value as determined in good faith by the Board of
90
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board. Short-term notes are stated at
amortized cost which approximates market value.
B. FOREIGN CURRENCY TRANSLATION--The books and records of the Funds are
maintained in U.S. dollars. The values of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars
are translated into U.S. dollars based upon foreign exchange rates
prevailing at the end of the period. Purchases and sales of investment
securities, income and expenses are translated on the respective dates of
such transactions.
Since the values of investment securities are presented at the foreign
exchange rates prevailing at the end of the period, it is not practical to
isolate that portion of the results of operations arising from changes in
exchange rates from fluctuations arising from changes in market prices of the
investment securities.
Net realized and unrealized gains and losses on foreign currency transactions
represent foreign exchange gains from the sale of short-term securities and
holdings of foreign currencies, foreign currency gains and losses between
trade dates and settlement dates on investment securities transactions, and
the difference between the amounts of daily interest accruals on the books of
the Fund and the amounts actually received resulting from changes in exchange
rates on the payable date.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Fund's currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Fund's investments against currency fluctuations. Also, a contract to buy or
sell can offset a previous contract. These contracts involve market risk in
excess of the unrealized gain or loss reflected in the Fund's Statements of
Assets and Liabilities. The U.S. dollar value of the currencies the Fund has
committed to buy or sell is shown in the Schedules of Investments under the
caption "Forward Foreign Currency Contracts." This amount represents the
aggregate exposure to each currency the Fund has acquired or hedged through
currency contracts at period end. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contract's terms. The U.S. dollar value of forward foreign currency contracts
is determined using forward currency exchange rates supplied by a quotation
service.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME--Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. In determining gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
D. FUTURES CONTRACTS--The Value Growth, Stock Index, Managed, Balanced,
International Equity, U.S. Government, Strategic Bond Opportunities and
Venture Value Series each may enter into futures contracts on the S&P 500
Index or on interest-bearing securities or indices thereof, or on indices
of stocks to hedge against changes in the values of securities the Series
owns or expects to purchase. Upon entering into a futures contract, the
Series is required to deposit with a broker an amount ("initial margin")
equal to a certain percentage of the purchase price indicated in the
futures contract. Subsequent payments ("variation margin") are made or
received by the Series each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial reporting
purposes as unrealized gains or losses by the Series. When entering into a
closing transaction, the Series will realize, for book purposes, a gain or
loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the
most recent settlement price, unless such price does not reflect the fair
market value of the contract, in which case the position will be valued by
or under the direction of the Board of Trustees. Certain risks are
associated with investments in futures contracts, including risk of
imperfect correlation between the value of a position in futures contracts
and the value of the stocks or bonds that the Series is attempting to
hedge. In addition, there is a risk that the Series may not be able to
close out its futures positions due to an illiquid secondary market.
E. REPURCHASE AGREEMENTS--The Series, through their custodian, receive
delivery of the underlying securities collateralizing repurchase
agreements. It is the Series' policy that the market value of the
collateral be at least equal to 100% of the repurchase price. Each Series'
adviser is responsible for determining that the value of the collateral is
at all times at least equal to the repurchase price. In connection with
transactions in repurchase agreements, if the seller defaults and the value
of the collateral declines or if the seller enters an insolvency
proceeding, realization of the collateral by the Series may be delayed or
limited.
91
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
F. SHORT SALES AGAINST THE BOX--The Equity Growth Series may hedge against
changes in the value of investments by engaging in short sales against the
box. In a short sale against the box, the fund sells a borrowed security,
while at the same time either owning an identical security or having the
right to obtain such a security. By selling short against the box the
equity underlying one of its convertible holdings, the Series would seek to
offset the effect that a decline in the underlying equity might have on the
value of the convertible security. While the short sale is outstanding, the
Series will not dispose of the security hedged by the short sale. The
Series is required to establish a margin account with the broker lending
the security sold short. While the short sale is outstanding, the broker
retains the proceeds of the short sale and the Series instructs the
custodian to maintain in a separate account securities having a value at
least equal to the amount of the securities sold short. The Series had no
such transactions during the six months ended June 30, 1996.
G. FEDERAL TAXES--Each Series, which is a separate taxable entity, intends to
meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute to its shareholders all of its
taxable income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--Money Market Series dividends
are declared daily to shareholders of record at the time and are paid
monthly. Dividends and distributions are recorded by all other Series on
the ex-dividend date. Net realized gains from security transactions are
distributed at least annually to shareholders. The timing and
characterization of certain income and capital gains distributions are
determined in accordance with federal tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassification to paid in capital. These differences primarily relate to
tax equalization, investments in mortgage backed securities and investments
in foreign securities.
I. OTHER--The Money Market Series invests primarily in a portfolio of money
market instruments maturing in 397 days or less whose ratings are within
the two highest ratings categories by a nationally recognized rating agency
or, if not rated, are believed to be of comparable quality. The weighted
average maturity of the Series is less than ninety days. The ability of the
issuers of the securities held by the Series to meet their obligations may
be affected by foreign economic, political and legal developments in the
case of foreign banks or of foreign branches or subsidiaries of U.S. banks
or domestic economic developments in a specific industry, state or region.
2. At June 30, 1996 The New England owned an aggregate of 11 shares of the
fourteen Series and held 15,958,759 shares in separate investment accounts for
annuity contracts offered by The New England. NEVLICO, a life insurance
subsidiary of The New England, held the remaining 9,999,000 shares then
outstanding in separate investment accounts for life insurance and annuity
contracts offered by NEVLICO.
As long as The New England owns (directly or through NEVLICO) more than 25% of
the Fund's outstanding shares, it will be presumed to be in control (as that
term is defined by the Investment Company Act of 1940, as amended) of the
Fund.
3. For the six months ended June 30, 1996, purchases and sales of securities
(excluding short-term investments) for each of the Series were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------ ------------------------------
SERIES OTHER U.S. GOVERNMENT OTHER U.S. GOVERNMENT
------ -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Back Bay Advisors Bond
Income................. $ 72,274,167 $20,497,109 $ 58,078,109 $20,151,317
Capital Growth.......... 1,325,026,661 -- 1,290,107,685 --
Westpeak Stock Index.... 3,834,474 -- 755,737 --
Back Bay Advisors
Managed................ 47,326,703 617,880 49,938,778 113,694
Loomis Sayles Avanti
Growth................. 33,986,799 -- 23,063,576 --
Westpeak Value Growth... 43,718,750 -- 31,182,194 --
Loomis Sayles Small Cap. 25,727,596 -- 10,232,265 --
Loomis Sayles Balanced.. 17,409,280 4,751,545 5,074,622 2,957,387
Draycott International
Equity................. 19,325,110 -- 10,470,205 --
Salomon Brothers U.S.
Government............. -- 20,916,045 -- 17,423,127
Salomon Brothers
Strategic Bond
Opportunities.......... 13,476,185 8,315,029 7,407,314 5,633,507
Venture Value........... 22,186,884 -- 2,536,982 --
Alger Equity Growth..... 61,713,743 -- 27,029,125 --
</TABLE>
92
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
Purchases and sales of corporate short-term obligations for the Money Market
Series aggregated $353,378,049 and $343,457,175, respectively.
Transactions in index futures contracts for the Managed Series for the six
months ended June 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF FUTURES
CONTRACTS
----------------------
AGGREGATE
NUMBER OF FACE VALUE
CONTRACTS OF CONTRACTS
--------- ------------
<S> <C> <C>
Contracts opened........................................ 10 $ 3,153,870
Contracts closed........................................ (10) (3,153,870)
--- -----------
Open at June 30, 1996................................... 0 $ 0
=== ===========
</TABLE>
Transactions in forward currency contracts for the Strategic Bond
Opportunities Series for the six months ended June 30, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
SALES OF CONTRACTS
------------------
AGGREGATED FACE
VALUE OF CONTRACTS
------------------
<S> <C>
Open at December 31, 1995.................................... $ 919,184
Contracts opened............................................. 3,707,020
Contracts closed............................................. (4,544,431)
-----------
Open at June 30, 1996........................................ $ 81,773
===========
</TABLE>
4. MANAGEMENT FEES.
TNE Advisers, Inc. acts as adviser to all of the Series (except the Capital
Growth Series for which Capital Growth Management, L.P. ("CGM") serves as
advisor). Separate management agreements for each Series provide for fees as
set forth below:
<TABLE>
<CAPTION>
NET FEES EARNED
BY TNE ADVISERS
FOR THE SIX MONTHS MANAGEMENT FEE
ENDED JUNE 30, 1996 PAID BY SERIES TO
BEFORE REDUCTION DUE TO TNE ADVISERS, INC.
SERIES EXPENSE LIMITS (A) (% OF AVERAGE NET ASSETS)
------ ----------------------- ---------------------------------------
<S> <C> <C>
Loomis Sayles Small Cap
Series................. $ 85,853 1.00% all assets
Draycott International
Equity Series.......... 26,080 0.90% all assets
Alger Equity Growth
Series................. 102,399 0.75% all assets
Loomis Sayles Avanti
Growth Series.......... 72,303 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million
Venture Value Series.... 73,677 0.75% all assets
Westpeak Value Growth
Series................. 70,845 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million
Westpeak Stock Index
Series................. 47,559 0.25% all assets
Loomis Sayles Balanced
Series................. 28,634 0.70% of all assets
Back Bay Managed Series. 210,904 0.50% of all assets
Salomon Brothers 0.65% of all assets
Strategic Bond
Opportunities Series... 20,264
Back Bay Advisors Bond
Income Series.......... 149,869 0.40% the first $400 million
0.35% the next $300 million
0.30% the next $300 million
0.25% amounts in excess of $1 billion
Salomon Brothers U.S.
Government Series...... 15,165 0.55% all assets
Back Bay Advisors Money
Market Series.......... 93,653 0.35% the first $500 million
0.30% the next $500 million
0.25% amounts in excess of $1 billion
</TABLE>
(a) There are two forms of expense limit, a Voluntary Expense Limitation and
an Expense Deferral Arrangement. Only one pertains to each of these
Series, as described below.
93
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
The Capital Growth Series pays its adviser, CGM, a management fee at an annual
rate of 0.70% of the first $200 million of average net assets, 0.65% of the
next $300 million of such assets and 0.60% of such assets in excess of $500
million. For advisory services rendered during the six months ended June 30,
1996, CGM was paid at an annual rate of 0.64% of the Capital Growth Series'
average net assets, totaling $3,093,449.
SUB-ADVISORY FEES. TNE Advisers, Inc. has sub-contracted day-to-day portfolio
management responsibilities to each of the following sub-advisers to manage
the Series: Loomis, Sayles & Company, L.P., for the Loomis Sayles Small Cap,
Loomis Sayles Avanti Growth and the Loomis Sayles Balanced Series, Draycott
Partners, Ltd. for the Draycott International Equity Series; Fred Alger
Management, Inc. for the Alger Equity Growth Series; Davis Selected Advisers,
L.P. for the Venture Value Series; Westpeak Investment Advisors, L.P. for the
Westpeak Value Growth and Westpeak Stock Index Series; Back Bay Advisors, L.P.
for the Back Bay Advisors Managed, Back Bay Advisors Bond Income and Back Bay
Advisors Money Market Series and Salomon Brothers Asset Management Inc, for
the Salomon Brothers Strategic Bond Opportunities and Salomon Brothers U.S.
Government Series. TNE Advisers, Inc. pays each sub-adviser at the following
rates for providing sub-advisory services to the following Series:
<TABLE>
<CAPTION>
GROSS FEES
EARNED BY ANNUAL
SUB-ADVISOR PERCENTAGE
FOR SIX MONTHS RATES PAID
ENDED JUNE TO SUB- AVERAGE DAILY NET ASSET
SERIES 30, 1996 ADVISERS VALUE LEVELS
------ -------------- ---------- ------------------------------------
<S> <C> <C> <C>
Loomis Sayles Small Cap
Series................. $98,286 0.55% of the first $25 million
0.50% of the next $75 million
0.45% of the next $100 million
0.40% of amounts in excess of $200 million
Draycott International
Equity Series.......... $74,535 0.75% of the first $10 million
0.60% of the next $40 million
0.45% of amounts in excess of $50 million
Alger Equity Growth Se-
ries*.................. $133,458 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Loomis Sayles Avanti
Growth Series.......... $125,411 0.50% of the first $25 million
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of $200 million
Venture Value Series.... $110,514 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Westpeak Value Growth
Series................. $123,469 0.50% of the first $25 million
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of $200 million
Westpeak Stock Index Se-
ries................... $31,704 0.10% of all assets
Loomis Sayles Balanced
Series................. $65,712 0.50% of the first $25 million
0.40% of the next $75 million
0.30% of amounts in excess of $100 million
Back Bay Advisors Man-
aged Series............ $161,324 0.25% of the first $50 million
0.20% of amounts in excess of $50 million
</TABLE>
- -------
* During the period January 1, 1996 through May 1, 1996 the sub-advisory fees
for the Alger Equity Growth Series were: 0.45% of the Series' first $10
million of average daily net assets; 0.40% of the next $90 million of such
assets, 0.35% of the next $150 million of such assets, 0.30% of the next
$250 million of such assets and 0.25% of such assets in excess of $500
million.
94
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
<TABLE>
<CAPTION>
GROSS FEES
EARNED BY ANNUAL
SUB-ADVISOR PERCENTAGE
FOR SIX MONTHS RATES PAID
ENDED JUNE TO SUB- AVERAGE DAILY NET ASSET
SERIES 30, 1996 ADVISERS VALUE LEVELS
------ --------------- ---------- ------------------------------------
<S> <C> <C> <C>
Salomon Brothers Strate-
gic Bond Opportunities
Series................. $23,641 0.35% of the first $50 million
0.30% of the next $150 million
0.25% of the next $300 million
0.20% of amounts in excess of $500 million
Back Bay Advisors Bond
Income Series.......... $174,731 0.25% of the first $50 million
0.20% of the next $200 million
0.15% of amounts in excess of $250 million
Salomon Brothers U.S.
Government Series...... $10,499 0.225% of the first $200 million
0.150% of the next $300 million
0.100% of amounts in excess of $500 million
Back Bay Advisors Money
Market Series.......... $70,234 0.15% of the first $100 million
0.10% of amounts in excess of $100 million
</TABLE>
VOLUNTARY EXPENSE LIMITATION AND EXPENSE DEFERRAL AGREEMENT.
Each Series (except the Capital Growth Series) is subject to one of two forms
of expense limit. The first form of expense limit is a Voluntary Expense
Limitation, which relates to the Loomis Sayles Avanti Growth Series, Westpeak
Value Growth Series, Westpeak Stock Index Series, Back Bay Advisors Managed,
Back Bay Advisors Bond Income and Back Bay Advisors Money Market Series.
Pursuant to this agreement TNE Advisers, Inc. bears expenses (other than
advisory fees and any brokerage costs, interest, taxes or extraordinary
expenses) of the Series in excess of 0.15% of the respective Series' average
daily net assets. In the case of the Loomis Sayles Small Cap Series, TNE
Advisers, Inc. bears all the expenses (other than any brokerage costs,
interest, taxes or extraordinary expenses) of the Series in excess of 1.00% of
the Series' average daily net assets. Similar Voluntary Expense Limitations
with The New England were in effect with respect to the Capital Growth Series
from November 1, 1994 to April 30, 1996 and with respect to the Back Bay
Advisors Money Market, Back Bay Advisors Bond Income, Back Bay Advisors
Managed and Westpeak Stock Index Series from November 1, 1994 to April 30,
1995 and with respect to the Loomis Sayles Small Cap, Loomis Sayles Avanti
Growth and Westpeak Value Growth Series from December 1, 1994 to April 30,
1995.
The second form of expense limit is an Expense Deferral Agreement which has
been in effect since November 1, 1994 and relates to the Draycott
International Equity Series, Alger Equity Growth Series, Venture Value Series,
Loomis Sayles Balanced Series, Salomon Brothers Strategic Bond Opportunities
Series, and Salomon Brothers U.S. Government Series. Under this arrangement,
which TNE Advisers, Inc. can terminate at any time, TNE Advisers, Inc. has
agreed to pay expenses of the Series' operations (exclusive of any brokerage
costs, interest, taxes or extraordinary expenses) in excess of the annual
percentages of the Series net assets set forth below, subject to the
obligation of the Series to repay TNE Advisers, Inc. such expenses in future
years, if any, when the Series' expenses fall below that percentage; provided,
however, that no Series is obligated to repay any expenses paid by TNE
Advisers, Inc. more than two years after the end of the fiscal year in which
such expenses were incurred. The percentage applicable to each Series are as
follows:
<TABLE>
<CAPTION>
% OF
AVERAGE
SERIES NET ASSETS
------ ----------
<S> <C>
Draycott International Equity Series......................... 1.30%
Alger Equity Growth Series................................... 0.90
Venture Value Series......................................... 0.90
Loomis Sayles Balanced Series................................ 0.85
Salomon Brothers Strategic Bond Opportunities Series......... 0.85
Salomon Brothers U.S. Government Series...................... 0.70
</TABLE>
95
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1996--(CONTINUED) (UNAUDITED)
For the period January 1, 1996 to June 30, 1996 the effective expense ratios
for each series, after giving effect to the foregoing arrangements, and the
amounts of expenses deferred for those Series to which the Expense Deferral
Agreement applies, are:
<TABLE>
<CAPTION>
EXPENSES ASSUMED
BY THE NEW
ENGLAND AND TNE
TOTAL EXPENSE RATIO ADVISERS AS A
UNDER CURRENT VOLUNTARY RESULT OF THE SERIES
EXPENSE AGREEMENT EXCEEDING THE
OR EXPENSE DEFERRAL VOLUNTARY EXPENSE EXPENSES DEFERRED UNTIL EXPENSES DEFERRED UNTIL
SERIES ARRANGEMENT LIMIT DECEMBER 1997 DECEMBER 31, 1998
------ ----------------------- -------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Back Bay Advisors Money
Market Series 0.50% -- not applicable not applicable
Back Bay Advisors Bond
Income Series 0.52% -- not applicable not applicable
Back Bay Advisors
Managed Series 0.63% -- not applicable not applicable
Westpeak Value Growth
Series 0.85% $22,619 not applicable not applicable
Westpeak Stock Index
Series 0.40% 34,175 not applicable not applicable
Loomis Sayles Small Cap
Series 1.00% 66,288 not applicable not applicable
Loomis Sayles Avanti
Growth Series 0.85% 26,039 not applicable not applicable
Draycott International
Equity Series 1.30% not applicable $176,796 $62,308
Alger Equity Growth
Series 0.90%* not applicable 77,254 6,754
Venture Value Series 0.90% not applicable 108,971 46,239
Loomis Sayles Balanced
Series 0.85% not applicable 96,085 37,335
Salomon Brothers
Strategic Bond
Opportunities Series 0.85% not applicable 88,120 45,511
Salomon Brothers U.S.
Government Series 0.70% not applicable 84,623 42,814
</TABLE>
* Prior to January 1, 1996 the voluntary expenses limit was 0.85%
Effective May 1, 1996, Fred Alger Management, Inc. has agreed with TNE
Advisers, Inc. that the sub-advisory fee payable by TNE Advisers, Inc. to Fred
Alger Management, Inc. will be reduced by 0.05% of the first $240 million of
the excess of the Series' average daily net assets over $10 million, and by
0.10% of the excess of the Series' average daily net assets over $250 million.
This fee reduction benefits TNE Advisers, Inc. but does not reduce the
advisory fee payable by the Series. The fee reduction agreement will expire on
(a) January 1, 1998 or (b) at such time as TNE Advisers, Inc. has recovered
certain expenses (generally those expenses borne by TNE Advisers, Inc. under
the Expense Deferral Arrangement prior to January 1, 1996 which were not
recovered from the Series), whichever occurs first.
5. The Fund does not pay any compensation to its officers or to any trustees
who are directors, officers or employees of The New England, NEVLICO, Back Bay
Advisors, L.P., Capital Growth Management Limited Partnership, Loomis, Sayles
& Company, L.P., Westpeak Investment Advisors, L.P., New England Funds L.P. or
their affiliates, other than registered investment companies. Each
disinterested trustee is compensated by each Series as follows:
<TABLE>
<CAPTION>
BOND CAPITAL MONEY STOCK AVANTI VALUE SMALL
INCOME GROWTH MARKET INDEX MANAGED GROWTH GROWTH CAP
------ ------- ------ ------ ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $2,416 $3,692 $1,580 $1,527 $2,391 $796 $795 $761
Meeting Fee............. $ 133 $ 133 $ 133 $ 133 $ 133 $133 $133 $133
Committee Chairman
Annual Retainer
(Contract Review)...... $ 287 $1,627 $ 159 $ 104 $ 261 $ 86 $ 85 $ 49
Committee Chairman
Annual Retainer
(Audit)................ $ 192 $1,084 $ 106 $ 69 $ 174 $ 57 $ 57 $ 33
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC
INTERNATIONAL U.S. BOND VENTURE EQUITY
BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH
-------- ------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $746 $742 $727 $730 $773 $792
Meeting Fee............. $133 $133 $133 $133 $133 $133
Committee Chairman
Annual Retainer
(Contract Review)...... $ 33 $ 29 $ 73 $ 77 $ 62 $ 82
Committee Chairman
Annual Retainer
(Audit)................ $ 22 $ 19 $ 9 $ 11 $ 41 $ 55
</TABLE>
A deferred compensation plan is available to trustees on a voluntary basis.
Each participating trustee will receive deferred compensation in an amount
equal to the value that such compensation would have had if it had been
invested in the relevant Series on the normal payment date.
96
<PAGE>
FOOTNOTES TO PORTFOLIO MANAGER COMMENTARY
- ---------------------------------
(1) COL (Cost of Living) is based on the Consumer Price Index, a widely
recognized measure of the cost of goods and services in the United
States, calculated by the U.S. Bureau of Labor Statistics.
(2) EAFE-Morgan Stanley Capital International Europe, AustralAsia, Far East
Index is an arithmetical average (weighted by market value) of the
performance (in U.S. dollars) of 1,036 companies representing the stock
markets of Europe, Australia, New Zealand and the Far East. The Index
performance has not been adjusted for ongoing management, distribution
and operating expenses and sale charges applicable to mutual funds
investments.
(3) Lehman Brothers Aggregate Bond Index includes most obligations of the
U.S. Treasury, agencies and quasi-federal corporations, most publicly
issued investment grade corporate bonds, and most bonds backed by
mortgage pools of GNMA, FNMA and FHLMC. The index has not been adjusted
for ongoing management, distribution and operating expenses and sales
charges applicable to mutual funds expenses.
(4) Lehman Brothers Government/Corporate Bond Index is an unmanaged index of
the market value of approximately 5,300 bonds with a face value
currently in excess of $1.3 trillion. To be included in the Lehman
Brothers Government/ Corporate Bond Index, an issue must have amounts
outstanding in excess of $25 million, have at least one year to maturity
and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency. The index has not been adjusted for ongoing
management, distribution and operating expenses and sales charges
applicable to mutual fund expenses.
(5) Lehman Brothers Intermediate Government Bond Index includes most
obligations of the U.S. Treasury, agencies and quasi-federal
corporations having maturities of 1 to 10 years. The index has not been
adjusted for ongoing management, distribution and operating expenses and
sales charges applicable to mutual fund expenses.
(6) Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index of investment grade bonds issued by the U.S. government
and U.S. corporations having maturities between one and ten years. The
Index performance has not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to
mutual fund investments.
(7) Lipper Variable A-Rated Corporate Bond Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(8) Lipper Variable Balanced Fund Average is an average of the total return
performance (calculated on the basis of net asset level) of funds with
similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(9) Lipper Variable Flexible Portfolio Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(10) Lipper Variable General Bond Fund Average is an average of the total
return performance (calculated on the basis of net asset value) of funds
with similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(11) Lipper Variable Growth Fund Average is an average of the total return
performance (calculated on the basis of net asset value) of funds with
similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(12) Lipper Variable Growth and Income Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(13) Lipper Variable International Funds Average is an average of the total
return performance (calculated on the basis of net asset value) of funds
with similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(14) Lipper Variable Intermediate Investment Grade Debt Average is
an average of the total return performance (calculated on the
basis of net asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services, an independent mutual fund
ranking service.
97
<PAGE>
(15) Lipper Variable Small Company Fund Average is an average of the total
return performance (calculated on the basis of net asset value) of funds
with similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(16) Lipper Variable S&P 500 Index Fund Average is an average of the total
return performance (calculated on the basis of net asset value) of funds
with similar investment objectives as calculated by Lipper Analytical
Services, an independent mutual fund ranking service.
(17) Lipper Variable U.S. Mortgage and GNMA Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(18) The Russell 1000 represents the "large cap" segment of the Russell 3000
index. This index is comprised of 1,000 large U.S. companies as
determined by market capitalization, the smallest of which has
approximately $250 million in market capitalization. The average market
capitalization for this index is currently $510 million, and the median
capitalization is $2.38 billion.
(19) Russell 2000 Index consists of 2000 small market capitalization stocks
having an average market cap of $160 million. The Russell 2000 Index
performance has not been adjusted for ongoing management, distribution
and operating expenses and sales charges applicable to mutual fund
investments.
(20) Standard & Poor's 500 Index (S&P 500) is an unmanaged index representing
the performance of 500 major companies, most of which are listed on the
New York Stock Exchange. The S&P 500 performance has not been adjusted
for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments.
98
<PAGE>
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99
<PAGE>
[LOGO OF THE NEW ENGLAND APPEARS HERE]
-------------------
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-------------------
NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
EQUAL OPPORTUNITY EMPLOYER M/F
(C) 1996 NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(C) 1996 NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
This booklet has been prepared for variable contract owners of
New England Variable Life Insurance Company and of The New
England.
