<PAGE>
[LOGO OF NEW ENGLAND APPEARS HERE]
The New England
Insurance and Investment
A MetLife Affiliate
-------------------------------------------------------------------------
ZENITH FUND
VARIABLE PRODUCTS
SEMIANNUAL REPORTS
JUNE 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Loomis Sayles Balanced Series Supplement.................................... I
Loomis Sayles Small Cap Series.............................................. 1
Morgan Stanley International Magnum Equity Series........................... 7
Alger Equity Growth Series.................................................. 14
Capital Growth Series....................................................... 20
Loomis Sayles Avanti Growth Series.......................................... 24
Davis Venture Value Series.................................................. 29
Westpeak Growth & Income Series............................................. 36
Westpeak Stock Index Series................................................. 43
Loomis Sayles Balanced Series............................................... 53
Back Bay Advisors Managed Series............................................ 61
Salomon Brothers Strategic Bond Opportunities Series........................ 69
Back Bay Advisors Bond Income Series........................................ 77
Salomon Brothers U.S. Government Series..................................... 83
Back Bay Advisors Money Market Series....................................... 87
Notes to Financial Statements............................................... 93
Footnotes to Portfolio Manager Commentary................................... 102
</TABLE>
IMPORTANT:
Some funds appearing in this report may not be available under your variable
life or variable annuity product.
<PAGE>
August, 1997
TO OUR POLICYHOLDERS/CONTRACT OWNERS:
We are pleased to provide you with the 1997 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, 1997, 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 1997 Semiannual Report also contains important information pertaining to
the Loomis Sayles Balanced Series and the Morgan Stanley International Magnum
Equity Series. Please see the enclosed supplement for more details.
The New England and its affiliates offer 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 your Registered Representative with any questions
you may have regarding your financial objectives. Thank you for choosing a
Zenith Variable product.
Sincerely,
/s/ David Allen /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>
NEW ENGLAND ZENITH FUND
MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES
AND LOOMIS SAYLES BALANCED SERIES
SUPPLEMENT DATED AUGUST 1, 1997 TO PROSPECTUS DATED MAY 1, 1997
THE FOLLOWING PARAGRAPH REPLACES THE SECOND PARAGRAPH UNDER MORGAN STANLEY
INTERNATIONAL MAGNUM EQUITY SERIES IN THE "INVESTMENT OBJECTIVES AND POLICIES"
SECTION:
The countries in which the Series will primarily invest are those comprising
the Morgan Stanley Capital International EAFE Index (the "EAFE Index"), which
includes Australia, Japan, New Zealand, most nations located in Western Europe
and certain developed countries in Asia, such as Hong Kong and Singapore (each
an "EAFE country," and collectively the "EAFE countries"). The Series may
invest up to 5% of its assets in non-EAFE countries. Under normal
circumstances, at least 65% of the total assets of the Series will be invested
in equity securities of issuers in at least three countries outside the United
States.
THE FOLLOWING INFORMATION REPLACES THE THIRD PARAGRAPH UNDER LOOMIS, SAYLES &
COMPANY, L.P. ("LOOMIS SAYLES") IN THE "MANAGEMENT" SECTION:
Carol C. McMurtrie, Tricia H. Mills and Roderic Dillon are the portfolio
managers of the equity portion of the Loomis Sayles Balanced Series and are
responsible for allocating the assets of the Series between equity and fixed-
income securities. Ms. McMurtrie and Ms. Mills have served in these capacities
since July 1997, and Mr. Dillon since August 1997. The portfolio management
team for the fixed-income portion of the Series consists of Meri Anne Beck,
John Hyll and Barr Segal. Ms. Beck and Mr. Hyll have had portfolio management
responsibility for the Series' fixed-income investments since 1994, and Mr.
Segal joined the team in 1996. Messrs. Dillon, Hyll and Segal and Mses. Beck,
McMurtrie and Mills are Vice Presidents of Loomis Sayles. Mses. Beck,
McMurtrie and Mills and Mr. Hyll have been employed by Loomis Sayles for more
than five years. Mr. Segal was a Senior Portfolio Manager at TCW Group before
joining Loomis Sayles in 1996. Mr. Dillon rejoins Loomis Sayles in August 1997
following several years as principal of Dillon Capital Management.
VL-111-97
<PAGE>
LOOMIS SAYLES SMALL CAP SERIES
PORTFOLIO MANAGERS: JEFFREY C. PETHERICK AND MARY CHAMPAGNE
LOOMIS, SAYLES & COMPANY, L.P.
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
Q. HOW HAS THE SERIES PERFORMED DURING THE FIRST HALF OF 1997?
A. The Series performed favorably during the first half of 1997 with a total
return 12.36% compared to the Lipper Variable Products Small Company Aver-
age/14/ return of 8.11%. The smaller, value orientated stocks the Series fa-
vors outpaced the returns of the growth orientated small company stocks for
the first half of the year. Relative to large capitalization stocks, however,
small capitalization stocks still lagged. But after underperforming large com-
pany stocks for about three years we find small company issues are relatively
undervalued compared with their growth potential.
Q. HOW DID YOU MANAGE THE SERIES FOR THE FIRST HALF OF THE YEAR?
A. We continued to look for undervalued issues in companies with market capi-
talizations under $1 billion. The health care industry is one example of an
area offering very attractive valuations, partly due to the difficulties
caused by the proposed changes to Medicare and Medicaid. Recently, we pur-
chased Sierra Healthcare, a well-managed health maintenance organization whose
stock price was suffering when the health care sector was out of favor. An-
other promising health care issue is Hologic, Inc., a maker of equipment for
assessing the risk of developing osteoporosis. There is high growth potential
in this market as the American population ages.
Technology stocks are also currently selling at more reasonable valuations--
with good earnings prospects--after a year-long correction that began in May
1996. On the flip side, financial services stocks are reaching their peak val-
uation level after some terrific growth over the past seven years, and we
could be trimming those holdings.
Q. WHAT IS YOUR OUTLOOK OVER THE MONTHS AHEAD?
A. Overall, we see the small company stocks benefitting from a number of fac-
tors, including a rise in the U.S. dollar that began a year ago. A rising dol-
lar reduces some of the competitive edge larger companies had worldwide for
their products (because their products are more expensive for foreigners to
import), and will likely cut into these firms' relative earnings. Smaller
firms generally do not depend on overseas customers a great deal, and there-
fore their stocks aren't as susceptible to the dollar's fluctuations.
A $10,000 Investment Compared to the Russell 2000/17/
Average Annual Return
<TABLE>
<CAPTION>
Small Cap Lipper Variable Small
Series Company Fund Average/14/
<S> <C> <C>
6 mos.* 12.36% 8.11%
1 year 26.69% 14.19%
Since Inception 21.08% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
SERIES COMPARED TO THE GROWTH OF A $10,000 INVESTMENT IN THE RUSSELL 2000 INDEX,
THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Small Cap Series Russell 2000/17/
<S> <C> <C>
Inception 5/1/94 10,000 10,000
12/31/94 9,676 10,026
12/31/95 12,471 12,877
12/31/96 16,295 15,007
6/30/97 18,309 16,538
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Long-term growth from investment in common stocks or their equivalent.
START DATE: May 1, 1994
SIZE: $138 million as of June 30, 1997
MANAGERS: Jeffrey C. Petherick and Mary Champagne. Mr. Petherick has managed the
Series since its inception in May 1994. Ms. Champagne joined the management of
the Fund in July 1995. Mr. Petherick has also managed the Loomis Sayles portion
of the New England Star Advisers Fund 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 Value Fund and the Maxim
Series--Small Cap Aggressive Growth Fund. 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 in-
surance, 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.
1
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--85.6% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--0.5%
31,400 Gencorp, Inc. ............................................ $ 726,125
-----------
AUTOMOBILE & RELATED--1.7%
9,200 Amcast Industrial Corp. .................................. 230,000
16,500 Borg Warner Automotive, Inc. ............................. 892,031
35,200 Echlin, Inc. ............................................. 1,267,200
-----------
2,389,231
-----------
BANKS--SAVINGS & LOAN--3.4%
23,300 Bank Utd. Corp. .......................................... 885,400
41,100 City National Corp. ...................................... 988,969
28,075 Commercial Federal Corp. ................................. 1,042,284
34,400 Downey Financial Corp. ................................... 812,700
31,300 First Financial Corp. .................................... 919,437
-----------
4,648,790
-----------
BUSINESS SERVICES--1.5%
27,200 Alternative Resources Corp. .............................. 554,200
6,400 CDI Corp.(c).............................................. 266,800
40,800 Cort Business Services Corp.(c)........................... 1,203,600
8,300 Team America Corp. ....................................... 69,512
-----------
2,094,112
-----------
CHEMICALS--SPECIALTY--4.0%
54,000 Cuno, Inc. ............................................... 904,500
47,100 Dexter Corp. ............................................. 1,507,200
32,900 Hexcel Corp.(c)........................................... 567,525
83,900 Lawter International, Inc. ............................... 1,059,237
13,600 Learonal, Inc. ........................................... 387,600
32,400 OM Group, Inc. ........................................... 1,073,250
-----------
5,499,312
-----------
COMPUTER SOFTWARE & SERVICES--4.6%
25,700 American Management Systems, Inc. ........................ 687,475
35,200 National Computer Systems, Inc. .......................... 937,200
29,700 Network General Corp. .................................... 441,787
32,000 Nichols Research Corp. ................................... 672,000
43,800 Platinum Technology, Inc. ................................ 580,350
34,600 Semitool, Inc. ........................................... 402,225
38,400 Sterling Software, Inc. .................................. 1,200,000
37,100 Symantec Corp.(c)......................................... 723,450
45,900 Wonderware Corp. ......................................... 648,337
-----------
6,292,824
-----------
ELECTRICAL EQUIPMENT--1.4%
30,800 York International Corp. ................................. 1,416,800
26,200 Woodhead Industries....................................... 494,525
-----------
1,911,325
-----------
ELECTRONIC COMPONENTS--3.5%
17,800 Dynatech Corp. ........................................... 636,350
42,200 International Rectifier Corp. ............................ 785,975
38,700 Merix Corp. .............................................. 643,387
26,700 Perceptron, Inc. ......................................... 724,237
52,400 Trident Microsystems, Inc. ............................... 589,500
41,000 VLSI Technology, Inc. .................................... 968,625
76,800 Xicor, Inc. .............................................. 451,200
-----------
4,799,274
-----------
ENVIROMENTAL SERVICES--1.5%
47,800 Tetra Technical, Inc. .................................... 1,153,175
39,400 World Fuel Services Corp. ................................ 861,875
-----------
2,015,050
-----------
FINANCIAL SERVICES--1.9%
40,000 DVI, Inc.(c).............................................. 580,000
34,500 Financial Federal Corp. .................................. 759,000
16,000 Firstplus Financial Group, Inc. .......................... 544,000
42,880 WFS Financial, Inc.(c).................................... 718,240
-----------
2,601,240
-----------
FOOD PACKAGING & MISCELLANEOUS--2.5%
29,200 International Multifoods Corp. ........................... 733,650
62,500 Lance, Inc. .............................................. 1,195,312
80,100 Michaels Foods............................................ 1,481,850
-----------
3,410,812
-----------
FREIGHT TRANSPORTATION--1.7%
48,200 Circle International Group, Inc. ......................... 1,271,275
39,500 Pittston Burlington Group................................. 1,110,937
-----------
2,382,212
-----------
HEALTH CARE--DRUGS--1.7%
49,300 Bindley Western Industries, Inc. ......................... 1,130,819
54,500 Gulf South Medical Supply, Inc. .......................... 1,062,750
10,000 Weider Nutrition International, Inc. ..................... 158,750
-----------
2,352,319
-----------
HEALTH CARE--MEDICAL TECHNOLOGY--4.8%
59,100 Conmed Corp.(c)........................................... 1,004,700
23,600 C. R. Bard, Inc. ......................................... 856,975
41,200 Hologic, Inc. ............................................ 1,096,950
56,300 Invacare Corp. ........................................... 1,316,012
36,000 Marquette Medical Systems, Inc. .......................... 792,000
15,000 Sofamor/Danek Group, Inc.(c).............................. 686,250
23,900 Sola International, Inc. ................................. 800,650
-----------
6,553,537
-----------
HEALTH CARE--SERVICES--5.3%
5,700 Compdent Corp. ........................................... 120,056
67,245 Grancare, Inc.(c)......................................... 727,087
58,600 Healthplan Services Corp.(c).............................. 1,106,075
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--SERVICES--(CONTINUED)
33,000 Integrated Health Services, Inc. ......................... $ 1,270,500
52,043 Vitalink Pharmacy Services, Inc. ......................... 995,322
29,500 Phymatrix Corp. .......................................... 453,562
50,400 Physicians Resource Group, Inc. .......................... 453,600
50,000 Rotech Medical Corp.(c)................................... 1,003,125
39,400 Sierra Health Services, Inc. ............................. 1,231,250
-----------
7,360,577
-----------
HOME PRODUCTS--2.4%
9,600 Aptargroup, Inc. ......................................... 434,400
17,700 Bush Boake Allen, Inc.(c)................................. 550,912
49,600 Premark International, Inc. .............................. 1,326,800
72,550 US Can Corp.(c)........................................... 1,033,837
-----------
3,345,949
-----------
HOTELS & RESTAURANTS--0.4%
36,600 Buffets, Inc. ............................................ 308,812
19,500 Cooker Restaurant Corp. .................................. 208,406
-----------
517,218
-----------
HOUSING & BUILDING MATERIALS--2.2%
12,700 Crossman Communities, Inc.(c)............................. 269,875
26,700 Dayton Superior Corp. .................................... 340,425
56,400 Giant Cement Holdings, Inc.(c)............................ 1,057,500
35,600 Toro Co. ................................................. 1,348,350
-----------
3,016,150
-----------
INSURANCE--7.7%
34,050 Allied Group, Inc. ....................................... 1,293,900
23,900 Capital Resource Corp. ................................... 1,278,650
24,900 Capmac Holdings, Inc. .................................... 837,262
50,900 Everest Reinsurance Holdings.............................. 2,016,912
35,500 Protective Life Corp. .................................... 1,783,875
22,400 Reinsurance Group of America, Inc. ....................... 1,288,000
42,200 TIG Holdings, Inc. ....................................... 1,318,750
16,225 Triad Guaranty, Inc.(c)................................... 736,209
-----------
10,553,558
-----------
LEISURE--1.7%
28,095 Harman International...................................... 1,183,502
53,600 Scientific Games Holdings Corp.(c)........................ 1,105,500
-----------
2,289,002
-----------
MACHINERY--1.7%
31,500 Brown & Sharpe Manufacturing Co.(c)....................... 476,437
40,800 BW/IP, Inc. .............................................. 828,750
31,900 Greenfield Industries Inc. ............................... 861,300
6,700 Hardinge Brothers, Inc. .................................. 195,975
-----------
2,362,462
-----------
MEDIA & ENTERTAINMENT--2.1%
39,100 Banta Corp. .............................................. 1,060,587
41,200 Cadmus Communications Corp. .............................. 638,600
17,700 Houghton Mifflin Co. ..................................... 1,181,475
-----------
2,880,662
-----------
METALS--3.3%
62,100 Agnico Eagle Mines, Ltd. ................................. 597,712
38,400 Citation Corp.(c)......................................... 657,600
30,200 Lone Star Technologies, Inc. ............................. 864,475
44,700 LTV Corp. ................................................ 636,975
67,200 Oregon Steel Mills, Inc. ................................. 1,339,800
59,600 UNR Industries, Inc. ..................................... 409,750
-----------
4,506,312
-----------
MULTI-INDUSTRY--2.6%
11,700 Apogee Enterprises, Inc. ................................. 251,550
75,900 Griffon Corp.(c).......................................... 1,038,881
98,700 Vaid Corp. ............................................... 1,899,975
10,500 Insilco Corp.(c).......................................... 393,750
-----------
3,584,156
-----------
NATURAL GAS PIPELINES--0.3%
24,500 Public Service Co. North Carolina, Inc. .................. 470,094
-----------
OFFICE EQUIPMENT--0.4%
31,500 Telxon Corp. ............................................. 567,000
-----------
OIL--INDEPENDENT PRODUCERS--1.4%
56,900 Lomak Petroleum, Inc.(c).................................. 1,013,531
32,200 Vintage Petroleum, Inc.(c)................................ 990,150
-----------
2,003,681
-----------
OIL--SERVICES--4.6%
15,200 Falcon Drilling........................................... 875,900
35,100 Key Energy Group, Inc. ................................... 625,219
58,500 Pride International, Inc. ................................ 1,404,000
25,000 Seitel, Inc.(c)........................................... 950,000
51,200 Tuboscope Vetco International Corp. ...................... 1,017,600
38,000 Weatherford Enterra, Inc.(c).............................. 1,463,000
-----------
6,335,719
-----------
PAPER PRODUCTS--0.1%
5,700 Wausau Paper Mills, Inc. ................................. 107,587
-----------
REAL-ESTATE INVESTMENT TRUSTS--7.7%
58,100 American General Hospitality Corp. ....................... 1,437,975
52,800 Brandywine Realty Trust................................... 1,069,200
46,700 Cali Realty Corp. ........................................ 1,587,800
60,300 Capstone Capital Corp.(c)................................. 1,477,350
39,800 Health Care Property Investments, Inc. ................... 1,402,950
68,300 Koger Equity, Inc.(c)..................................... 1,246,475
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
REAL-ESTATE INVESTMENT TRUSTS--(CONTINUED)
49,000 Liberty Property......................................... $ 1,218,875
33,700 Sun Communities, Inc. ................................... 1,131,065
------------
10,571,690
------------
RETAIL--GENERAL MERCHANDISE--0.6%
30,800 Family Dollar Stores, Inc. .............................. 839,300
------------
RETAIL--SPECIALTY--3.5%
18,200 Carson Pirie Scott & Co. ................................ 577,850
40,650 Cato Corp.(c)............................................ 221,036
61,400 Heilig Meyers Co. ....................................... 1,204,975
36,600 Tandycrafts, Inc. ....................................... 173,850
35,600 United Auto Group, Inc. ................................. 705,325
26,700 Wet Seal, Inc. .......................................... 842,719
57,600 Zale Corp. .............................................. 1,141,200
------------
4,866,955
------------
TELECOMMUNICATIONS--1.7%
57,600 Alliant Communications, Inc. ............................ 1,123,200
55,500 Inter Tel, Inc. ......................................... 1,179,375
------------
2,302,575
------------
TEXTILE & APPAREL--0.3%
6,600 Timberland Co. .......................................... 425,700
------------
UTILITIES--ELECTRIC--0.9%
67,600 Calpine Corp. ........................................... 1,284,400
------------
Total Common Stocks
(Identified Cost $101,126,001).......................... 117,866,910
------------
<CAPTION>
- -----------------------------
SHORT-TERM INVESTMENTS--14.2%
- -----------------------------
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$6,392,668 Associates Corp. North America
6.080%, 7/01/97..................................... $ 6,392,668
6,400,000 Chevron Oil Finance Co.
5.350%, 7/02/97..................................... 6,400,000
5,800,000 Exxon Asset Management
6.250%, 7/02/97..................................... 5,800,000
1,000,000 General Electric 5.500%, 7/01/97..................... 1,000,000
------------
19,592,668
------------
Total Short-Term Investments
(Identified Cost $19,592,668)....................... 19,592,668
------------
Total Investments--99.8%
(Identified Cost $120,718,669)(b)................... 137,459,578
Other assets less liabilities........................ 181,166
------------
TOTAL NET ASSETS--100%............................... $137,640,744
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $120,718,669 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..................................... $ 19,331,802
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (2,590,893)
------------
Net unrealized appreciation........................ $ 16,740,909
============
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
4
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $137,459,578
Receivable for:
Fund shares sold....................................... 598,808
Securities sold........................................ 812,890
Dividends and interest................................. 127,490
------------
138,998,766
LIABILITIES
Payable for:
Securities purchased................................... $948,931
Fund shares redeemed................................... 214,296
Accrued expenses:
Management fees........................................ 161,602
Deferred trustees' fees................................ 1,637
Other expenses......................................... 31,556
--------
1,358,022
------------
$137,640,744
============
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $112,338,672
Undistributed net investment income.................... 514,242
Accumulated net realized gains......................... 8,046,921
Unrealized appreciation on investments................. 16,740,909
------------
NET ASSETS............................................... $137,640,744
============
Computation of offering price:
Net asset value and redemption price per share
($137,640,744 divided by 848,992 shares of beneficial
interest)............................................... $ 162.12
============
Identified cost of investments........................... $120,718,669
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 641,703(a)
Interest................................................ 403,828
-----------
1,045,531
EXPENSES
Management fees......................................... $540,630
Trustees' fees and expenses............................. 11,411
Custodian............................................... 37,869
Audit and tax services.................................. 3,796
Legal................................................... 9,340
Printing................................................ 18,339
Miscellaneous........................................... 1,820
--------
Total expenses........................................ 623,205
Less expenses assumed by the investment adviser....... (82,574) 540,631
-------- -----------
NET INVESTMENT INCOME.................................... 504,900
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net....................................... 7,344,960
Unrealized appreciation on:
Investments--net....................................... 6,534,301
-----------
Net gain on investment transactions...................... 13,879,261
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............... $14,384,161
===========
</TABLE>
(a) Net of foreign taxes of: $161
See accompanying notes to financial statements.
5
<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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 591,899 $ 504,900
Net realized gain on investments.................. 5,566,031 7,344,960
Unrealized appreciation on investments............ 7,966,226 6,534,301
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 14,124,156 14,384,161
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (597,412) 0
Net realized gain on investments.................. (5,269,235) 0
------------ ------------
(5,866,647) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 66,168,269 50,597,912
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 597,412 0
Distributions from net realized gain.............. 5,269,235 0
------------ ------------
72,034,916 50,597,912
Cost of shares redeemed........................... (18,839,546) (16,535,354)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 53,195,370 34,062,558
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 61,452,879 48,446,719
NET ASSETS
Beginning of the period........................... 27,741,146 89,194,025
------------ ------------
End of the period................................. $ 89,194,025 $137,640,744
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 14,855 $ 9,342
============ ============
End of the period................................. $ 9,342 $ 514,242
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 482,269 343,671
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 7,195 0
Distributions from net realized gain.............. 34,411 0
------------ ------------
523,875 343,671
Redeemed.......................................... (139,206) (112,850)
------------ ------------
Net change........................................ 384,669 230,821
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
MAY 2, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
-------------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $100.00 $ 96.61 $118.80 $ 144.29
------- ------- ------- --------
Income From Investment Operations
Net Investment Income........... 0.14 0.85 1.05 0.59
Net Realized and Unrealized Gain
(Loss) on Investments.......... (3.38) 26.93 35.03 17.24
------- ------- ------- --------
Total From Investment
Operations..................... (3.24) 27.78 36.08 17.83
------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income.............. (0.15) (0.78) (1.03) 0.00
Distributions From Net Realized
Capital Gains.................. 0.00 (4.81) (9.56) 0.00
------- ------- ------- --------
Total Distributions............. (0.15) (5.59) (10.59) 0.00
------- ------- ------- --------
Net Asset Value, End of Period... $ 96.61 $118.80 $144.29 $ 162.12
======= ======= ======= ========
TOTAL RETURN (%)................. (3.23)(b) 28.88 30.67 12.36(b)
Ratio of Operating Expenses to
Average Net Assets (%).......... 1.00 (c) 1.00 1.00 1.00(c)
Ratio of Net Investment Income to
Average Net Assets (%).......... 0.32 (c) 1.26 1.15 0.92(c)
Portfolio Turnover Rate (%)...... 80 (c) 98 62 83(c)
Average Commission Rate(d)....... -- -- $0.0568 $ 0.0547
Net Assets, End of Period (000).. $ 3,105 $27,741 $89,194 $137,641
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 (c) 1.91 1.29 1.15(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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.
6
<PAGE>
MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES
PORTFOLIO MANAGER: FRANCINE J. BOVICH MORGAN STANLEY ASSET MANAGEMENT INC.
[PICTURE APPEARS HERE]
Morgan Stanley Asset Management, Inc. ("MSAM") took over management of the
Draycott International Equity Series on May 1, 1997. Accordingly, the portfo-
lio was renamed the Morgan Stanley International Magnum Equity Series and re-
structured to reflect Morgan Stanley's own ideas. Specifically, as a result of
the stocks we selected, we increased the portfolio's exposure to Austria,
Switzerland, Denmark, the Netherlands, Sweden, Hong Kong, Japan, Malaysia,
Singapore and New Zealand, while reducing exposure to Australia, the United
Kingdom, Finland, Italy and Norway. Every attempt was made to minimize the
cost of the transition in the portfolio.
Q. HOW HAS THE SERIES PERFORMED SINCE YOU TOOK OVER THE MANAGEMENT OF THE
PORTFOLIO IN MAY?
A. Since taking over the investment management from Draycott Partners,Ltd. on
May 1, 1997, the International Magnum portfolio has slightly underperformed
the EAFE Index/2/, the Series' benchmark. The Series matched an impressive
EAFE Index performance in the month of May despite the fact the portfolio was
still in a transition period during the month. The portfolio slightly
underperformed in June due to a bounce back of Japanese banks in late May and
into June. For the second quarter, the series was below median performance of
its peer group but outperformed the average for each of the two months since
Morgan Stanley took over.
Q. WHAT WERE THE IMPORTANT WINNERS OR LOSERS IN TERMS OF INDIVIDUAL
SECURITIES, SECTORS OR COUNTRIES?
A. During the months of May and June the Japanese stocks in the Series gave
the Series no exposure to banks and limited exposure to finance companies, in-
stead favoring investment in companies which experienced clear earnings growth
such as blue chip export-orientated companies like NEC and Sony. The Japanese
stocks in which we are invested had a very strong run during the period
November 1996 through May 1997; in June, however, these stocks succumbed to
profit-taking while the oversold bank sector staged what we believe will be a
short-lived recovery.
Among our top performing stocks was Philips Electronics of the Netherlands,
which was up over 30% during June alone on the news of the company's link-up
with Lucent Technologies to develop telecommunications equipment. Stock selec-
tion in the United Kingdom and in Germany was strong, with Kwik Save Group,
Reckitt & Colman, Volkswagen and Lufthansa among top contributors to perfor-
mance.
A $10,000 Investment Compared to the EAFE Index
Average Annual Return
<TABLE>
<CAPTION>
International Lipper Variable International
Equity Series Funds Average/12/
<S> <C> <C>
6 mos.* 7.79% 12.13%
1 year 8.05% 16.75%
Since Inception 8.84% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
INTERNATIONAL MAGNUM EQUITY SERIES COMPARED TO THE GROWTH OF A $10,000
INVESTMENT IN THE RUSSELL 2000 INDEX, THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
International Magnum
Equity Series EAFE/2/
<S> <C> <C>
10/31/94 10,000 10,000
12/31/94 10,260 9,579
12/31/95 10,879 10,653
12/31/96 11,627 11,297
6/30/97 12,533 12,563
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Total return from long-term growth of capital
START DATE: October 31, 1994
SIZE: $49 million as of June 30, 1997
MANAGER: Francine J. Bovich manages the Morgan Stanley International Magnum
Equity Series. Ms. Bovich joined MSAM as Principal in 1993. Previously she was a
Principal and Executive Vice President of Westwood Management Corp., a
registered investment adviser.
Performance numbers are net of all Series expenses but do not include any in-
surance, 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.
7
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--94.6% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AUSTRIA--0.6%
3,500 Bochler Uddeholm.......................................... $ 271,415
480 Radex Heraklith........................................... 20,314
-----------
291,729
-----------
AUSTRALIA--2.9%
28,400 Amcor, Ltd. .............................................. 188,877
19,000 Broken Hill Proprietary, Ltd.............................. 279,761
15,500 Commonwealth Bank......................................... 187,426
8,400 Lend Lease Corp........................................... 177,752
12,700 National Australia Bank, Ltd.............................. 182,075
39,000 News Corp., Ltd. ......................................... 187,161
38,500 WMC, Ltd. ................................................ 242,955
-----------
1,446,007
-----------
BELGIUM--0.5%
5,600 GB Inno................................................... 267,704
-----------
DENMARK--1.5%
6,200 BG Bank AS................................................ 342,686
7,100 Unidanmark................................................ 398,846
-----------
741,532
-----------
FINLAND--2.2%
10,000 Amer-Yhtymae(e)........................................... 180,059
5,000 Huhtamaki OY.............................................. 215,204
1,000 Kone OY Series B.......................................... 119,397
41,300 Merita Ltd................................................ 137,594
358 Rauma OY.................................................. 8,204
26,700 Rautaruukki OY............................................ 280,227
8,000 Valmet OY................................................. 138,347
-----------
1,079,032
-----------
FRANCE--6.6%
1,200 Alcatel Alsthom........................................... 150,288
3,200 Banque Nationale de Paris................................. 131,884
600 Bongrain S.A. ............................................ 234,724
2,700 Cie de St. Gobain......................................... 393,741
2,300 Cie General des Eaux...................................... 1,378
1,800 Groupe Danone............................................. 297,412
3,200 Elf Aquitaine............................................. 345,227
1,800 Eridanig Beghin-Say....................................... 269,539
4,000 Lafarge-Coppee............................................ 248,779
5,000 Legris.................................................... 235,676
1,800 SGS Thomson Microelectronics(e)........................... 142,121
4,200 Total S.A., Series B...................................... 424,524
21,690 Usinor.................................................... 391,230
-----------
3,266,523
-----------
GERMANY--7.9%
7,400 Basf AG................................................... 273,453
6,900 Bayer AG.................................................. 265,144
250 Buderus AG................................................ 137,607
800 Dyckerhoff AG, Preferred.................................. 288,974
12,300 Gerresheimer Glas......................................... 211,570
3,700 Hornbach Holdings AG, Preferred........................... 313,973
23,850 Lufthansa AG.............................................. 457,418
300 Mannesmann AG............................................. 133,651
1,200 Metro AG.................................................. 131,483
360 Sudzucker AG, Preferred................................... 192,994
8,510 Veba AG................................................... 478,172
800 Viag AG................................................... 363,741
900 Volkswagen................................................ 689,926
-----------
3,938,106
-----------
GREAT BRITAIN--12.6%
32,100 Associated British Foods.................................. 276,368
21,355 Bank of Scotland.......................................... 137,271
24,000 Bass PLC.................................................. 292,960
30,700 Bat Industries PLC........................................ 274,796
37,500 BG PLC.................................................... 137,387
47,800 British Telecom PLC....................................... 355,022
24,550 Burmah Castrol............................................ 415,373
54,300 Courtaulds Textiles PLC................................... 277,607
52,600 Grand Metropolitan........................................ 506,298
68,400 Imperial Tobacco Group.................................... 439,680
53,800 Kwik Save Group........................................... 271,333
13,400 P & O Steam Navigation Co. ............................... 133,443
1,900 Premier Farnell........................................... 14,776
35,500 Racal Electronics PLC..................................... 141,884
34,500 Reckitt & Colman.......................................... 515,352
36,600 Royal Sun Alliance Insurance.............................. 270,618
58,200 Salveson Christian........................................ 272,347
38,600 Scottish Hydro-Electric................................... 266,765
33,000 Southern Electric PLC..................................... 242,901
47,100 Tate & Lyle PLC........................................... 350,215
9,600 Unilever PLC.............................................. 274,815
86,200 WPP Group PLC............................................. 352,413
-----------
6,219,624
-----------
HONG KONG--4.0%
38,000 Cheung Kong Holdings...................................... 375,228
50,000 China Resources Enterprises............................... 245,247
22,000 Dao Heng Bank Group....................................... 120,403
25,000 Henderson Land Development................................ 221,851
12,800 HSBC Holdings............................................. 384,960
22,000 Hutchison Whampoa......................................... 190,260
19,000 New World Development Co. ................................ 113,304
38,000 Shanghai Industrial Holdings.............................. 236,418
9,000 Sun Hung Kai Properties................................... 108,328
-----------
1,995,999
-----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ITALY--1.4%
74,200 Sogefi................................................... $ 187,730
75,800 Stet Risp................................................ 263,137
131,000 Telecom Italia Spa....................................... 259,369
-----------
710,236
-----------
JAPAN--29.6%
28,000 Amada, Ltd. ............................................. 246,728
24,000 Asahi Tech Corp.......................................... 116,838
16,000 Canon, Inc. ............................................. 435,526
13,000 Dai Nippon Printing...................................... 293,753
31,000 Daicel Chemical.......................................... 119,813
19,000 Daifuku.................................................. 250,305
18,000 Daikin Industries........................................ 163,322
5,000 Familymart Co., Ltd. .................................... 245,158
12,000 Fuji Machine Manufacturing............................... 434,479
10,000 Fuji Photo Film, Ltd..................................... 402,199
33,000 Fujitsu, Ltd. ........................................... 457,774
18,000 Fujitec Co. ............................................. 213,575
46,000 Furukawa Electric Co. ................................... 292,567
10,000 Hitachi Credit Corp. .................................... 193,684
43,000 Hitachi, Ltd. ........................................... 480,196
15,000 Inabata & Co. ........................................... 102,207
35,000 Kaneka Corp.............................................. 219,246
11,000 Kurita Water Industries.................................. 292,706
5,000 Kyocera.................................................. 396,964
16,000 Kyudenko Corp............................................ 134,846
11,000 Lintec Corp.............................................. 200,576
22,000 Matsushita Electric Industries........................... 443,378
68,000 Mitsubishi Chemical Industries........................... 221,881
15,000 Mitsubishi Estate........................................ 217,240
44,000 Mitsubishi Heavy Industries.............................. 337,428
16,000 Mitsumi Electric......................................... 381,085
7,000 Murata Manufacturing..................................... 278,485
31,000 NEC Corp. ............................................... 432,734
10,000 Nifco, Inc. ............................................. 104,694
5,000 Nintendo, Ltd. .......................................... 418,775
39,000 Nissan Motors............................................ 302,487
13,000 Nissha Printing Co....................................... 149,712
38 NTT...................................................... 364,683
30,000 Obayashi Corp............................................ 200,750
33,000 Ricoh.................................................... 431,862
6,000 Rinnai Corp. ............................................ 128,773
5,000 Sangetsu................................................. 106,439
14,000 Sankyo Co. .............................................. 470,250
19,000 Sanwa Shutter Corp....................................... 172,396
20,000 Sekisui Chemical......................................... 202,408
19,000 Sekisui House............................................ 192,288
4,000 Shimamura, Ltd........................................... 142,384
5,500 Sony Corp. .............................................. 479,367
19,000 Sumitomo Marine and Fire................................. 155,819
20,000 Suzuki Motor............................................. 253,010
44,000 Taisei Corp., Ltd. ...................................... 203,839
5,000 TDK....................................................... 366,864
9,000 Tokyo Electyron, Ltd...................................... 430,291
64,000 Toshiba Corp. ............................................ 411,516
300 Toto...................................................... 3,691
12,000 Toyota Motor Corp. ....................................... 353,865
28,000 Tsubakimoto Chain......................................... 171,000
8,000 Yamaha Corp. ............................................. 146,571
11,000 Yamanouchi Pharmaceutical................................. 295,585
-----------
14,664,012
-----------
MALAYSIA--2.4%
85,000 Berjaya Group BHD......................................... 104,398
18,000 Berjaya Sports Toto....................................... 84,865
18,000 Commerce Asset Holdings................................... 47,425
3,000 Dialog Group.............................................. 43,383
6,000 Edaran Otomobil Nasional.................................. 51,109
13,000 Genting BHD............................................... 62,322
10,000 Jaya Tiasa Holdings....................................... 50,317
5,000 Lityan Holding BHD........................................ 60,915
13,000 Malayan Bank BHD.......................................... 136,490
19,000 Malaysian Resources Corp.................................. 52,318
18,000 Rashid Hussain BHD........................................ 114,105
22,000 Resorts World BHD......................................... 66,244
43,000 Sime Darby BHD............................................ 143,106
14,000 United Engineers BHD...................................... 100,951
-----------
1,117,948
-----------
NETHERLANDS--4.9%
14,300 ABN Amro Holdings NV...................................... 266,636
3,000 Akzo Nobel NV............................................. 411,127
9,034 ING Groep NV.............................................. 416,515
4,400 KLM Royal Dutch Air....................................... 135,616
3,600 Koninklijke KNP, BT....................................... 251,811
13,000 Koninklijke KNP........................................... 296,042
3,300 Koninklijke Van Ommeren................................... 128,106
6,700 Philips Electronics....................................... 479,912
-----------
2,385,765
-----------
NEW ZEALAND--0.3%
2,000 Fletcher Challenge Forests Division....................... 2,907
50,000 Fletcher Challenge Paper Shares........................... 121,246
-----------
124,153
-----------
NORWAY--0.6%
15,700 Saga Petroleum, Series B.................................. 274,191
-----------
SINGAPORE--2.0%
35,000 Data Craft Asia........................................... 111,300
7,000 Development Bank of Singapore............................. 88,130
36,000 Electronic Resources, Ltd. ............................... 56,655
14,500 Electronic Resources (Rights)............................. 8,215
49,000 Natsteel, Ltd............................................. 124,754
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
SINGAPORE--(CONTINUED)
8,400 Overseas Chinese Bank..................................... $ 86,955
40,000 Pacific Century Regional Development, Ltd................. 55,676
13,000 Parkway Holdings.......................................... 58,194
6,000 Singapore Press........................................... 120,865
77,000 Small Summit Holdings, Ltd. .............................. 58,166
61,000 Super Coffeemix Manufacturing............................. 50,773
8,000 United Overseas Bank...................................... 82,255
19,200 Want Want Holding......................................... 63,744
21,000 Wing Tai Holdings......................................... 60,516
-----------
1,026,198
-----------
SPAIN--2.7%
3,500 Banco Bilboa Vizcaya...................................... 284,323
21,200 Iberdrola S.A............................................. 267,608
16,600 Telefonica de Espana, S.A. ............................... 479,918
28,200 Uralita, S.A.............................................. 314,822
-----------
1,346,671
-----------
SWEDEN--3.6%
5,100 Esselte AB, Series B...................................... 119,992
16,600 Nordbanken AB............................................. 560,093
4,100 Pharmacia & Upjohn........................................ 138,336
533 Pricer AB Series B........................................ 18,328
5,400 SKF AB.................................................... 139,616
6,100 Skandia Forsakrings AB.................................... 224,743
9,500 Sparbanken Sverige AB..................................... 211,234
11,500 Spectra Physics AB........................................ 206,645
4,500 Svenska Handelsbkn........................................ 143,107
-----------
1,762,094
-----------
SWITZERLAND--8.0%
230 Ascom Holdings AG......................................... 321,527
110 Baloise Holdings.......................................... 262,192
160 Bobst AG.................................................. 271,781
930 Forbo Holdings............................................ 401,301
430 Holderbank Financiere Glarus.............................. 406,144
410 Nestle S.A................................................ 540,863
227 Novartis AG............................................... 362,889
1,180 Oerlikon Buehrle Holdings................................. 138,206
30 Schindler Holdings AG..................................... 38,527
172 Schindler Holdings Ptg. AG................................ 215,000
170 Sig Schweiz Industry Holdings AG.......................... 252,671
510 Sulzer AG................................................. 436,644
860 Valora Holdings AG........................................ 182,603
360 Zuerich Versicherung...................................... 143,260
-----------
3,973,608
-----------
UNITED STATES--0.3%
7,000 Coltec Industries, Inc. .................................. 136,500
-----------
Total Common Stocks
(Identified Cost $42,525,412)............................ 46,767,632
-----------
<CAPTION>
- ---------------------------
SHORT-TERM INVESTMENT--7.4%
- ---------------------------
FACE
AMOUNT
<C> <S> <C>
$3,640,000 Repurchase agreement with State Street Bank & Trust
Company dated 6/30/97 at 5% to be repurchased at
$3,640,506 on 7/01/97 collateralized by $3,520,000
U.S. Treasury Note 7.25% due 5/15/16 with a value
of $3,716,349...................................... 3,640,000
-----------
Total Short-Term Investment
(Identified Cost $3,640,000)....................... 3,640,000
-----------
Total Investments--102.0%
(Identified Cost $46,165,412)(b)................... 50,407,632
Other assets less liabilities(c).................... (966,577)
-----------
TOTAL NET ASSETS--100%.............................. $49,441,055
===========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------------
FORWARD CONTRACTS OUTSTANDING AT JUNE 30, 1997
- ----------------------------------------------
<TABLE>
<CAPTION>
LOCAL UNREALIZED
DELIVERY CURRENCY AGGREGATE APPRECIATION/
DATE AMOUNT FACE VALUE TOTAL VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Belgian Franc
(sold)............. 08/29/97 7,411,950 $ 210,000 $ 206,826 $ 3,174
Belgian Franc
(bought)........... 08/29/97 5,315,550 150,000 148,328 (1,672)
Swiss Franc (sold).. 08/18/97 2,399,530 1,660,000 1,653,176 6,824
Swiss Franc
(bought)........... 08/18/97 1,033,125 725,000 711,780 (13,220)
Deutsche Mark
(sold)............. 08/29/97 2,663,544 1,560,000 1,533,782 26,218
Deutsche Mark
(bought)........... 08/29/97 1,029,960 600,000 593,095 (6,905)
French Franc (sold). 09/15/97 7,972,673 1,406,909 1,363,509 43,400
French Franc
(bought)........... 09/15/97 3,471,720 600,000 593,743 (6,257)
Japanese Yen (sold). 08/25/97 356,889,600 3,200,000 3,138,925 61,075
Japanese Yen (sold). 08/25/97 182,905,920 1,640,000 1,608,699 31,301
Japanese Yen (sold). 09/16/97 170,059,500 1,530,000 1,500,361 29,639
Netherland Guilder
(sold)............. 08/18/97 1,633,568 865,000 850,426 14,574
Netherland Guilder
(bought)........... 08/18/97 580,230 300,000 296,617 (3,383)
--------
$184,768
========
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30,1997 the net unrealized appreciation on investments based on cost
of $46,165,412 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......... $4,666,843
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value......... (426,330)
----------
Net unrealized appreciation................................. $4,240,513
==========
</TABLE>
(c) Including deposits in foreign denominated currencies with a value of
$595,017 and a cost of $596,724.
(d) Rights attached.
(e) Non-income producing security.
See accompanying notes to financial statements.
11
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $50,407,632
Cash................................................... 69
Foreign cash at value.................................. 595,017
Receivable for:
Fund shares sold...................................... 268,179
Securities sold....................................... 359,812
Open forward currency contracts--net.................. 184,768
Dividends and interest................................ 79,218
Foreign taxes......................................... 46,129
Unamortized organization............................... 4,691
-----------
51,945,515
LIABILITIES
Payable for:
Securities purchased.................................. $2,237,486
Fund shares redeemed.................................. 182,070
Withholding taxes..................................... 7,263
Accrued expenses:
Management fees....................................... 30,374
Deferred trustees' fees............................... 3,501
Other expenses........................................ 43,766
----------
2,504,460
-----------
$49,441,055
===========
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $43,985,790
Undistributed net investment income................... 247,735
Accumulated net realized gains........................ 782,405
Unrealized appreciation on investments, forward
contracts and foreign currency....................... 4,425,125
-----------
NET ASSETS.............................................. $49,441,055
===========
Computation of offering price:
Net asset value and redemption price per share
($49,441,055 divided by 4,062,435 shares of beneficial
interest).............................................. $ 12.17
===========
Identified cost of investments.......................... $46,165,412
===========
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $ 503,316(a)
Interest............................................ 65,467
----------
568,783
EXPENSES
Management fees..................................... $ 184,136
Trustees' fees and expenses......................... 12,367
Custodian........................................... 83,905
Audit and tax services.............................. 8,626
Legal............................................... 9,340
Printing............................................ 9,404
Amortization of organization expenses............... 997
Miscellaneous....................................... 1,837
----------
Total expenses..................................... 310,612
Less expenses assumed by the investment adviser.... (44,638) 265,974
---------- ----------
NET INVESTMENT INCOME................................ 302,809
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments--net................................... 1,019,883
Foreign currency transactions--net................. (258,768)
----------
Total realized gain on investments and foreign
currency transactions............................. 761,115
----------
Unrealized appreciation on:
Investments--net................................... 2,337,768
Foreign currency transactions--net................. 179,046
----------
Total unrealized appreciation on investments,
futures contracts and foreign currency
transactions...................................... 2,516,814
----------
Net gain on investment transactions.................. 3,277,929
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $3,580,738
==========
</TABLE>
(a) Net of foreign taxes of: $71,139
See accompanying notes to financial statements.
12
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
- ----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- ----------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 191,479 $ 302,809
Net realized gain on investments and foreign
currency transactions.............................. 536,541 761,115
Unrealized appreciation on investments, and foreign
currency transactions.............................. 1,051,280 2,516,814
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 1,779,300 3,580,738
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (50,813) 0
Net realized gain on investments.................... (542,008) 0
----------- -----------
(592,821) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 30,118,413 14,958,063
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 50,813 0
Distributions from net realized gain................ 542,008 0
----------- -----------
30,711,234 14,958,063
Cost of shares redeemed............................. (8,773,034) (8,489,932)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 21,938,200 6,468,131
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 23,124,679 10,048,869
NET ASSETS
Beginning of the period............................. 16,267,507 39,392,186
----------- -----------
End of the period................................... $39,392,186 $49,441,055
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME
Beginning of the period............................. $ (6,800) $ (55,074)
=========== ===========
End of the period................................... $ (55,074) $ 247,735
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 2,705,127 1,342,704
Issued in connection with the reinvestment of:
Distributions from net investment income............ 4,565 0
Distributions from net realized gain................ 48,698 0
----------- -----------
2,758,390 1,342,704
Redeemed............................................ (784,531) (770,845)
----------- -----------
Net change.......................................... 1,973,859 571,859
=========== ===========
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................. $10.00 $ 10.23 $ 10.73 $ 11.29
------ ------- ------- -------
Income From Investment
Operations
Net Investment Income...... 0.03 0.09 0.06 0.08
Net Realized and Unrealized
Gain on Investments....... 0.23 0.53 0.68 0.80
------ ------- ------- -------
Total From Investment
Operations................ 0.26 0.62 0.74 0.88
------ ------- ------- -------
Less Distributions
Distributions From Net
Investment Income......... (0.02) (0.09) (0.02) 0.00
Distributions in Excess of
Net Investment Income..... 0.00 (0.03) 0.00 0.00
Distributions From Net
Realized Capital Gains.... 0.00 0.00 (0.16) 0.00
Distributions From Paid-in
Capital................... (0.01) 0.00 0.00 0.00
------ ------- ------- -------
Total Distributions........ (0.03) (0.12) (0.18) 0.00
------ ------- ------- -------
Net Asset Value, End of
Period..................... $10.23 $ 10.73 $ 11.29 $ 12.17
====== ======= ======= =======
TOTAL RETURN (%)............ 2.60(b) 6.03 6.67 7.79(b)
Ratio of Operating Expenses
to Average Net Assets (%).. 1.30(c) 1.30 1.30 1.30(c)
Ratio of Net Investment
Income to Average Net
Assets (%)................. 2.56(c) 1.29 0.67 1.45(c)
Portfolio Turnover Rate (%). 4(c) 89 64 192(c)
Average Commission Rate(d).. -- -- $0.0204 $0.0094
Net Assets, End of Period
(000)...................... $2,989 $16,268 $39,392 $49,441
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(c) 3.12 1.66 1.52(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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>
ALGER EQUITY GROWTH SERIES
PORTFOLIO MANAGER: DAVID ALGER
FRED ALGER MANAGEMENT, INC.
[PICTURE APPEARS HERE]
Q. HOW DID THE SERIES PERFORM DURING THE FIRST HALF OF 1997?
A. During the first quarter of 1997, the S&P 500 Index/18/ posted a modest
gain in excess of 2.5%. In comparison the Alger Equity Growth Series declined
slightly during this period. Specifically, underperformance can in part be at-
tributed to a difficult February, when unseasonably warm weather caused oil
stock holdings to decline and several technology holdings were negatively im-
pacted by the poor performance of the networking sector.
The second quarter was much more favorable. The stock market had an exceptional
quarter and the portfolio kept pace. Fueled by a 17.3% second quarter return,
the portfolio ended the first half of the year with a 16.67% return through
June 30, 1997.
Q. HOW DID YOU MANAGE THE SERIES?
A. While the first half of 1997 produced impressive gains across the board, the
discrepancy between the various indices' modest to poor showing in the first
quarter and the strong results of the second quarter proves that the road was
not a smooth one. Despite a strong January, the first quarter was extremely
challenging for growth managers as investors continued the trend toward blue-
chip type stocks with predictable earnings and away from speculative growth
stocks with more explosive earnings growth potential. This trend, which began
in the second quarter of 1996, was in response to overriding concern of invest-
ors that the economy was growing too quickly and that this would touch off a
series of preemptive strikes on inflation by the Federal Reserve Board. These
concerns caused the market to behave erratically, particularly in the growth
stock discipline.
As we entered the second quarter the multiples of quality growth stocks had
compressed to the point where these stocks were selling at a discount to the
broader market. In reviewing the outlook for growth stocks in our universe of
followed companies, we concluded that the drop in growth stock multiples did
not reflect deteriorating company fundamentals, but negative investor psycholo-
gy. As investor confidence started to rebuild, premiums for quality growth
stocks started to expand which, coupled with strong earnings, helped the Alger
Equity Growth Series to rebound significantly from an unimpressive first quar-
ter.
Although most sectors performed well during the second quarter, top to bottom,
communications and communications equipment stood out as exceptional with hold-
ings such as Tellabs (up 54.7%), Worldcom (up 45.5%), Cisco Systems (up 39.5%)
and Nokia (up 26.6%) leading the way. The Series' 6.8% stake across these two
sectors as of the end of the second quarter helped returns. At the present
time, the Series remains well diversified with pharmaceuticals, semiconductors
and retailing representing the most heavily weighted sectors.
Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MONTHS AHEAD?
A. Looking ahead, as concerns about interest rates wane, we believe that in-
vestors will continue their return to growth stocks with possibly favorable re-
sults in the second half of the year. We are encouraged by the reversal of neg-
ative investor psychology toward growth stocks and excited by the fact that
there is still a long way to go until these explosive stocks are fairly valued
relative to the broad market.
14
<PAGE>
A $10,000 Investment Compared to the S&P 500 Index/18/
Average Annual Return
<TABLE>
<CAPTION>
Alger Lipper Variable Growth
Equity Growth Fund Average/10/
<S> <C> <C>
6 mos.* 16.69% 13.57%
1 year 25.18% 23.67%
Since Inception 26.72% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE ALGER
EQUITY GROWTH FUND SERIES COMPARED TO THE GROWTH OF A $10,000 INVESTMENT IN THE
S&P 500 INDEX, THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Alger Equity
Growth Series S&P 500/18/
<S> <C> <C>
10/31/94 10,000 10,000
12/31/94 9,580 9,779
12/31/95 14,256 13,449
12/31/96 16,122 16,535
6/30/97 18,802 19,942
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Long-term capital appreciation.
START DATE: October 31, 1994
SIZE: $166 million as of June 30, 1997
MANAGER: David D. Alger, President and Chief Financial Officer (since 1975),
Executive Vice President, portfolio Manager and Director of Research (since
1971), Fred Alger Management, Inc.; Portfolio Manager, The Alger Growth
Portfolio (since 1986), The Alger American Fund Growth Portfolio (since 1989)
and the 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, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--95.7% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--7.0%
27,300 AlliedSignal, Inc........................................ $ 2,293,200
7,300 AMR Corp................................................. 675,250
60,900 Boeing Co................................................ 3,231,506
31,500 Gulfstream Aerospace Corp................................ 929,250
55,100 United Technologies Corp................................. 4,573,300
------------
11,702,506
------------
AGRICULTURE--0.9%
10,100 Pioneer Hi-Bred International............................ 808,000
21,000 IMC Global, Inc. ........................................ 735,000
------------
1,543,000
------------
APPAREL--1.1%
45,000 Tommy Hilfiger Corp.(c).................................. 1,808,437
------------
BANKS--3.6%
18,071 Banc One Corp. .......................................... 875,336
42,900 Citicorp................................................. 5,172,131
------------
6,047,467
------------
BIO TECHNOLOGY--0.3%
20,000 Biochem Pharmacy, Inc.(c)................................ 445,000
------------
CASINOS & RESORTS--2.1%
70,500 Carnival Corp. .......................................... 2,908,125
24,300 Mirage Resorts, Inc. .................................... 613,575
------------
3,521,700
------------
CHEMICALS--2.8%
54,200 E.I. duPont de Nemours................................... 3,407,825
27,000 Monsanto Co.............................................. 1,162,688
------------
4,570,513
------------
COMMUNICATIONS--3.2%
14,500 L.M. Ericsson Telephone Co., Class B (ADR)(d)............ 570,938
29,000 Nokia Corp. (ADR)(d)..................................... 2,138,750
80,600 Worldcom, Inc.(c)........................................ 2,579,200
------------
5,288,888
------------
COMMUNICATIONS EQUIPMENT--3.6%
62,200 Cisco Systems, Inc.(c)................................... 4,175,175
31,000 Tellabs, Inc.(c)......................................... 1,732,125
------------
5,907,300
------------
COMPUTER RELATED & BUSINESS EQUIPMENT--3.1%
35,800 Bay Networks, Inc........................................ 950,938
39,502 First Data Corp.......................................... 1,735,619
26,700 International Business Machines.......................... 2,408,006
------------
5,094,563
------------
COMPUTER SOFTWARE--5.6%
24,200 Microsoft Corp. ........................................ 3,058,275
62,400 Parametric Technology Corp. ............................ 2,655,900
72,100 Oracle Systems Corp..................................... 3,632,037
------------
9,346,212
------------
COMPUTER TECHNOLOGY--0.5%
22,400 Adaptec, Inc.(c)........................................ 778,400
------------
CONSUMER PRODUCTS--11.1%
25,700 ADT, Ltd................................................ 848,100
83,650 CUC International, Inc.(c).............................. 2,159,216
28,000 Colgate Palmolive Co.................................... 1,827,000
30,500 Corning Inc............................................. 1,696,562
45,000 Gillette Co. ........................................... 4,263,750
10,000 McKesson Corp........................................... 775,000
10,800 Newell Co. ............................................. 427,950
82,300 Sunbeam Corp. .......................................... 3,106,825
47,700 Tyco International, Ltd................................. 3,318,131
------------
18,422,534
------------
CONGLOMERATE--2.4%
62,000 General Electric Co. ................................... 4,053,250
------------
DEFENSE--1.0%
30,500 Sundstrand Corp. ....................................... 1,702,281
------------
ELECTRONICS--2.5%
30,000 Hewlett-Packard Co. .................................... 1,680,000
104,800 Westinghouse Electric................................... 2,423,500
------------
4,103,500
------------
ENERGY & ENERGY SERVICES--2.1%
19,000 Halliburton Co.......................................... 1,505,750
16,500 Schlumberger, Ltd....................................... 2,062,500
------------
3,568,250
------------
FINANCIAL SERVICES--6.1%
37,700 Charles Schwab Corp..................................... 1,533,919
35,000 Equifax, Inc. .......................................... 1,301,562
6,800 Household International................................. 798,575
39,300 Money Store, Inc........................................ 1,127,419
107,250 Morgan Stanley/Dean Witter.............................. 4,618,453
21,400 Paine Webber Group, Inc. ............................... 749,000
------------
10,128,928
------------
FOOD & BEVERAGE--1.0%
42,600 PepsiCo, Inc............................................ 1,600,163
------------
HEALTH CARE--8.9%
30,000 Becton, Dickinson....................................... 1,518,750
47,500 Eli Lilly & Co.......................................... 5,192,344
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--(CONTINUED)
47,700 Merck & Co............................................... $ 4,936,950
11,400 Oxford Health Plans, Inc................................. 817,950
18,400 Warner-Lambert Co........................................ 2,286,200
------------
14,752,194
------------
INSURANCE--2.6%
22,200 American International Group............................. 3,316,125
20,000 MGIC Investment Corp..................................... 958,750
------------
4,274,875
------------
LEISURE & ENTERTAINMENT--0.8%
76,000 International Game Technology............................ 1,349,000
------------
MINING--1.0%
21,800 Diamond Offshore Drilling, Inc........................... 1,703,125
------------
MISCELLANEOUS--0.4%
19,800 Service Corp. International.............................. 650,925
------------
PHARMACEUTICALS--2.0%
10,200 Bristol-Myers Squibb Co. ................................ 826,200
13,800 Pfizer, Inc. ............................................ 1,649,100
16,800 Schering-Plough.......................................... 804,300
------------
3,279,600
------------
POLLUTION CONTROL--0.9%
40,100 USA Waste Services, Inc.(c).............................. 1,548,864
------------
RETAIL--8.6%
15,700 Cintas Corp.............................................. 1,079,375
42,700 Gucci Group N.V.(c)...................................... 2,748,812
72,000 Home Depot, Inc.......................................... 4,963,500
25,000 Rite Aid Corp............................................ 1,246,875
40,000 TJX Companies, Inc. ..................................... 1,055,000
95,000 Wal-Mart Stores, Inc. ................................... 3,212,188
------------
14,305,750
------------
SEMI-CONDUCTORS/CAPITAL
EQUIPMENT--10.5%
39,100 Altera Corp.(c).......................................... 1,974,550
23,700 Applied Materials........................................ 1,678,256
10,500 Intel Corp............................................... 1,489,031
65,300 Linear Technology Corp. ................................. 3,379,275
27,300 Maxim Integrated Products, Inc.(c)....................... 1,552,687
18,500 Motorola, Inc. .......................................... 1,406,000
47,300 Texas Instruments........................................ 3,976,156
38,600 Xilinx, Inc.(c).......................................... 1,893,812
------------
17,349,767
------------
Total Common Stocks
(Identified Cost $129,448,720).......................... 158,846,992
------------
<CAPTION>
- ----------------------------
SHORT-TERM INVESTMENTS--7.7%
- ----------------------------
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$3,000,000 Merrill Lynch & Company, Inc., 5.560%, 7/02/97..... $ 2,999,537
4,000,000 OGE Energy Corp., 5.650%, 7/02/97.................. 3,996,233
5,753,225 Seven Seas U.S. Government Money Market Fund....... 5,753,225
------------
Total Short-Term Investments
(Identified Cost $12,748,995)..................... 12,748,995
------------
Total Investments--103.4%
(Identified Cost $142,197,715)(b)................. 171,595,987
Other assets less liabilities...................... (5,634,210)
------------
TOTAL NET ASSETS--100%............................. $165,961,777
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $142,197,715 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..................................... $ 29,820,686
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (422,414)
------------
Net unrealized appreciation........................ $ 29,398,272
============
</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.
17
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $171,595,987
Receivable for:
Fund shares sold.................................... 605,484
Securities sold..................................... 3,866,477
Dividends and interest.............................. 82,711
Unamortized organization............................. 4,691
------------
176,155,350
LIABILITIES
Payable for:
Securities purchased................................ $9,898,790
Fund shares redeemed................................ 151,628
Accrued expenses:
Management fees..................................... 98,885
Deferred trustees' fees............................. 1,989
Other expenses...................................... 42,281
----------
10,193,573
------------
$165,961,777
============
NET ASSETS
Net Assets consist of:
Capital paid in..................................... $129,654,291
Undistributed net investment income................. 111,815
Accumulated net realized gains...................... 6,797,399
Unrealized appreciation on investments and foreign
currency........................................... 29,398,272
------------
NET ASSETS............................................ $165,961,777
============
Computation of offering price:
Net asset value and redemption price per share
($165,961,777 divided by 9,130,834 shares of
beneficial interest)................................. $ 18.18
============
Identified cost of investments........................ $142,197,715
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 518,926(a)
Interest.............................................. 201,942
-----------
720,868
EXPENSES
Management fees....................................... $517,190
Trustees' fees and expenses........................... 14,231
Custodian............................................. 31,944
Audit and tax services................................ 6,211
Legal................................................. 9,340
Printing.............................................. 29,592
Amortization of organization expenses................. 997
Miscellaneous......................................... 1,820
--------
Total expenses...................................... 611,325
-----------
NET INVESTMENT INCOME.................................. 109,543
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net..................................... 6,678,156
Unrealized appreciation on:
Investments--net..................................... 15,538,223
-----------
Net gain on investment transactions.................... 22,216,379
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $22,325,922
===========
</TABLE>
(a)Net of foreign taxes of: $4,090
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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 204,002 $ 109,543
Net realized gain on investments.................. 965,295 6,678,156
Unrealized appreciation on investments............ 9,359,159 15,538,223
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 10,528,456 22,325,922
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (206,060) 0
------------ ------------
(206,060) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 92,225,724 41,410,347
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 206,060 0
------------ ------------
92,431,784 41,410,347
Cost of shares redeemed........................... (28,685,075) (18,229,999)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 63,746,709 23,180,348
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 74,069,105 45,506,270
NET ASSETS
Beginning of the period........................... 46,386,402 120,455,507
------------ ------------
End of the period................................. $120,455,507 $165,961,777
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 1,354 $ 2,272
============ ============
End of the period................................. $ 2,272 $ 111,815
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 6,311,990 2,502,499
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 13,117 0
------------ ------------
6,325,107 2,502,499
Redeemed.......................................... (1,954,136) (1,104,832)
------------ ------------
Net change........................................ 4,370,971 1,397,667
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $10.00 $ 9.56 $ 13.80 $ 15.58
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income..... 0.02 0.01 0.04 0.01
Net Realized and
Unrealized Gain (Loss) on
Investments.............. (0.44) 4.65 1.78 2.59
------ ------- -------- --------
Total From Investment
Operations............... (0.42) 4.66 1.82 2.60
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income........ (0.02) (0.01) (0.04) 0.00
Distributions From Net
Realized Capital Gains... 0.00 (0.41) 0.00 0.00
------ ------- -------- --------
Total Distributions....... (0.02) (0.42) (0.04) 0.00
------ ------- -------- --------
Net Asset Value, End of
Period.................... $ 9.56 $ 13.80 $ 15.58 $ 18.18
====== ======= ======== ========
TOTAL RETURN (%)........... (4.20)(b) 48.80 13.17 16.69(b)
Ratio of Operating Expenses
to Average Net Assets (%). 0.85 (c) 0.85 0.90 0.89(c)
Ratio of Net Investment
Income to Average Net
Assets (%)................ 1.07 (c) 0.14 0.24 0.16(c)
Portfolio Turnover Rate
(%)....................... 32 (c) 107 78 111(c)
Average Commission Rate(d). -- -- $ 0.0716 $ 0.0722
Net Assets, End of Period
(000)..................... $1,917 $46,386 $120,456 $165,962
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 (c) 2.45 0.90 --
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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>
CAPITAL GROWTH SERIES
PORTFOLIO MANAGER: G. KENNETH HEEBNER
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP
[PICTURE APPEARS HERE]
Q. HOW DID THE CAPITAL GROWTH SERIES PERFORM FOR THE FIRST SIX MONTHS OF 1997?
A. The first half of the year provided an optimal investment scenario for the
Series: a strong economy, low inflation and a stable interest rate environ-
ment. As of June 30, 1997 the Series had posted a return of 18.71%. This com-
pares favorably to the Lipper Variable Growth Fund Average return of 13.57%
over the first six months of the year.
Q. HOW DID YOU MANAGE THE SERIES DURING THE FIRST HALF OF THE YEAR?
A. The success of the Series over the years is due in large part to a contin-
ued commitment to quality, long term investments in well-established companies
that are reasonably priced. During the first half of the year, we continued to
invest in these types of companies--with modest valuations (the value or worth
placed on an asset) and strong prospects for growth.
The industry concentration focused mainly in the areas of insurance, computers
and pharmaceuticals. Notable among the strong performers were American Inter-
national Group, Allstate and Eli Lilly. We remained fully invested, concen-
trating in companies which provided significant opportunities for apprecia-
tion.
As the market reached new highs, we kept watch on price-to-earnings ratios,
which helped indicate how much we pay for the company's earnings power. Most
stocks in the portfolio featured lower price-to-earnings ratios than the mar-
ket--giving us room to grow even with market peaks and cushioning us somewhat
from declines. Consequently, the Capital Growth Series is in a good position
to take full advantage of the overall market's continued strength.
Q. WHAT IS YOUR ECONOMIC OUTLOOK FOR THE SECOND HALF OF 1997?
A. For the second half of the year, we anticipate moderate economic growth
with relatively low inflation. And, after one-quarter percent interest in-
crease in February, the Federal Reserve seems content to maintain stable in-
terest rate environment. We feel that these factors should provide the basis
for a favorable investment climate.
Accordingly, we will continue to invest in growth companies at reasonable
prices with long term investment horizon in mind. We further believe that by
carefully selecting the companies we invest in, and by maintaining a long view
on performance, this approach will moderate any periodic bursts of market vol-
atility along the way.
A $10,000 Investment Compared to the S&P 500 Index/18/
Average Annual Return
<TABLE>
<CAPTION>
Capital Lipper Variable Growth
Growth Series Fund Average/10/
<S> <C> <C>
6 mos.* 18.71% 13.57%
1 year 36.48% 26.67%
5 years 16.21% 17.97%
10 years 12.42% 13.35%
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
CAPITAL GROWTH SERIES COMPARED TO THE GROWTH OF A $10,000 INVESTMENT IN THE S&P
500 INDEX, THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Capital Growth Series S&P 500/18/
<S> <C> <C>
6/30/87 10,000 10,000
12/31/87 9,130 8,259
12/31/88 8,328 9,631
12/31/89 10,889 12,682
12/31/90 10,509 12,287
12/31/91 16,184 16,032
12/31/92 15,205 17,254
12/31/93 17,482 18,989
12/31/94 16,246 19,238
12/31/95 22,424 26,459
12/31/96 27,150 32,530
6/30/97 32,229 39,232
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Long-term growth of capital.
START DATE: August 26, 1983
SIZE: $1.4 billion as of June 30, 1997
MANAGER: G. Kenneth Heebner, since 1983; portfolio manager of New England Growth
Fund since 1976; CGM Capital Development Fund since 1976; CGM Mutual Fund since
1981; CGM Realty Fund since May 1994; CGM Fixed Income Fund since June 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.
20
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--99.9% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AUTO & RELATED--3.1%
275,000 Volkswagen AG (ADR)(d).............................. $ 41,800,000
--------------
BEVERAGES & TOBACCO--9.3%
1,503,000 Anheuser-Busch Companies, Inc....................... 63,032,063
1,445,000 Philip Morris Companies, Inc........................ 64,121,875
--------------
127,153,938
--------------
COMPUTER SOFTWARE &
SERVICES--18.6%
650,000 Compaq Computer Corp.(c)............................ 64,512,500
745,000 Computer Sciences Corp.(c).......................... 53,733,125
565,000 Dell Computer Corp.(c).............................. 66,352,187
538,000 Microsoft Corp.(c).................................. 67,989,750
--------------
252,587,562
--------------
DRUGS--14.1%
715,000 Eli Lilly & Co...................................... 78,158,437
245,000 Pfizer, Inc......................................... 29,277,500
681,000 Warner Lambert Co. ................................. 84,614,250
--------------
192,050,187
--------------
FINANCIAL SERVICES--0.0%
10,000 Hanover Compressor Co.(c)........................... 195,000
--------------
FOOD--RETAILERS/
WHOLESALERS--7.1%
1,188,000 Hershey Foods Corp.................................. 65,711,250
450,000 Nestle S.A. (ADR)(d)................................ 29,925,000
--------------
95,636,250
--------------
HOME PRODUCTS & COSMETIC--3.7%
385,000 Clorox Co........................................... 50,820,000
--------------
INSURANCE--17.9%
665,000 Aetna. Inc.......................................... 68,079,375
1,165,000 Allstate Corp....................................... 85,045,000
603,850 American International Group, Inc. ................. 90,200,094
--------------
243,324,469
--------------
MACHINERY--10.0%
630,000 Caterpillar Inc. ................................... 67,646,250
1,250,000 Deere & Co.......................................... 68,593,750
--------------
136,240,000
--------------
OFFICE EQUIPMENT & SUPPLY--4.8%
730,000 International Business Machines..................... 65,836,875
--------------
OIL--SERVICE--6.2%
540,000 Halliburton Co. .................................... 42,795,000
336,000 Schlumberger, Ltd. ................................. 42,000,000
--------------
84,795,000
--------------
TELEPHONE--5.1%
455,000 Telebras (ADR)(d)................................... 69,046,250
--------------
Total Common Stocks
(Identified Cost $1,101,818,488)................... 1,359,485,531
--------------
<CAPTION>
- ---------------------------
SHORT-TERM INVESTMENT--0.4%
- ---------------------------
FACE
AMOUNT
<C> <S> <C>
$5,455,000 Chevron Oil Finance Co., 5.800%, 07/01/97.......... 5,455,000
--------------
Total Short-Term Investment
(Identified Cost $5,455,000)...................... 5,455,000
--------------
Total Investments--100.3%
(Identified Cost $1,107,273,488)(b)............... 1,364,940,531
Other assets less liabilities...................... (3,594,507)
--------------
TOTAL NET ASSETS--100%............................. $1,361,346,024
==============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $1,107,273,488 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................................... $ 263,691,039
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................. (6,023,996)
--------------
Net unrealized appreciation ..................... $ 257,667,043
==============
</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.
See accompanying notes to financial statements.
21
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value............................... $1,364,940,531
Cash............................................... 1,629
Receivable for:
Fund shares sold.................................. 1,307,520
Securities sold................................... 5,679,403
Dividends and interest............................ 1,434,374
Miscellaneous..................................... 41,566
--------------
1,373,405,023
LIABILITIES
Payable for:
Securities purchased.............................. $10,398,264
Fund shares redeemed.............................. 657,838
Withholding taxes................................. 36,017
Miscellaneous..................................... 23,225
Accrued expenses:
Management fees................................... 688,032
Deferred trustees' fees........................... 68,379
Other expenses.................................... 187,244
-----------
12,058,999
--------------
$1,361,346,024
==============
NET ASSETS
Net Assets consist of:
Capital paid in................................... $ 868,197,722
Undistributed net investment income............... 5,287,086
Accumulated net realized gains.................... 230,194,173
Unrealized appreciation on investments............ 257,667,043
--------------
NET ASSETS.......................................... $1,361,346,024
==============
Computation of offering price:
Net asset value and redemption price per share
($1,361,346,024 divided by 2,685,203 shares of
beneficial interest)............................... $ 506.98
==============
Identified cost of investments...................... $1,107,273,488
==============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................... $ 9,213,567(a)
Interest........................................... 234,522
------------
9,448,089
EXPENSES
Management fees.................................... $3,872,900
Trustees' fees and expenses........................ 32,692
Custodian.......................................... 84,287
Audit and tax services............................. 4,831
Legal.............................................. 9,340
Printing........................................... 187,746
Miscellaneous...................................... 5,601
----------
Total expenses..................................... 4,197,397
------------
NET INVESTMENT INCOME............................... 5,250,692
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net.................................. 198,852,747
Unrealized appreciation on:
Investments--net.................................. 9,593,639
------------
Net gain on investment transactions................. 208,446,386
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......... $213,697,078
============
</TABLE>
(a)Net of foreign taxes of: $119,267
See accompanying notes to financial statements.
22
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
- ----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- ----------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 7,929,365 $ 5,250,692
Net realized gain on investments.............. 68,632,360 198,852,747
Unrealized appreciation on investments........ 121,815,567 9,593,639
-------------- --------------
INCREASE IN NET ASSETS FROM OPERATIONS........ 198,377,292 213,697,078
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... (7,921,505) 0
Net realized gain on investments.............. (57,069,463) 0
-------------- --------------
(64,990,968) 0
-------------- --------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................. 236,084,630 138,479,960
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income...... 7,921,505 0
Distributions from net realized gain.......... 57,069,463 0
-------------- --------------
301,075,598 138,479,960
Cost of shares redeemed....................... (213,245,567) (133,491,189)
-------------- --------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................... 87,830,031 4,988,771
-------------- --------------
TOTAL INCREASE IN NET ASSETS.................. 221,216,355 218,685,849
NET ASSETS
Beginning of the period....................... 921,443,820 1,142,660,175
-------------- --------------
End of the period............................. $1,142,660,175 $1,361,346,024
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period....................... $ 28,556 $ 36,394
============== ==============
End of the period............................. $ 36,394 $ 5,287,086
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 647,661 297,114
Issued in connection with the reinvestment of:
Distributions from net investment income...... 18,320 0
Distributions from net realized gain.......... 83,188 0
-------------- --------------
749,169 297,114
Redeemed...................................... (533,320) (287,416)
-------------- --------------
Net change.................................... 215,849 9,698
============== ==============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62 $ 427.08
-------- -------- -------- -------- ---------- ----------
Income From Investment
Operations
Net Investment Income.. 4.04 2.12 5.28 3.47 3.08 1.96
Net Realized and
Unrealized Gain (Loss)
on Investments........ (25.10) 46.21 (30.54) 114.91 74.80 77.94
-------- -------- -------- -------- ---------- ----------
Total From Investment
Operations............ (21.06) 48.33 (25.26) 118.38 77.88 79.90
-------- -------- -------- -------- ---------- ----------
Less Distributions
Distributions From Net
Investment Income..... (4.07) (2.18) (5.15) (3.48) (3.08) 0.00
Distributions From Net
Realized Capital
Gains................. 0.00 (16.75) (8.92) (52.58) (22.34) 0.00
-------- -------- -------- -------- ---------- ----------
Total Distributions.... (4.07) (18.93) (14.07) (56.06) (25.42) 0.00
-------- -------- -------- -------- ---------- ----------
Net Asset Value, End of
Period................. $ 322.23 $ 351.63 $ 312.30 $ 374.62 $ 427.08 $ 506.98
======== ======== ======== ======== ========== ==========
TOTAL RETURN (%)........ (6.05) 14.97 (7.07) 38.03 21.08 18.71(a)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.70 0.68 0.67 0.71 0.69 0.68(b)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 1.53 0.67 1.61 0.92 0.79 0.78(b)
Portfolio Turnover Rate
(%).................... 207 169 140 242 207 236(b)
Average Commission
Rate(c)................ -- -- -- -- $ 0.0669 $ 0.0693
Net Assets, End of
Period (000)........... $472,017 $644,384 $667,127 $921,444 $1,142,660 $1,361,346
</TABLE>
(a) Not computed on an annualized basis.
(b) 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>
LOOMIS SAYLES AVANTI GROWTH SERIES
PORTFOLIO MANAGERS: SCOTT F. PAPE AND BRUCE A. EBEL
LOOMIS, SAYLES & COMPANY, L.P.
[PICTURE APPEARS HERE]
Q. PLEASE DISCUSS THE SERIES' PERFORMANCE IN LIGHT OF THE CURRENT INVESTMENT
ENVIRONMENT.
A. Loomis Sayles Avanti Growth Series produced a total return of 11.01% for
the six month period ended June 30, 1997. While the Series performance lagged
the 20.59% return on the Standard & Poor's 500 Stock Index/18/, results were
more in line with the average growth Series' return of 13.57%, as measured by
the Lipper Variable Growth Fund Average.
Our position in smaller, emerging growth stocks dampened results relative to
large company stocks. As in 1996, the market favored a few large-capitaliza-
tion stocks for their liquidity and perceived lower risk. Mid- and smaller-
capitalization companies were sold off or ignored, often despite strong funda-
mentals. In May and June, these emerging sectors began to recover, improving
performance.
Q. WHAT WERE THE SERIES' KEY PORTFOLIO SECTORS AND STRATEGIES?
A. We emphasized consumer staples, including household products and food com-
panies with strong international recognition. We also liked technology, a sec-
tor whose customers reaped the benefits of declining costs. In business serv-
ices, another group we favored, credit-card processors, insurers and others
continued to prosper as a basic raw material--computing power--became less
costly. Larger holdings that did well include Microsoft, Coca Cola, Gillette
and American International Group.
Meanwhile, we minimized holdings in utilities, where we see little growth
ahead, and in energy, where current growth rates appeared unsustainable.
We committed more than 30% of the Series to emerging growth companies, a sec-
tor whose valuations now appear more attractive than they have in years. Com-
pared to larger companies, these firms rely less on cost cuts and restructur-
ing to boost earnings, focusing instead on product innovation and niche mar-
kets. Some better-known holdings are Parametric Technologies, CUC Interna-
tional and Thermo Electron.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Factors supporting current price levels should persist: low inflation and
moderate growth, stable interest rates, record earnings, and strong dollar
flows into financial assets.
Appreciation may slow for those few corporate giants that have accounted for
much of the market's rise. We believe investor interest will broaden, to en-
compass smaller companies whose valuations appear reasonable. Finally, we re-
main committed to our basic strategy of owning "America's premier companies"--
industry leaders with outstanding growth potential.
A $10,000 Investment Compared to the S&P 500 Index
Average Annual Return
<TABLE>
<CAPTION>
Avanti Lipper Variable Growth
Growth Series Fund Average/10/
<S> <C> <C>
6 mos.* 11.01% 13.57%
1 year 17.76% 23.67%
Since Inception 17.34% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
LOOMIS SAYLES AVANTI GROWTH SERIES COMPARED TO THE SAME INVESTMENT IN THE S&P
500 INDEX, THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Avanti Growth Series S&P 500/18/
<S> <C> <C>
Inception 4/30/93 10,000 10,000
12/31/93 11,474 10,807
12/31/94 11,443 10,949
12/31/95 14,916 15,058
12/31/96 17,538 18,513
6/30/97 19,469 22,327
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Long-term growth of capital.
START DATE: April 30, 1993
SIZE: $104 million as of June 30, 1997
MANAGERS: Scott F. Pape has co-managed the Series since 1993; Bruce Ebel began
co-managing the Series in June 1996. They also both manage the New England
Capital Growth Fund. Mr. Pape joined Loomis Sayles in 1991 and Mr. Ebel joined
Loomis Sayles in 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.
24
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------
COMMON STOCKS--96.7% OF NET ASSETS
- ----------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.5%
30,000 Boeing Co................................................ $ 1,591,875
------------
AIRLINES--1.1%
43,400 Southwest Airlines Co.................................... 1,122,975
------------
APPAREL & TEXTILES--0.5%
9,600 NIKE, Inc., Class B...................................... 560,400
------------
BANKS--2.0%
3,900 Chase Manhattan Corp., New............................... 378,544
19,800 First Bank Systems, Inc. ................................ 1,690,425
------------
2,068,969
------------
BEVERAGES--1.2%
19,200 Coca-Cola Co. ........................................... 1,296,000
------------
BUSINESS SERVICES--12.4%
40,000 ABR Information Services, Inc.(c)........................ 1,160,000
33,700 Automatic Data Processing................................ 1,583,900
48,000 Checkfree Corp.(c)....................................... 846,000
28,200 Cintas Corp.............................................. 1,938,750
26,400 Danka Business Systems................................... 1,079,100
46,200 First Data Corp.......................................... 2,029,913
47,250 Fiserv, Inc.(c).......................................... 2,108,531
35,850 Paychex, Inc............................................. 1,362,300
4,900 Stewart Enterprises, Inc................................. 205,800
21,750 Sykes Enterprises, Inc.(c)............................... 565,500
------------
12,879,794
------------
CHEMICALS--1.8%
43,300 Monsanto Co.............................................. 1,864,606
------------
COMPUTER SOFTWARE & SERVICES--7.2%
15,000 Aurum Software, Inc...................................... 360,000
10,400 Computer Associates International, Inc................... 579,150
24,200 HBO & Co................................................. 1,666,775
25,000 HNC Software, Inc.(c).................................... 953,125
17,700 Microsoft Corp.(c)....................................... 2,236,838
31,000 Oracle Systems Corp.(c).................................. 1,561,625
------------
7,357,513
------------
CONGLOMERATES--1.2%
36,600 Thermo Electron Corp.(c)................................. 1,244,400
------------
CONSTRUCTION MATERIALS--0.6%
13,000 Fastenal Co. ............................................ 637,000
------------
ELECTRICAL EQUIPMENT--2.2%
34,800 General Electric Co...................................... 2,275,050
------------
ELECTRONIC COMPONENTS--8.2%
11,500 Altera Corp. ............................................ 580,750
27,600 Andrew Corp. ............................................ 776,250
16,000 Cymer, Inc............................................... 780,000
12,300 Intel Corp............................................... 1,744,294
30,800 LSI Logic Corp.(c)....................................... 985,600
5,000 Molex, Inc. ............................................. 182,500
51,225 Molex, Inc. Class A...................................... 1,786,472
22,200 Solectron Corp.(c)....................................... 1,554,000
2,500 Texas Instruments, Inc. ................................. 210,156
------------
8,600,022
------------
FINANCIAL SERVICES--2.7%
20,700 Charles Schwab Corp...................................... 842,231
40,400 MGIC Investment Corp..................................... 1,936,675
------------
2,778,906
------------
FOODS--0.2%
4,300 Hershey Foods Corp....................................... 237,844
------------
GAS & PIPELINE UTILITIES--0.4%
10,900 Enron Corp............................................... 444,856
------------
HEALTH CARE--MEDICAL TECHNOLOGY--2.5%
14,300 Boston Scientific Corp.(c)............................... 878,556
36,300 Indexx Laboratories, Inc.(c)............................. 451,481
16,100 Medtronic, Inc........................................... 1,304,100
------------
2,634,137
------------
HEALTH CARE--DRUGS--8.2%
17,000 Abbott Laboratories...................................... 1,134,750
29,300 Amgen, Inc.(c)........................................... 1,703,063
24,800 Biogen, Inc.(c).......................................... 840,100
9,200 Eli Lilly & Co........................................... 1,005,675
18,000 Johnson & Johnson........................................ 1,158,750
21,600 Merck & Co. ............................................. 2,235,600
107,000 Oncor, Inc.(c)........................................... 421,313
23,000 Somatogen, Inc.(c)....................................... 106,375
------------
8,605,626
------------
HEALTH CARE--SERVICES--3.4%
24,700 Columbia/HCA Healthcare Corp............................. 971,019
70,700 Healthsouth Corp.(c)..................................... 1,763,081
24,250 Phycor, Inc.(c).......................................... 835,109
------------
3,569,209
------------
HOTELS & RESTAURANTS--4.0%
5,900 Boston Chicken, Inc.(c).................................. 82,600
9,100 Circus Circus Enterprises, Inc.(c)....................... 224,088
10,000 Einstein Noah Bagel Corp.(c)............................. 119,375
30,500 Lone Star Steakhouse Saloon(c)........................... 793,000
15,900 Primadonna Resorts, Inc.(c).............................. 307,069
67,000 Starbucks Corp.(c)....................................... 2,608,813
------------
4,134,945
------------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HOUSEHOLD PRODUCTS--4.3%
10,000 Corning, Inc. ........................................... $ 556,250
25,868 Gillette Co.............................................. 2,450,993
8,000 Kimberly-Clark Corp...................................... 398,000
27,500 Newell Co................................................ 1,089,688
------------
4,494,931
------------
INSURANCE--2.0%
12,300 American International Group, Inc.(c).................... 1,837,313
3,600 Travelers Group, Inc..................................... 227,025
------------
2,064,338
------------
LEISURE TIME--0.6%
8,800 Eastman Kodak Co......................................... 675,400
------------
MACHINERY--1.5%
30,400 Illinois Tool Works, Inc................................. 1,518,100
------------
MEDIA & ENTERTAINMENT--0.9%
12,100 Walt Disney Co. ......................................... 971,025
------------
MEDICAL PRODUCTS--0.5%
37,300 Cardiothoracic Systems, Inc.............................. 522,200
------------
MISCELLANEOUS--1.2%
2,700 Pioneer Hi Bred International, Inc. ..................... 216,000
23,000 Sun Guard Data Systems................................... 1,069,500
------------
1,285,500
------------
OFFICE EQUIPMENT & SUPPLIES--6.4%
40,100 Cascade Communications Corp.(c).......................... 1,107,763
23,900 Cisco Systems, Inc.(c)................................... 1,604,288
14,400 Hewlett-Packard Co. ..................................... 806,400
48,500 Parametric Technology Corp.(c)........................... 2,064,281
23,625 3Com Corp................................................ 1,063,125
------------
6,645,857
------------
OIL--INDEPENDENT PRODUCERS--1.6%
27,700 Anadarko Petroleum Corp.................................. 1,662,000
------------
OIL--MAJOR INTEGRATED--0.3%
3,600 Amoco Corp............................................... 312,975
------------
OIL SERVICES--2.0%
13,700 Baker Hughes, Inc........................................ 530,019
15,900 Rowan Companies(c)....................................... 448,181
9,200 Schlumberger, Ltd. ...................................... 1,150,000
------------
2,128,200
------------
PAPER & CONTAINERS--0.3%
6,800 Crown Cork & Seal, Inc. ................................. 363,375
------------
PHARMACEUTICALS--1.0%
6,200 Pfizer, Inc.............................................. 740,900
2,200 Warner Lambert Co........................................ 273,350
------------
1,014,250
------------
RETAIL--0.4%
13,600 Wal-Mart Stores, Inc. ................................... 459,850
------------
RETAIL SPECIALTY--5.2%
88,525 CUC International, Inc. ................................. 2,285,052
22,500 Home Depot, Inc.......................................... 1,551,094
135,000 Petsmart, Inc.(c)........................................ 1,552,500
------------
5,388,646
------------
SOFTWARE--1.3%
6,600 Electronic Arts.......................................... 221,925
17,500 McAfee Associates, Inc................................... 1,104,688
------------
1,326,613
------------
TELECOMMUNICATION--4.3%
5,700 MCI Communications....................................... 218,203
10,700 Paging Network, Inc.(c).................................. 93,953
40,800 PairGain Technologies, Inc.(c)........................... 632,400
23,900 QUALCOMM, Inc.(c)........................................ 1,215,913
33,700 Tellabs, Inc.(c)......................................... 1,882,988
13,200 Worldcom, Inc.(c)........................................ 422,400
------------
4,465,857
------------
TOBACCO--1.6%
38,100 Philip Morris Companies, Inc............................. 1,690,688
------------
Total Common Stocks
(Identified Cost $81,271,550)........................... 100,893,932
------------
<CAPTION>
- ---------------------------
SHORT TERM INVESTMENT--3.4%
- ---------------------------
FACE
AMOUNT
<C> <S> <C>
$3,511,911 Associates Corp. North America
6.10% 7/01/97..................................... 3,511,911
------------
Total Short-Term Investment
(Identified Cost $3,511,911)...................... 3,511,911
------------
Total Investments--100.1%
(Identified Cost $84,783,461)(b).................. 104,405,843
Other assets less liabilities...................... (63,670)
------------
TOTAL NET ASSETS--100%............................. $104,342,173
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $84,783,461 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..................................... $ 23,695,258
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (4,072,876)
------------
Net unrealized appreciation........................ $ 19,622,382
============
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
26
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $104,405,843
Receivable for:
Fund shares sold...................................... 280,918
Securities sold....................................... 139,995
Dividends and interest................................ 59,061
Foreign taxes......................................... 45
------------
104,885,862
LIABILITIES
Payable for:
Securities purchased.................................. $204,250
Fund shares redeemed.................................. 196,202
Withholding taxes..................................... 419
Miscellaneous......................................... 474
Accrued expenses:
Management fees....................................... 113,656
Deferred trustees' fees............................... 2,494
Other expenses........................................ 26,194
--------
543,689
------------
$104,342,173
============
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $ 80,672,222
Undistributed net investment loss..................... (34,675)
Accumulated net realized gains........................ 4,082,244
Unrealized appreciation on investments................ 19,622,382
------------
NET ASSETS.............................................. $104,342,173
============
Computation of offering price:
Net asset value and redemption price per share
($104,342,173 divided by 595,315 shares of beneficial
interest).............................................. $ 175.27
============
Identified cost of investments.......................... $ 84,783,461
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 267,230(a)
Interest.............................................. 85,935
----------
353,165
EXPENSES
Management fees....................................... $319,398
Trustees' fees and expenses........................... 11,422
Custodian............................................. 28,219
Audit and tax services................................ 3,796
Legal................................................. 9,340
Printing.............................................. 27,465
Miscellaneous......................................... 1,819
--------
Total expenses...................................... 401,459
Less expenses assumed by the investment adviser..... (13,619) 387,840
-------- ----------
NET INVESTMENT LOSS.................................... (34,675)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net..................................... 2,919,801
Unrealized appreciation on:
Investments--net..................................... 7,051,374
----------
Net gain on investment transactions.................... 9,971,175
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $9,936,500
==========
</TABLE>
(a)Net of foreign taxes of: $414
See accompanying notes to financial statements.
27
<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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)...................... $ 49,436 $ (34,675)
Net realized gain on investments.................. 4,796,759 2,919,801
Unrealized appreciation on investments............ 5,241,031 7,051,374
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 10,087,226 9,936,500
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (56,514) 0
Net realized gain on investments.................. (4,542,510) 0
------------ ------------
(4,599,024) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 40,573,027 24,515,697
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 56,514 0
Distributions from net realized gain.............. 4,542,510 0
------------ ------------
45,172,051 24,515,697
Cost of shares redeemed........................... (16,825,278) (12,777,369)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 28,346,773 11,738,328
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 33,834,975 21,674,828
NET ASSETS
Beginning of the period........................... 48,832,370 82,667,345
------------ ------------
End of the period................................. $ 82,667,345 $104,342,173
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
Beginning of the period........................... $ 6,362 $ 0
============ ============
End of the period................................. $ 0 $ (34,675)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 265,834 150,634
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 313 0
Distributions from net realized gain.............. 22,968 0
------------ ------------
289,115 150,634
Redeemed.......................................... (108,338) (78,919)
------------ ------------
Net change........................................ 180,777 71,715
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
APRIL 30, 1993(A) SIX MONTHS
THROUGH YEAR YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED ENDED JUNE 30,
1993 1994 1995 1996 1997
----------------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $100.00 $113.67 $112.77 $142.44 $ 157.88
------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income.. 0.18 0.59 0.42 0.11 (0.06)
Net Realized and
Unrealized Gain (Loss)
on Investments........ 14.56 (0.89) 33.80 24.88 17.45
------- ------- ------- ------- --------
Total From Investment
Operations............ 14.74 (0.30) 34.22 24.99 17.39
------- ------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income..... (0.18) (0.60) (0.40) (0.13) 0.00
Distributions From Net
Realized Capital
Gains................. (0.67) 0.00 (4.15) (9.42) 0.00
Distributions From
Paid-in Capital....... (0.22) 0.00 0.00 0.00 0.00
------- ------- ------- ------- --------
Total Distributions.... (1.07) (0.60) (4.55) (9.55) 0.00
------- ------- ------- ------- --------
Net Asset Value, End of
Period................. $113.67 $112.77 $142.44 $157.88 $ 175.27
======= ======= ======= ======= ========
TOTAL RETURN (%)........ 14.74(b) (0.27) 30.35 17.58 11.01 (b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.85(c) 0.84 0.85 0.85 0.85 (c)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.46(c) 0.67 0.37 0.08 (0.07)(c)
Portfolio Turnover Rate
(%).................... 21(c) 67 58 65 36 (c)
Average Commission
Rate(d)................ -- -- -- $0.0508 $ 0.0503
Net Assets, End of
Period (000)........... $11,972 $25,622 $48,832 $82,667 $104,342
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(c) 0.84 1.06 0.92 0.88(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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.
28
<PAGE>
DAVIS VENTURE VALUE SERIES
PORTFOLIO MANAGER: CHRISTOPHER C. DAVIS
DAVIS SELECTED ADVISERS, L.P.
[PICTURE APPEARS HERE]
Q. HOW DID THE SERIES PERFORM DURING THE FIRST HALF OF THE YEAR?
A. The Series had six month and one year total returns of 18.77% and 38.76%,
respectively. These numbers compare favorably to the Lipper Variable Growth and
Income Fund Average of 15.81% and 28.12% over the same period.
Q. HOW DID YOU MANAGE THE SERIES DURING THE FIRST HALF OF 1997?
A. During the last six months we continued to see strong market returns, low
unemployment and low inflation. Looking at the current investment climate we
remain optimistic about the role of U.S.-style capitalism, the ability for com-
panies to grow and prosper over time, and the impact of good management. Our
approach is strictly long-term--that is, a 10 to 20 year time frame. And we
judge every investment in relation to the risk-free return available from
bonds. With U.S. Treasury Bonds now yielding around 7%, you could buy a zero
coupon Treasury and double your money in 10 years or quadruple it in 20 years.
That's a tough bogey for stocks. Yet over 70 years, stocks have compounded at
more than 10% as an annual average.
Today, financial brand names are emerging as baby boomers enter their peak
earning, saving and investing years. We have large investments in Wells Fargo
and Travelers, both of which we purchased at less than 10 times earnings, and
American Express--one of the great brand names worldwide--remains a top hold-
ing. We also have a core investment in Citicorp which has performed well.
In the energy services area, Halliburton, Schlumberger, Burlington Resources
and Smith International are among our holdings, and our largest technology
holdings include Intel, Hewlett Packard and IBM.
First-rate pharmaceutical companies should also benefit as the baby boomers
age. Our holdings in this sector include Merck, Pfizer and Eli Lilly, among
others.
Q. WHAT IS YOUR INVESTMENT OUTLOOK?
A. Our vision is for the Dow Jones Industrial average to approach 10,000 around
the turn of the century, punctuated by volatility and corrections along the
way. There can, of course, be no assurance that this will occur. The Dow has
gone from 1,000 to 7,000 very rapidly, and the percentage gains won't be what
we're used to. The big question to ask after any market decline is: "And then
what?" As long-term investors, we will undoubtedly be investing even through
market drops, so that we are positioned to participate in the optimism that has
always followed pessimism.
We never lose sight of the fact that our firm's 28-year track record has built
as much by avoiding the big losers as by picking winners.
29
<PAGE>
A $10,000 Investment Compared to the S&P 500
Average Annual Return
<TABLE>
<CAPTION>
Venture Lipper Variable
Value Growth Fund/10/
<S> <C> <C>
6 mos.* 18.77% 13.57%
1 year 38.76% 23.67%
Since Inception 29.91% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE DAVIS
VENTURE VALUE SERIES COMPARED TO THE SAME INVESTMENT IN THE S&P 500 INDEX, THE
PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Davis Venture
Value Series S&P 500/18/
<S> <C> <C>
10/31/94 10,000 10,000
12/31/94 9,650 9,779
12/31/95 13,441 13,449
12/31/96 16,914 16,535
6/30/97 20,089 19,942
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Growth of capital.
START DATE: October 31, 1994
SIZE: $186 million as of June 30, 1997
MANAGER: Christopher C. Davis has been the manager of the Series since February
19, 1997. He was co-portfolio manager with Shelby M.C. Davis from October 1995
to February 1997.
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
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--90.5% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.2%
43,000 Boeing Co. ............................................. $ 2,281,688
------------
AGRICULTURE--1.5%
117,655 Archer-Daniels-Midland Co............................... 2,764,893
------------
BANKS AND SAVINGS & LOANS--12.4%
59,560 Banc One Corp........................................... 2,884,938
66,800 BankAmerica Corp........................................ 4,312,775
10,200 Barnett Banks, Inc. .................................... 535,500
34,180 Citicorp................................................ 4,120,826
28,500 First Bank Systems, Inc. ............................... 2,433,187
500 First Union Corp. ...................................... 46,250
15,800 Golden West Financial Corp. ............................ 1,106,000
51,500 State Street Corp....................................... 2,381,875
19,500 Wells Fargo & Co. ...................................... 5,255,250
------------
23,076,601
------------
CONSUMER PRODUCTS--5.6%
500 American Home Products Corp............................. 38,250
7,100 Coca-Cola Co............................................ 479,250
900 Fortune Brands, Inc..................................... 33,581
900 Gallaher Group (ADR)(c)(d).............................. 16,594
2,600 General Electric Co. ................................... 169,975
86,300 Masco Corp.............................................. 3,603,025
23,400 Nestle S.A. (ADR)(d).................................... 1,545,713
104,100 Philip Morris Companies, Inc. .......................... 4,619,438
------------
10,505,826
------------
DIVERSIFIED FINANCIAL SERVICES--5.0%
85,100 American Express Co. ................................... 6,339,950
73,900 Federal Home Loan Mortgage Corp......................... 2,540,313
9,700 TCF Financial Corp. .................................... 478,937
------------
9,359,200
------------
DRILLING--1.5%
2,700 Nabors Industries, Inc.(c).............................. 67,500
40,200 Smith International, Inc.(c)............................ 2,442,150
------------
2,509,650
------------
ELECTRIC--0.0%
200 New England Elecricial Systems.......................... 7,400
------------
ENERGY--6.7%
400 Amerada Hess Corp....................................... 22,225
300 Amoco Corp.............................................. 26,081
1,000 Atlantic Richfield Co................................... 70,500
52,100 Burlington Resources, Inc............................... 2,298,913
1,700 Chevron Corp............................................ 125,694
5,300 Exxon Corp. ............................................ 325,950
34,400 Evi, Inc.(c)............................................ 1,444,800
54,900 Halliburton Co.......................................... 4,350,825
600 Mobil Corp.............................................. 41,925
46,264 Noble Affiliates, Inc. ................................. 1,789,838
16,200 Schlumberger, Ltd. ..................................... 2,025,000
500 Sonat, Inc.............................................. 25,625
------------
12,547,376
------------
ENTERTAINMENT--0.5%
11,700 Walt Disney Co.......................................... 938,925
------------
FOOD & RESTAURANT--3.4%
117,400 McDonald's Corp. ....................................... 5,671,888
28,550 Tyson Foods Inc......................................... 546,019
------------
6,217,907
------------
HOUSING & BUILDING MATERIALS--1.2%
67,900 Martin Marietta Materials, Inc. ........................ 2,198,262
------------
INFORMATION SERVICES--0.0%
100 Cognizant Corp.......................................... 4,050
------------
INTERNATIONAL CLOSED-END INVESTMENT COMPANY--0.5%
92,434 Morgan Stanley Asia Pacific Fund, Inc. ................. 970,557
------------
INVESTMENT FIRMS--4.5%
29,400 Donaldson Lufkin & Jenrette, Inc. ...................... 1,756,650
17,800 J.P. Morgan & Co., Inc.................................. 1,857,875
110,355 Morgan Stanley/Dean Witter.............................. 4,752,162
------------
8,366,687
------------
LIFE INSURANCE--1.4%
53,800 SunAmerica, Inc......................................... 2,622,750
------------
MANUFACTURING--0.0%
200 Dow Chemical Co. ....................................... 17,425
800 Maytag Corp. ........................................... 20,900
------------
38,325
------------
MARKETING ANALYSIS--0.7%
33 ACNeilson Corp.(c)...................................... 648
33,800 Sun Microsystems, Inc................................... 1,257,994
------------
1,258,642
------------
OIL--0.5%
14,500 British Petrol (ADR)(d)................................. 1,085,687
27,100 Tosco Corp.............................................. 811,306
------------
1,896,993
------------
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PAPER PRODUCTS--0.9%
21,600 Fort Howard Corp.(c)..................................... $ 1,093,500
300 International Paper Co. ................................. 14,569
9,400 Kimberly-Clark Corp...................................... 467,650
400 Union Camp Corp.......................................... 20,000
------------
1,595,719
------------
PHARMACEUTICAL AND HEALTH CARE--6.0%
14,500 Bristol-Myers Squibb Co. ................................ 1,174,500
9,900 Eli Lilly & Co. ......................................... 1,082,194
12,200 Johnson & Johnson........................................ 785,375
5,500 Merck & Co............................................... 569,250
16,300 Novartis AG (ADR)(c)(d).................................. 1,306,038
20,100 Pfizer, Inc. ............................................ 2,401,950
41,000 SmithKline Beecham (ADR)(d).............................. 3,756,625
------------
11,075,932
------------
PROPERTY/CASUALTY INSURANCE--12.0%
39,581 The Allstate Corp. ...................................... 2,889,413
8,000 American International Group, Inc. ...................... 1,195,000
25,700 W.R. Berkley Corp. ...................................... 1,513,087
34,800 Chubb Corp............................................... 2,327,250
32,074 General Re Corp.......................................... 5,837,468
19,400 Progressive Corp......................................... 1,687,800
17,800 Transatlantic Holdings, Inc. ............................ 1,766,650
62,433 The Travelers Group, Inc................................. 3,937,181
28,200 20th Century Industries, Inc.(c)......................... 592,200
15,800 UNUM Corp. .............................................. 663,600
------------
22,409,649
------------
PUBLISHING--1.6%
100 Dun & Bradstreet Corp.................................... 2,625
20,500 Gannet Co., Inc. ........................................ 2,024,375
19,400 Tribune Co. ............................................. 932,413
------------
2,959,413
------------
RAILROAD--4.8%
58,800 Burlington Northern Santa Fe............................. 5,284,650
29,000 Illinois Central Corp.................................... 1,013,187
33,600 Union Pacific Corp....................................... 2,368,800
------------
8,666,637
------------
REAL ESTATE--2.7%
9,280 Crescent Operations, Inc................................. 111,360
92,800 Crescent Real Estate Equities............................ 2,946,400
10,300 Federal Realty Investment Trust.......................... 278,100
2,400 Kimco Realty Corp. ...................................... 76,200
5,900 Mid-Atlantic Realty Trust................................ 66,375
6,300 Saul Centers, Inc........................................ 108,675
11,100 United Dominion Realty Trust, Inc. ...................... 157,481
16,200 Vornado Realty Trust..................................... 1,168,425
3,300 Weingarten Realty........................................ 139,425
------------
5,052,441
------------
RETAIL--0.5%
17,200 Harcourt General, Inc.................................... 819,150
------------
TECHNOLOGY--10.8%
115,200 Hewlett-Packard Co. ..................................... 6,451,200
27,600 Intel Corp............................................... 3,914,025
81,700 International Business Machines.......................... 7,368,319
45,100 Komag, Inc.(c)........................................... 738,512
5,350 Molex, Inc. ............................................. 195,275
14,400 Novellus Systems, Inc.(c)................................ 1,245,600
6,100 Seagate Technology(c).................................... 214,644
------------
20,127,575
------------
TELECOMMUNICATIONS--3.5%
89,700 Airtouch Communications, Inc.(c)......................... 2,455,538
4,852 Globalstar Telecommunications(c)......................... 148,592
18,300 Loral Space Communications(c)............................ 274,500
32,600 Motorola, Inc. .......................................... 2,477,600
300 SBC Communications, Inc. ................................ 18,562
64,700 360 Communications Co.(c)................................ 1,107,987
------------
6,482,779
------------
UTILITIES--1.1%
300 Carolina Power & Light Co. .............................. 10,762
40,000 Cooper Cameron Corp.(c).................................. 1,870,000
300 Duke Power Co............................................ 14,381
200 Edison International..................................... 4,975
100 Enova Corp. ............................................. 2,406
600 Southern Co.............................................. 13,125
200 Wisconsin Energy Corp. .................................. 4,975
------------
1,920,624
------------
WASTE MANAGEMENT--0.0%
400 Waste Management International (ADR)(d).................. 12,850
------------
Total Common Stocks
(Identified Cost $128,526,355).......................... 168,688,501
------------
<CAPTION>
- ----------------------
PREFERRED STOCKS--0.5%
- ----------------------
<C> <S> <C>
4,420 Airtouch Communications, Inc.,
Class B, 6.000%........................................ 125,970
2,896 Airtouch Communications, Inc.,
Class C, 4.250%........................................ 139,008
1,600 Banc One Corp., $3.50, Series C......................... 148,800
6,800 Devon Financing Trust, 6.500%........................... 477,700
2,000 Vornada Realty Trust.................................... 106,000
------------
Total Preferred Stocks
(Identified Cost $932,865)............................. 997,478
------------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------
SHORT-TERM INVESTMENTS--8.7%
- ----------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 5,490,000 Federal Home Loan Mortgage,
5.420%, 7/03/97.................................. $ 5,488,347
10,660,000 Federal Home Loan Bank,
5.470%, 7/03/97.................................. 10,656,760
------------
Total Short-Term Investment
(Identified Cost $16,145,107).................... 16,145,107
------------
Total Investments--99.7%
(Identified Cost $145,604,327)(b)................ 185,831,086
Other assets less liabilities(e).................. 601,771
------------
TOTAL NET ASSETS--100%............................ $186,432,857
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $145,604,327 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 ................................... $ 41,101,528
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value ................................. (874,769)
------------
Net unrealized appreciation....................... $ 40,226,759
============
</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) Including deposits in foreign denominated currencies with a value of
$25,381 and a cost of $24,455.
See accompanying notes to financial statements.
33
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $185,831,086
Cash.................................................... 6,074
Foreign cash at value................................... 25,381
Receivable for:
Fund shares sold....................................... 838,843
Securities sold........................................ 689,485
Dividends and interest................................. 180,769
Foreign taxes.......................................... 3,179
Miscellaneous.......................................... 12,323
Unamortized organization................................ 4,691
------------
187,591,831
Payable for:
Securities purchased................................... $736,444
Fund shares redeemed................................... 243,607
Accrued expenses:
Management fees........................................ 128,583
Deferred trustees' fees................................ 1,964
Other expenses......................................... 48,376
--------
1,158,974
------------
$186,432,857
============
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $142,541,141
Undistributed net investment income.................... 715,526
Accumulated net realized gains......................... 2,948,440
Unrealized appreciation on investments and foreign
currency.............................................. 40,227,750
------------
NET ASSETS............................................... $186,432,857
============
Computation of offering price:
Net asset value and redemption price per share
($186,432,857 divided by 9,757,678 shares of beneficial
interest)............................................... $ 19.11
============
Identified cost of investments........................... $145,604,327
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................... $ 963,662(a)
Interest.......................................... 373,232
-----------
1,336,894
EXPENSES
Management fees................................... $ 554,852
Trustees' fees and expenses....................... 14,125
Custodian......................................... 33,032
Audit and tax services............................ 6,211
Legal............................................. 9,340
Printing.......................................... 18,308
Amortization of organization expenses............. 997
Miscellaneous..................................... 1,820
-----------
Total expenses.................................. 638,685
-----------
NET INVESTMENT INCOME.............................. 698,209
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments--net................................. 2,689,611
-----------
Unrealized appreciation (depreciation) on:
Investments--net................................. 22,015,796
Foreign currency transactions--net............... (26)
-----------
Total unrealized appreciation on investments and
foreign currency transactions.................. 22,015,770
-----------
Net gain on investment transactions............... 24,705,381
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......... $25,403,590
===========
</TABLE>
(a)Net of foreign taxes of: $6,983
See accompanying notes to financial statements.
34
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
- ----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- ----------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 833,527 $ 698,209
Net realized gain on investments.................. 1,885,474 2,689,611
Unrealized appreciation on investments, and
foreign currency transactions.................... 14,269,167 22,015,770
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 16,988,168 25,403,590
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (818,557) 0
Net realized gain on investments.................. (1,709,985) 0
------------ ------------
(2,528,542) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 73,335,902 68,940,005
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 818,557 0
Distributions from net realized gain.............. 1,709,985 0
------------ ------------
75,864,444 68,940,005
Cost of shares redeemed........................... (17,180,011) (16,099,764)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 58,684,433 52,840,241
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 73,144,059 78,243,831
NET ASSETS
Beginning of the period........................... 35,044,967 108,189,026
------------ ------------
End of the period................................. $108,189,026 $186,432,857
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 3,911 $ 17,317
============ ============
End of the period................................. $ 17,317 $ 715,526
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 5,082,303 3,959,185
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 49,916 0
Distributions from net realized gain.............. 106,943 0
------------ ------------
5,239,162 3,959,185
Redeemed.......................................... (1,190,115) (924,976)
------------ ------------
Net change........................................ 4,049,047 3,034,209
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------- -------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $10.00 $ 9.62 $ 13.10 $ 16.09
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income..... 0.03 0.10 0.13 0.07
Net Realized and
Unrealized Gain (Loss) on
Investments.............. (0.38) 3.68 3.26 2.95
------ ------- -------- --------
Total From Investment
Operations............... (0.35) 3.78 3.39 3.02
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income........ (0.03) (0.10) (0.13) 0.00
Distributions From Net
Realized Capital Gains... 0.00 (0.20) (0.27) 0.00
------ ------- -------- --------
Total Distributions....... (0.03) (0.30) (0.40) 0.00
------ ------- -------- --------
Net Asset Value, End of
Period.................... $ 9.62 $ 13.10 $ 16.09 $ 19.11
====== ======= ======== ========
TOTAL RETURN (%)........... (3.50)(b) 39.28 25.84 18.77(b)
Ratio of Operating Expenses
to Average Net Assets (%). 0.90 (c) 0.90 0.90 0.90(c)
Ratio of Net Investment
Income to Average Net
Assets (%)................ 2.54 (c) 1.39 1.25 1.08(c)
Portfolio Turnover Rate
(%)....................... 1 (c) 20 18 25(c)
Average Commission Rate
(d)....................... -- -- $ 0.0599 $ 0.0600
Net Assets, End of Period
(000)..................... $3,371 $35,045 $108,189 $186,433
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 (c) 1.51 0.96 0.90(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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.
35
<PAGE>
WESTPEAK GROWTH & INCOME SERIES
PORTFOLIO MANAGERS: GERALD H. SCRIVER AND PHILIP J. COOPER WESTPEAK INVESTMENT
ADVISORS, L.P.
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
Q. HOW DID THE WESTPEAK GROWTH AND INCOME SERIES PERFORM DURING THE FIRST HALF
OF THE YEAR?
A. Westpeak Growth and Income Series generated a total return of 19.35% in the
six months ended June 30, 1997. The Series' performance falls just below that
of its benchmark, the S&P 500/18/, which posted a 20.59% return.
We're pleased to report that Lipper Analytical Services, an independent mutual
Series' tracking service, ranked Westpeak Growth & Income Series #7 out of 96
in the Lipper Growth and Income Variable Insurance peer group for its one-year
performance and 13th out of 57 for three-year performance through June 30,
1997. Past performance is no guarantee of future return.
One of our goals is to adjust the portfolio in favor of growth stocks when it
seems appropriate to do so, and to favor value stocks when the market seems
poised to shift toward them. The Series' strong first-half return came in large
part from our decision to tilt the portfolio away from so-called high momentum
stocks and toward companies with attractive value credentials. This positioning
of the Series' portfolio--more exposure to value investments and less to
growth--began to take shape a year ago, and some modification remains underway.
Q. WHAT WERE THE KEY STRATEGIC AND PORTFOLIO CHANGES DURING THIS PERIOD?
A. At the start of the period, we felt that the economy would stay strong,
based on upward trends in consumer confidence and several other key indicators.
In fact, first quarter growth widely exceeded expectations as consumers, buoyed
by vigorous employment prospects, continued to spend.
Interestingly, most stocks have not participated in this year's dramatic gains.
According to our analysis, sharp price rises in a small number of very large
company stocks--no more than 20-- account for the bulk of the increases in the
widely publicized market averages. During the early part of the year, the Se-
ries was slightly underweight in these stocks compared to the S&P 500.
Among our more successful holdings during the last six months were "baby bells"
Ameritech and Bell Atlantic, computer manufacturers IBM and Compaq, and various
other companies, such as BankAmerica, Royal Dutch and Unilever.
The Series' underweighting in growth stocks helped the portfolio in the first
quarter. By the second quarter, however, we began to view them more favorably,
and increased participation in that sector. To help manage price risk, we fo-
cused on variables such as return-on-equity, future earnings prospects, short
and long-term profit history and trends in Wall Street's earnings estimates for
each company.
Q. WHAT IS YOUR MARKET OUTLOOK AND WHAT DOES IT IMPLY FOR THE SERIES?
A. During the second quarter economic growth slowed, a trend we believe will
continue. We have begun to detect signs of wage inflation, an economic compo-
nent that the Federal Reserve watches closely. If that trend continues, a sec-
ond hike in short-term interest rates could follow.
We believe the market will slow during the second half of the year. However, a
sharp drop seems unlikely unless the Fed aggressively raises interest rates. If
the economy slows in the near term, the likelihood of rate increases would di-
minish.
We plan to pursue growth opportunities where they are available at reasonable
prices. Any decline in stock prices would create more attractive buying oppor-
tunities; in this case, we will become more aggressive in our pursuit of long-
term growth for 1998 and beyond.
36
<PAGE>
A 10,000 Investment Compared to the S&P 500 Index/18/
Average Annual Return
<TABLE>
<CAPTION>
Growth Lipper Variable Growth
& Income and Income Fund Average/12/
<S> <C> <C>
6 mos.* 19.35% 15.81%
1 year 34.62% 28.12%
Since Inception 20.44% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
GROWTH AND INCOME SERIES COMPARED TO THE SAME INVESTMENT IN THE S&P
500 INDEX, THE PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Growth and
Income Series S&P 500/18/
<S> <C> <C>
4/30/93 10,000 10,000
12/31/93 11,424 10,807
12/31/94 11,286 10,949
12/31/95 15,402 15,058
12/31/96 18,189 18,513
6/30/97 21,709 22,327
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Long-term total return through investment in equity securities.
START DATE: May 1, 1993
SIZE: $115 million as of June 30, 1997
MANAGERS: Gerald Scriver and Philip Cooper. Mr. Scriver and Mr. Cooper have
managed the Series from its inception in 1993; they also have managed Westpeak
Stock Index Series since August 1993 and New England Growth Opportunities Fund
since May 1, 1995. Mr. Scriver joined Westpeak in June, 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 GROWTH & INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--96.6% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.1%
4,400 Boeing Co. ............................................... $ 233,475
25,600 United Technologies Corp. ................................ 2,124,800
-----------
2,358,275
-----------
AIRLINES--2.9%
22,700 AMR, Corp.(c)............................................. 2,099,750
1,100 Delta Airlines, Inc. ..................................... 90,200
15,300 UAL, Inc.(c).............................................. 1,094,906
-----------
3,284,856
-----------
AUTOMOTIVE & RELATED--1.6%
29,000 Chrysler Corp. ........................................... 951,562
16,500 General Motors Corp. ..................................... 918,844
-----------
1,870,406
-----------
BANKS--6.6%
41,000 BankAmerica Corp. ........................................ 2,647,063
2,300 First Union Corp. ........................................ 212,750
38,600 NationsBank Corp. ........................................ 2,489,700
40,000 Popular, Inc. ............................................ 1,615,000
5,800 Republic New York Corp. .................................. 623,500
-----------
7,588,013
-----------
BUSINESS SERVICES--5.0%
84,150 Comdisco, Inc. ........................................... 2,187,900
25,400 Manpower, Inc. ........................................... 1,130,300
23,500 Omnicom Group............................................. 1,448,187
30,900 Pittston Brinks Group..................................... 927,000
-----------
5,693,387
-----------
CHEMICALS--3.0%
4,600 Albemarle Corp. .......................................... 96,888
22,500 Dow Chemical Co. ......................................... 1,960,312
21,800 Lubrizol Corp. ........................................... 914,237
5,800 Rohm & Haas Co. .......................................... 522,363
-----------
3,493,800
-----------
COMPUTER SOFTWARE & SERVICES--0.2%
7,500 Adobe Systems, Inc. ...................................... 262,969
-----------
COMPUTERS & BUSINESS EQUIPMENT--2.7%
7,900 Compaq Computer Corp.(c).................................. 784,075
17,400 International Business Machines........................... 1,569,262
16,900 Lexmark International Group, Inc.(c)...................... 513,338
11,800 Quantum Corp.(c).......................................... 239,688
-----------
3,106,363
-----------
CONSUMER DURABLES--0.1%
2,400 HON Industries, Inc. ..................................... 106,200
-----------
DOMESTIC OIL--0.0%
300 Amoco Corp. .............................................. 26,081
-----------
DRUGS--8.9%
20,400 Abbott Laboratories....................................... 1,361,700
7,900 Amgen, Inc. .............................................. 459,188
34,875 Bergen Brunswig Corp. .................................... 972,141
14,700 Bristol-Myers & Squibb Co. ............................... 1,190,700
6,600 McKesson Corp. ........................................... 511,500
13,800 Merck & Co. .............................................. 1,428,300
4,600 Pfizer, Inc. ............................................. 549,700
9,300 Rhone Poulenc Rorer, Inc. ................................ 845,137
31,600 Schering-Plough Corp. .................................... 1,512,850
11,700 Warner-Lambert Co. ....................................... 1,453,725
------------
10,284,941
------------
ELECTRIC UTILITIES--1.7%
52,600 Pinnacle West Capital Corp. .............................. 1,581,287
13,000 Public Service Enterprise Group........................... 325,000
------------
1,906,287
------------
ELECTRONICS--3.9%
6,600 Intel Corp. .............................................. 935,962
57,075 Molex, Inc. .............................................. 2,083,237
8,600 Motorola, Inc. ........................................... 653,600
5,800 SCI Systems, Inc.(c)...................................... 369,750
7,700 Tektronix, Inc. .......................................... 462,000
------------
4,504,549
------------
FINANCE--2.7%
27,700 Bear Stearns Companies, Inc. ............................. 946,994
6,200 Donaldson, Lufkin & Jenrette, Inc. ....................... 370,450
24,200 Lehman Brothers Holdings, Inc. ........................... 980,100
14,400 Salomon, Inc. ............................................ 801,000
------------
3,098,544
------------
FOOD & BEVERAGES--5.4%
43,300 Archer-Daniels-Midland Co. ............................... 1,017,550
6,700 CPC International, Inc. .................................. 618,494
28,800 IBP, Inc. ................................................ 669,600
33,900 Quaker Oats Co. .......................................... 1,521,263
19,450 Tyson Foods, Inc. del..................................... 371,981
9,300 Unilever N.V. ............................................ 2,027,400
------------
6,226,288
------------
FOREIGN OIL RESERVES--0.1%
1,600 Kerr-McGee Corp. ......................................... 101,400
------------
GAS & PIPELINE UTILITIES--0.5%
9,300 National Fuel Gas Co. .................................... 390,019
5,000 Nicor, Inc. .............................................. 179,375
------------
569,394
------------
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH & INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--7.5%
25,700 Beckman Instruments, Inc. ............................... $ 1,240,025
68,300 Beverly Enterprises, Inc.(c)............................. 1,109,875
3,800 Columbia HCA/Healthcare Corp. ........................... 149,388
42,000 Johnson & Johnson........................................ 2,703,750
71,175 Tenet Healthcare Corp.(c)................................ 2,104,111
3,000 United Healthcare Corp. ................................. 156,000
26,000 Wellpoint Health Networks, Inc.(c)....................... 1,192,750
------------
8,655,899
------------
INSURANCE--5.3%
7,600 Allstate Corp. .......................................... 554,800
4,300 AMBAC, Inc. ............................................. 328,413
13,100 CIGNA Corp. ............................................. 2,325,250
23,900 Everest Reinsurance Holdings............................. 947,037
14,700 Loews Corp. ............................................. 1,471,837
16,350 Old Republic International Corp. ........................ 495,609
------------
6,122,946
------------
INTERNATIONAL OIL--2.4%
3,600 Chevron Corp. ........................................... 266,175
40,000 Exxon Corp. ............................................. 2,460,000
------------
2,726,175
------------
LIFE INSURANCE--0.4%
5,600 American National Insurance Co. ......................... 499,800
------------
LIQUOR--0.9%
26,600 Fortune Brands, Inc. .................................... 992,512
------------
MEDIA & ENTERTAINMENT--1.5%
15,300 Clear Channel Communications(c).......................... 940,950
23,100 King World Productions, Inc. ............................ 808,500
------------
1,749,450
------------
METAL--1.2%
16,600 ASARCO, Inc. ............................................ 508,375
10,500 Phelps Dodge Corp. ...................................... 894,469
------------
1,402,844
------------
MISCELLANEOUS--0.1%
5,400 American Water Works, Inc. .............................. 115,425
------------
MORTGAGE--0.5%
11,900 Federal National Mortgage Association.................... 519,138
------------
OIL--2.3%
49,600 Royal Dutch Petroleum Co. ............................... 2,697,000
------------
OIL SERVICE--0.9%
8,400 Noble Drilling Corp.(c).................................. 189,525
2,600 Smith International, Inc.(c)............................. 157,950
30,600 Union Texas Peteroleum Holdings, Inc. ................... 640,688
------------
988,163
------------
PAPER & FOREST PRODUCTS--0.3%
8,000 Rayonier, Inc. .......................................... 336,500
------------
PHOTOGRAPHY--0.2%
2,400 Eastman Kodak Co. ....................................... 184,200
------------
PRODUCER OF GOODS--9.5%
24,500 Caterpillar, Inc. ....................................... 2,630,687
33,200 Cummins Engine, Inc. .................................... 2,342,675
19,600 Harsco Corp. ............................................ 793,800
9,600 Illinois Tool Works, Inc. ............................... 479,400
40,300 Ingersoll-Rand Co. ...................................... 2,488,525
4,500 Lancaster Colony Corp. .................................. 217,688
6,400 Lucent Technologies, Inc. ............................... 461,200
38,400 Premark International, Inc. ............................. 1,027,200
14,400 Timken Co. .............................................. 512,100
------------
10,953,275
------------
PUBLISHING--0.7%
39,200 Moore Corp., Ltd. ....................................... 771,750
------------
RAILROAD & EQUIPMENT--0.5%
8,700 Kansas City Southern Industries, Inc. ................... 561,150
------------
RETAIL--2.7%
19,000 Dayton Hudson Corp. ..................................... 1,010,562
30,600 Sears Roebuck & Co. ..................................... 1,644,750
17,800 TJX Companies, Inc. ..................................... 469,475
------------
3,124,787
------------
RETAIL--FOOD & DRUG--1.3%
31,000 American Stores Co. ..................................... 1,530,625
------------
SOAPS--0.8%
19,500 Ecolab, Inc. ............................................ 931,125
------------
STEEL--1.5%
49,700 USX-U.S. Steel Group..................................... 1,742,606
------------
TELECOMMUNICATION--7.6%
56,100 AT&T Corp. .............................................. 1,967,006
28,000 Ameritech Corp. ......................................... 1,902,250
24,600 Bell Atlantic Corp. ..................................... 1,866,525
22,400 BellSouth Corp. ......................................... 1,038,800
23,800 MCI Communications Corp. ................................ 911,094
9,900 Sprint Corp. ............................................ 520,988
14,300 U.S. West, Inc. ......................................... 538,931
------------
8,745,594
------------
TOBACCO--1.1%
2,000 Philip Morris Companies, Inc. ........................... 88,750
35,600 RJR Nabisco Holdings Corp. .............................. 1,174,800
------------
1,263,550
------------
Total Common Stocks
(Identified Cost $90,491,771)........................... 111,096,267
------------
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH & INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ---------------------------
SHORT-TERM INVESTMENT--3.2%
- ---------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$3,679,000 Repurchase agreement with
State Street Bank &
Trust Company dated
6/30/97 at 5.000% to be
repurchased at
$3,679,511 on 7/1/97.
Collateralized by
$3,555,000 U.S. Treasury
Bond 7.250% due 5/15/16
with a value of
$3,753,301.............. $ 3,679,000
------------
Total Short-Term
Investment
(Identified cost
$3,679,000)............... 3,679,000
------------
Total Investments--99.8%
(Identified cost
$94,170,771)(b)......... 114,775,267
Other assets less
liabilities............. 220,445
------------
TOTAL NET ASSETS--100%... $114,995,712
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30,1997 the net unrealized appreciation on investments based on cost
of $94,170,771 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............ $ 21,090,380
Aggregate gross unrealized depreciation
for all investments in which there in an
excess of tax cost over value............ (485,884)
------------
Net unrealized appreciation............... $ 20,604,496
============
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
40
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH & INCOME SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $114,775,267
Cash.................................................... 168
Receivable for:
Fund shares sold....................................... 292,936
Dividends and interest................................. 158,077
------------
115,226,448
LIABILITIES
Payable for:
Fund shares redeemed................................... $ 80,645
Withholding taxes...................................... 1,382
Miscellaneous.......................................... 471
Accrued expenses:
Management fees........................................ 111,702
Deferred trustees' fees................................ 2,622
Other expenses......................................... 33,914
--------
230,736
------------
$114,995,712
============
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $ 85,535,328
Undistributed net investment income.................... 694,529
Accumulated net realized gains......................... 8,161,359
Unrealized appreciation on investments................. 20,604,496
------------
NET ASSETS............................................... $114,995,712
============
Computation of offering price:
Net asset value and redemption price per share
($114,995,712 divided by 634,854 shares of beneficial
interest)............................................... $ 181.14
============
Identified cost of investments........................... $ 94,170,771
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 1,023,565(a)
Interest.............................................. 72,574
-----------
1,096,139
EXPENSES
Management fees....................................... $332,622
Trustees' fees and expenses........................... 11,533
Custodian............................................. 21,185
Audit and tax services................................ 3,796
Legal................................................. 9,340
Printing.............................................. 21,785
Miscellaneous......................................... 1,818
--------
Total expenses...................................... 402,079
-----------
NET INVESTMENT INCOME.................................. 694,060
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net..................................... 6,023,834
Unrealized appreciation on:
Investments--net..................................... 10,676,226
-----------
Net gain on investment transactions.................... 16,700,060
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $17,394,120
===========
</TABLE>
(a)Net of foreign taxes of: $13,697
See accompanying notes to financial statements.
41
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH & INCOME SERIES)
- ----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- ----------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 890,831 $ 694,060
Net realized gain on investments.................. 8,163,321 6,023,834
Unrealized appreciation on investments............ 2,277,386 10,676,226
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 11,331,538 17,394,120
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (904,227) 0
Net realized gain on investments.................. (6,507,691) 0
------------ ------------
(7,411,918) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 35,852,491 28,057,500
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 904,227 0
Distributions from net realized gain.............. 6,507,691 0
------------ ------------
43,264,409 28,057,500
Cost of shares redeemed........................... (12,982,923) (12,786,051)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 30,281,486 15,271,449
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 34,201,106 32,665,569
NET ASSETS
Beginning of the period........................... 48,129,037 82,330,143
------------ ------------
End of the period................................. $ 82,330,143 $114,995,712
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 13,865 $ 469
============ ============
End of the period................................. $ 469 $ 694,529
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 239,114 171,272
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 5,851 0
Distributions from net realized gain.............. 42,976 0
------------ ------------
287,941 171,272
Redeemed.......................................... (86,095) (78,867)
------------ ------------
Net change........................................ 201,846 92,405
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
APRIL 30, 1993(A) SIX MONTHS
THROUGH YEAR YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED ENDED JUNE 30,
1993 1994 1995 1996 1997
----------------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $100.00 $112.32 $109.03 $141.31 $ 151.77
------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income... 0.92 1.90 1.77 1.78 1.09
Net Realized and
Unrealized Gain (Loss)
on Investments......... 13.33 (3.25) 37.91 23.69 28.28
------- ------- ------- ------- --------
Total From Investment
Operations............. 14.25 (1.35) 39.68 25.47 29.37
------- ------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income...... (0.92) (1.92) (1.71) (1.82) 0.00
Distributions From Net
Realized Capital Gains. (1.00) 0.00 (5.69) (13.19) 0.00
Distributions in Excess
of Net Realized Capital
Gains.................. (0.01) 0.00 0.00 0.00 0.00
Distributions From Paid-
in Capital............. 0.00 (0.02) 0.00 0.00 0.00
------- ------- ------- ------- --------
Total Distributions..... (1.93) (1.94) (7.40) (15.01) 0.00
------- ------- ------- ------- --------
Net Asset Value, End of
Period................. $112.32 $109.03 $141.31 $151.77 $ 181.14
======= ======= ======= ======= ========
TOTAL RETURN (%)........ 14.24(b) (1.21) 36.46 18.10 19.35(b)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.85(c) 0.85 0.85 0.85 0.85(c)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.16(c) 2.30 1.63 1.40 1.45(c)
Portfolio Turnover Rate
(%).................... 49(c) 133 92 104 80(c)
Average Commission
Rate(d)................ -- -- -- $0.0344 $ 0.0329
Net Assets, End of
Period (000)........... $ 9,082 $22,934 $48,129 $82,330 $114,996
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(c) 0.86 1.06 0.91 0.85(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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>
WESTPEAK STOCK INDEX SERIES
PORTFOLIO MANAGERS: GERALD H. SCRIVER AND PHILIP J. COOPER
WESTPEAK INVESTMENT ADVISORS, L.P.
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
Q. HOW DID THE SERIES' PERFORM DURING THE FIRST HALF OF 1997?
A. The Westpeak Stock Index returned 20.13% compared to 20.59% posted by the
S&P 500 Index/18/ for the six months ended June 30, 1997. For the one-year
period the Series has returned 33.90% as compared to the S&P 500 Index/18/
return of 34.62%.
Q. HOW WAS THE SERIES MANAGED DURING THE FIRST SIX MONTHS?
A. The Series is managed so as to track the performance of the S&P 500 Index.
Westpeak's approach is to seek and emulate the S&P 500 Index 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 to the index). For example, during the second
quarter the Series returned 17.13% while the Index returned 17.43%.
A $10,000 Investment Compared to the S&P 500 Index
Average Annual Return
<TABLE>
<CAPTION>
Stock Index Lipper Variable S&P 500
Series Fund Index Average/15/
<S> <C> <C>
6 mos.* 20.13% 20.21%
1 year 33.90% 34.14%
5 years 19.24% 19.20%
10 years 14.82% 13.99%
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
WESTPEAK STOCK INDEX COMPARED TO THE SAME IN THE S&P 500 INDEX, THE PLOT POINTS
OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Stock Index Series S&P 500/18/
<S> <C> <C>
6/30/87 10,000 10,000
12/87 8,271 8,257
12/88 9,623 9,619
12/89 12,524 12,658
12/90 12,006 12,264
12/91 15,652 15,984
12/92 16,794 17,700
12/93 18,427 18,926
12/94 18,637 19,183
12/95 25,511 26,366
12/96 31,243 32,404
6/30/97 37,532 39,075
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks.
START DATE: May 1, 1987
SIZE: $106 million as of June 30, 1997
MANAGERS: Gerald Scriver and Philip Cooper. Mr. Scriver and Mr. Cooper have
managed the Series since 1993; they have also managed Westpeak Growth and Income
Series since August 1993 and New England Growth Opportunities Fund since May 1,
1995. Mr. Scriver joined Westpeak in June 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.
43
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--99.3% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.0%
4,400 Allied Signal, Inc....................................... $ 369,600
800 B.F. Goodrich Co. ....................................... 34,650
11,294 Boeing Co................................................ 599,288
900 General Dynamics Corp.................................... 67,500
2,915 Lockheed Martin Corp. ................................... 301,885
3,200 McDonnell Douglas Corp. ................................. 219,200
900 Northrop Grumman Corp. .................................. 79,031
3,600 United Technologies Corp................................. 298,800
------------
1,969,954
------------
AIRLINES--0.4%
1,400 AMR Corp.(c)............................................. 129,500
1,100 Delta Airlines, Inc. .................................... 90,200
1,700 Federal Express Corp.(c)................................. 98,175
2,200 Southwest Airlines Co.................................... 56,925
1,200 US Air Group, Inc.(c).................................... 42,000
------------
416,800
------------
ALUMINUM--0.4%
3,600 Alcan Aluminum, Ltd. .................................... 124,875
2,600 Aluminum Company of America.............................. 195,975
1,100 Reynolds Metals Co....................................... 78,375
------------
399,225
------------
APPAREL & TEXTILES--0.5%
1,100 Fruit of the Loom, Inc.(c)............................... 34,100
1,100 Liz Claiborne, Inc. ..................................... 51,288
4,500 Nike, Inc. Class B....................................... 262,687
800 Reebok International Ltd.(c)............................. 37,400
600 Russell Corp............................................. 17,775
300 Springs Industries, Inc.................................. 15,825
700 Stride Rite Corp. ....................................... 9,013
900 VF Corp. ................................................ 76,275
------------
504,363
------------
AUTOMOTIVE & RELATED--1.9%
10,800 Chrysler Corp............................................ 354,375
1,500 Dana Corp................................................ 57,000
900 Echlin, Inc. ............................................ 32,400
500 Fleetwood Enterprises, Inc............................... 14,906
18,600 Ford Motor Co. .......................................... 702,150
11,800 General Motors Corp...................................... 657,112
1,120 Navistar International Corp., Inc.(c).................... 19,320
1,290 Paccar, Inc.............................................. 59,904
1,900 TRW, Inc................................................. 107,944
------------
2,005,111
------------
BANKS--7.6%
8,775 Banc One Corp............................................ 425,039
2,300 Bank Boston Corp......................................... 165,744
6,100 Bank of New York, Inc.................................... 265,350
11,056 BankAmerica Corp. ....................................... 713,803
1,200 Bankers Trust New York Corp.............................. 104,400
3,200 Barnett Banks of Florida, Inc............................ 168,000
6,770 Chase Manhattan Corp. ................................... 657,113
7,200 Citicorp................................................. 868,050
1,600 Comerica, Inc............................................ 108,800
3,500 Core States Financial Corp. ............................. 188,125
1,600 Fifth Third Bancorp...................................... 131,300
2,000 First Bank Systems, Inc. ................................ 170,750
4,910 First Chicago Corp. ..................................... 297,055
4,450 First Union Corp. ....................................... 411,625
3,962 Fleet Financial Group, Inc............................... 250,596
2,800 J.P. Morgan & Co., Inc................................... 292,250
3,400 Keycorp.................................................. 189,975
4,100 Mellon Bank Corp......................................... 185,012
3,500 National City Corp. ..................................... 183,750
11,542 NationsBank Corp......................................... 744,459
5,800 Norwest Corp............................................. 326,250
5,200 PNC Bank Corp. .......................................... 216,450
800 Republic New York Corp. ................................. 86,000
3,500 Suntrust Banks, Inc...................................... 192,719
2,300 U.S. Bancorp. ........................................... 147,487
2,500 Wachovia Corp. .......................................... 145,781
1,433 Wells Fargo & Co......................................... 386,193
------------
8,022,076
------------
BUSINESS SERVICES--0.9%
1,200 Deluxe Corp. ............................................ 40,950
1,400 Dow Jones & Co., Inc. ................................... 56,263
2,720 Dun & Bradstreet Corp.................................... 71,400
700 EG & G, Inc. ............................................ 15,750
2,300 Equifax, Inc. ........................................... 85,531
6,900 First Data Corp.......................................... 303,169
2,000 Ikon Office Solutions, Inc............................... 49,875
1,200 Interpublic Group Companies, Inc......................... 73,575
2,400 Marsh & McLennan Cos..................................... 171,300
1,200 Ryder Systems, Inc....................................... 39,600
2,600 Unisys, Corp.(c)......................................... 19,825
------------
927,238
------------
CHEMICALS--3.0%
1,700 Air Products and Chemicals, Inc.......................... 138,125
1,600 Avery Dennison Corp...................................... 64,200
3,650 Dow Chemical Co.......................................... 318,006
1,200 Eastman Chemical Co. .................................... 76,200
17,700 E.I. Du Pont de Nemours & Co............................. 1,112,887
2,125 Engelhard Corp. ......................................... 44,492
600 FMC Corp.(c)............................................. 47,663
900 Great Lakes Chemical Corp................................ 47,138
1,500 Hercules, Inc. .......................................... 71,812
9,300 Monsanto Co.............................................. 400,481
2,100 Morton International, Inc. .............................. 63,394
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
CHEMICALS--(CONTINUED)
1,000 Nalco Chemical Co........................................ $ 38,625
5,100 Occidental Petroleum Corp. .............................. 127,819
2,900 PPG Industries, Inc...................................... 168,562
2,500 Praxair, Inc. ........................................... 140,000
1,000 Rohm & Haas Co. ......................................... 90,062
1,500 Sigma-Aldrich Corp....................................... 52,594
1,900 Union Carbide Corp. ..................................... 89,419
1,100 W.R. Grace & Co.......................................... 60,638
------------
3,152,117
------------
COMPUTER SOFTWARE & SERVICES--3.6%
1,100 Adobe Systems, Inc....................................... 38,569
700 Autodesk, Inc............................................ 26,819
4,500 Automatic Data Processing, Inc........................... 211,500
1,200 Ceridian Corp.(c)........................................ 50,700
2,520 Cognizant Corp. ......................................... 102,060
5,600 Computer Associates International, Inc................... 311,850
1,100 Computer Sciences Corp.(c)............................... 79,337
700 Intergraph Corp.(c)...................................... 5,950
18,600 Microsoft Corp.(c)....................................... 2,350,575
5,400 Novell, Inc.(c).......................................... 37,463
10,425 Oracle Systems Corp.(c).................................. 525,159
1,900 Parametric Technology Corp.(c)........................... 80,869
400 Shared Medical System.................................... 21,600
------------
3,842,451
------------
COMPUTERS & BUSINESS EQUIPMENT--5.1%
5,200 3Com Corp.(c)............................................ 234,000
1,800 Amdahl Corp.(c).......................................... 15,750
1,900 Apple Computer, Inc.(c).................................. 27,075
3,000 Bay Networks, Inc.(c).................................... 79,687
2,300 Cabletron Systems, Inc.(c)............................... 65,119
10,400 Cisco Systems, Inc.(c)................................... 698,100
4,300 Compaq Computer Corp.(c)................................. 426,775
600 Data General Corp.(c).................................... 15,600
2,700 Dell Computer Corp.(c)................................... 317,081
2,400 Digital Equipment Corp.(c)............................... 85,050
3,900 EMC Corp.(c)............................................. 152,100
15,800 Hewlett-Packard Co. ..................................... 884,800
16,100 International Business Machines.......................... 1,452,019
2,200 Pitney Bowes, Inc. ...................................... 152,900
3,800 Seagate Technology(c).................................... 133,712
2,700 Silicon Graphics, Inc.(c)................................ 40,500
5,700 Sun Microsystems, Inc.(c)................................ 212,147
1,800 Tandem Computers, Inc.(c)................................ 36,450
5,000 Xerox Corp. ............................................. 394,375
------------
5,423,240
------------
CONSTRUCTION--0.3%
600 Armstrong World Industries, Inc. ........................ 44,025
400 Centex Corp.............................................. 16,250
1,200 Fluor Corp............................................... 66,225
600 Kaufman & Broad Home Corp................................ 10,538
2,400 Masco Corp............................................... 100,200
2,600 Sherwin Williams Co...................................... 80,275
------------
317,513
------------
CONSUMER GOODS & SERVICES--0.4%
1,400 Black & Decker Corp...................................... 52,063
6,400 CUC International, Inc.(c)............................... 165,200
1,500 Maytag Corp.............................................. 39,188
3,700 Service Corporation International........................ 121,637
1,100 Whirlpool Corp. ......................................... 60,019
------------
438,107
------------
CONTAINERS & GLASS--0.3%
500 Ball Corp. .............................................. 15,031
800 Bemis, Inc. ............................................. 34,600
1,900 Crown Cork & Seal, Inc. ................................. 101,531
800 Temple Inland, Inc. ..................................... 43,200
2,600 Tenneco, Inc. ........................................... 117,487
------------
311,849
------------
COSMETICS & TOILETRIES--0.2%
800 Alberto Culver Co........................................ 22,400
2,000 Avon Products, Inc....................................... 141,125
------------
163,525
------------
DOMESTIC OIL--1.5%
7,700 Amoco Corp. ............................................. 669,419
1,100 Ashland, Inc. ........................................... 51,013
5,000 Atlantic Richfield Co.................................... 352,500
1,900 Burlington Resources, Inc................................ 83,837
500 Louisiana Land & Exploration............................. 28,563
700 Pennzoil Co.............................................. 53,725
4,100 Phillips Petroleum Co. .................................. 179,375
1,511 Santa Fe Energy Research, Inc.(c)........................ 22,193
1,300 Sonat, Inc. ............................................. 66,625
3,964 Union Pacific Res. Group, Inc............................ 98,605
------------
1,605,855
------------
DRUGS--8.2%
12,100 Abbott Laboratories...................................... 807,675
1,000 Allergan, Inc. .......................................... 31,813
1,300 Alza Corp.(c)............................................ 37,700
10,100 American Home Products Corp.............................. 772,650
4,000 Amgen, Inc. ............................................. 232,500
15,580 Bristol-Myers & Squibb Co................................ 1,261,980
1,700 Cardinal Health, Inc. ................................... 97,325
8,700 Eli Lilly & Co........................................... 951,019
18,900 Merck & Co............................................... 1,956,150
10,100 Pfizer, Inc. ............................................ 1,206,950
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
DRUGS--(CONTINUED)
7,880 Pharmacia & Upjohn, Inc. ................................ $ 273,830
11,400 Schering-Plough Corp..................................... 545,775
4,300 Warner-Lambert Co........................................ 534,275
------------
8,709,642
------------
ELECTRIC UTILITIES--2.4%
3,000 American Electric Power Co., Inc. ....................... 126,000
2,200 Baltimore Gas & Electric Co. ............................ 58,713
2,300 Carolina Power & Light Co. .............................. 82,512
3,200 Central & South West Corp................................ 68,000
2,411 Cinergy Corp............................................. 83,933
3,700 Consolidated Edison Co. of New York...................... 108,919
2,850 Dominion Resources, Inc.................................. 104,381
2,200 DTE Energy Co............................................ 60,775
5,627 Duke Power Co............................................ 269,744
6,700 Edison International..................................... 166,662
3,700 Entergy Corp............................................. 101,287
2,800 FPL Group, Inc. ......................................... 128,975
1,800 GPU, Inc................................................. 64,575
3,600 Houston Industries, Inc. ................................ 77,175
2,200 Niagara Mohawk Power Corp.(c)............................ 18,838
1,000 Northern States Power Co................................. 51,750
2,300 Ohio Edison Co. ......................................... 50,169
6,400 Pacific Gas & Electric Corp.............................. 155,200
4,600 Pacificorp............................................... 101,200
3,500 PECO Energy Co........................................... 73,500
2,600 P.P. & L Res, Inc. ...................................... 51,838
3,600 Public Service Enterprise Group.......................... 90,000
10,700 Southern Co.............................................. 234,062
3,400 Texas Utilities Co. ..................................... 117,087
3,400 Unicom Corp. ............................................ 75,650
1,500 Union Electric Co. ...................................... 56,531
------------
2,577,476
------------
ELECTRONICS--4.4%
2,200 Advanced Micro Devices, Inc.(c).......................... 79,200
3,456 AMP, Inc................................................. 144,288
1,330 Andrew Corp.(c).......................................... 37,406
1,800 Cooper Industries, Inc................................... 89,550
600 Harris Corp. ............................................ 50,400
1,900 Honeywell, Inc. ......................................... 144,162
12,800 Intel Corp. ............................................. 1,815,200
2,100 LSI Logic Corp.(c)....................................... 67,200
3,300 Micron Technology, Inc................................... 131,794
9,300 Motorola, Inc. .......................................... 706,800
2,100 National Semiconductor Corp.(c).......................... 64,313
4,100 Northern Telecom, Ltd. .................................. 373,100
700 Raychem Corp. ........................................... 52,063
3,700 Raytheon Co. ............................................ 188,700
3,300 Rockwell International Corp.............................. 194,700
1,100 Scientific Atlanta, Inc. ................................ 24,063
500 Tektronix, Inc. ......................................... 30,000
2,700 Tellabs, Inc.(c)......................................... 150,862
3,000 Texas Instruments, Inc................................... 252,187
800 Thomas & Betts Corp. .................................... 42,050
------------
4,638,038
------------
FINANCE--2.5%
7,300 American Express Co...................................... 543,850
800 Beneficial Corp.......................................... 56,850
2,700 Charles Schwab Corp. .................................... 109,856
1,500 H & R Block, Inc......................................... 48,375
1,700 Household International, Inc............................. 199,644
5,187 MBNA Corp. .............................................. 189,974
5,200 Merrill Lynch & Company, Inc. ........................... 310,050
8,899 Morgan Stanley Group, Inc................................ 383,213
1,400 Providian Corp........................................... 44,975
1,600 Salomon, Inc. ........................................... 89,000
10,068 Travelers Group, Inc..................................... 634,913
------------
2,610,700
------------
FOOD & BEVERAGES--6.1%
8,425 Archer-Daniels-Midland Co. .............................. 197,988
7,200 Campbell Soup Co. ....................................... 360,000
38,800 Coca Cola Co. ........................................... 2,619,000
3,650 Conagra, Inc. ........................................... 234,056
2,200 CPC International, Inc................................... 203,087
2,400 General Mills, Inc. ..................................... 156,300
5,700 H.J. Heinz Co............................................ 262,912
2,300 Hershey Foods Corp. ..................................... 127,219
3,200 Kellogg Co. ............................................. 274,000
24,200 PepsiCo, Inc............................................. 909,012
1,200 Pioneer Hi Bred International, Inc. ..................... 96,000
2,000 Quaker Oats Co........................................... 89,750
7,400 Sara Lee Corp. .......................................... 308,025
2,400 Unilever N.V. ........................................... 523,200
1,500 Whitman Corp. ........................................... 37,969
1,700 William Wrigley Jr. Co................................... 113,900
------------
6,512,418
------------
FOREIGN OIL RESERVES--0.0%
700 Kerr-McGee Corp. ........................................ 44,363
------------
GAS & PIPELINE UTILITIES--0.5%
800 Columbia Gas System, Inc................................. 52,200
1,400 Consolidated Natural Gas Co. ............................ 75,338
300 Eastern Enterprises...................................... 10,406
4,000 Enron Corp............................................... 163,250
1,000 Ensearch Corp............................................ 22,250
700 Nicor, Inc. ............................................. 25,113
2,200 Noram Energy Corp........................................ 33,550
400 Oneok, Inc............................................... 12,875
1,300 Pacific Enterprises, Ltd. ............................... 43,713
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
GAS & PIPELINE UTILITIES--(CONTINUED)
500 Peoples Energy Corp. .................................... $ 18,719
2,400 Williams Companies, Inc. ................................ 105,000
------------
562,414
------------
HEALTH CARE--3.2%
800 Bausch & Lomb, Inc....................................... 37,700
4,400 Baxter International, Inc. .............................. 229,900
1,800 Becton Dickinson & Co.................................... 91,125
1,500 Beverly Enterprises, Inc.(c)............................. 24,375
1,700 Biomet, Inc. ............................................ 31,663
3,100 Boston Scientific Corp.(c)............................... 190,456
10,386 Columbia HCA/Healthcare Corp. ........................... 408,300
800 C.R. Bard, Inc. ......................................... 29,050
1,100 Guidant Corp............................................. 93,500
5,400 HEALTHSOUTH Corp.(c)..................................... 134,662
2,600 Humana, Inc.(c).......................................... 60,125
20,900 Johnson & Johnson........................................ 1,345,437
1,100 Mallinckrodt Group, Inc. ................................ 41,800
900 Manor Care, Inc.......................................... 29,363
3,600 Medtronics, Inc.......................................... 291,600
600 Millipore Corp. ......................................... 26,400
1,300 St. Jude Medical, Inc.(c)................................ 50,700
4,700 Tenet Healthcare Corp.(c)................................ 138,944
2,800 United Healthcare Corp. ................................. 145,600
1,100 United States Surgical Corp.............................. 40,975
------------
3,441,675
------------
HOTELS & RESTAURANTS--1.0%
2,400 Darden Restaurants, Inc.................................. 21,750
1,550 Harrahs Entertainment, Inc.(c)........................... 28,288
2,400 HFS, Inc.(c)............................................. 139,200
3,800 Hilton Hotels Corp....................................... 100,938
1,700 ITT Corp. ............................................... 103,806
1,900 Marriott International, Inc. ............................ 116,612
10,800 McDonald's Corp. ........................................ 521,775
2,100 Wendys International, Inc. .............................. 54,469
------------
1,086,838
------------
INSURANCE--3.0%
6,886 Allstate Corp. .......................................... 502,678
7,212 American International Group, Inc........................ 1,077,292
2,600 Aon Corp. ............................................... 134,550
2,600 Chubb Corp............................................... 173,875
1,100 CIGNA Corp. ............................................. 195,250
1,200 General Reinsurance Corp................................. 218,400
1,800 Hartford Financial Services Group........................ 148,950
1,700 Loews Corp. ............................................. 170,213
600 MBIA, Inc. .............................................. 67,688
1,800 MGIC Investment Corp..................................... 86,287
1,900 Safeco Corp. ............................................ 88,706
1,200 St. Paul Companies, Inc. ................................ 91,500
1,050 Torchmark, Inc. ......................................... 74,812
2,200 UNUM Corp. .............................................. 92,400
1,700 USF&G Corp. ............................................. 40,800
------------
3,163,401
------------
INTERNATIONAL OIL--4.2%
10,300 Chevron Corp............................................. 761,556
38,800 Exxon Corp. ............................................. 2,386,200
12,200 Mobil Corp. ............................................. 852,475
1,600 Oryx Energy Corp.(c)..................................... 33,800
4,000 Texaco, Inc. ............................................ 435,000
------------
4,469,031
------------
LEISURE TIME--0.2%
1,500 Brunswick Corp........................................... 46,875
1,950 Hasbro, Inc. ............................................ 55,331
4,450 Mattel, Inc.............................................. 150,744
------------
252,950
------------
LIFE INSURANCE--0.7%
2,283 Aetna Life & Casualty Co. ............................... 233,722
3,698 American General Corp. .................................. 176,580
2,900 Conseco, Inc. ........................................... 107,300
1,025 Jefferson Pilot Corp. ................................... 71,622
1,600 Lincoln National Corp., Inc. ............................ 103,000
1,000 Transamerica Corp. ...................................... 93,562
------------
785,786
------------
LIQUOR--0.7%
600 Adolph Coors Co. ........................................ 15,975
7,700 Anheuser-Busch Companies, Inc. .......................... 322,919
1,000 Brown Forman Corp. "B"................................... 48,813
2,600 Fortune Brands, Inc. .................................... 97,013
5,800 Seagram Company, Ltd. ................................... 233,450
------------
718,170
------------
MEDIA & ENTERTAINMENT--2.1%
5,100 Comcast Corp. ........................................... 109,012
2,000 General Instrument Corp.(c).............................. 50,000
550 King World Productions, Inc. ............................ 19,250
10,400 Tele-Communications A(c)................................. 154,700
8,800 Time-Warner, Inc. ....................................... 424,600
1,800 Tribune Co. ............................................. 86,512
9,600 U.S. West Media Group, Inc............................... 194,400
5,457 Viacom, Inc.(c).......................................... 163,710
10,398 Walt Disney Co. ......................................... 834,439
10,000 Westinghouse Electric Corp............................... 231,250
------------
2,267,873
------------
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
METAL--0.2%
600 ASARCO, Inc.............................................. $ 18,375
2,500 Inco, Ltd. .............................................. 75,156
1,000 Phelps Dodge Corp. ...................................... 85,187
------------
178,718
------------
MINING--0.0%
1,350 Cyprus Amax Minerals Co. ................................ 33,075
------------
MORTGAGE--1.2%
1,600 Countrywide Credit Industries, Inc....................... 49,900
11,000 Federal Home Loan Mortgage Corp.......................... 378,125
17,000 Federal National Mortgage Association.................... 741,625
2,100 Green Tree Acceptance Corp............................... 74,812
------------
1,244,462
------------
OIL--2.1%
1,400 Amerada Hess Corp. ...................................... 77,787
1,600 Coastal Corp. ........................................... 85,100
33,200 Royal Dutch Petroleum Co. ADR(d)......................... 1,805,250
1,100 Sun, Inc. ............................................... 34,100
3,800 Unocal Corp. ............................................ 147,487
4,500 USX Marathon Group....................................... 129,937
------------
2,279,661
------------
OIL SERVICES--0.8%
2,200 Baker Hughes, Inc........................................ 85,113
1,900 Halliburton Co. ......................................... 150,575
400 Helmerich & Payne, Inc. ................................. 23,050
1,300 Rowan Companies, Inc.(c)................................. 36,644
3,900 Schlumberger, Ltd. ...................................... 487,500
800 Western Atlas, Inc.(c)................................... 58,600
------------
841,482
------------
PAPER & FOREST PRODUCTS--1.3%
733 Boise Cascade Corp. ..................................... 25,884
1,400 Champion International Corp.............................. 77,350
1,400 Georgia Pacific Corp..................................... 119,525
4,710 International Paper Co. ................................. 228,729
1,300 James River Corp......................................... 48,100
8,712 Kimberly Clark Corp. .................................... 433,422
1,600 Louisiana Pacific Corp. ................................. 33,800
800 Mead Corp. .............................................. 49,800
400 Potlatch Corp............................................ 18,100
1,500 Stone Container Corp.(c)................................. 21,469
1,000 Union Camp Corp.......................................... 50,000
1,475 Westvaco Corp............................................ 46,370
3,000 Weyerhaeuser Co.......................................... 156,000
800 Willamette Industries, Inc............................... 56,000
------------
1,364,549
------------
PHOTOGRAPHY--0.4%
5,050 Eastman Kodak Co. ....................................... 387,587
700 Polaroid Corp............................................ 38,850
------------
426,437
------------
POLLUTION CONTROL--0.3%
3,200 Browning-Ferris Industries, Inc.......................... 106,400
900 Safety Kleen Corp........................................ 15,188
7,000 Waste Management, Inc.................................... 224,875
------------
346,463
------------
PRECIOUS METALS--0.4%
5,800 Barrick Gold Corp........................................ 127,600
3,600 Battle Mountain Gold Co. ................................ 20,475
2,100 Echo Bay Mines, Ltd.(c).................................. 12,075
3,100 Freeport McMoran Copper & Gold........................... 96,487
2,200 Homestake Mining Co. .................................... 28,738
2,341 Newmont Mining Corp...................................... 91,299
3,800 Placer Dome, Inc......................................... 62,225
------------
438,899
------------
PRODUCER OF GOODS--7.4%
400 Aeroquip-Vickers, Inc. .................................. 18,900
2,700 Applied Materials, Inc.(c)............................... 191,194
400 Briggs & Stratton Corp................................... 20,000
1,100 Case Equipment Corp...................................... 75,763
2,900 Caterpillar, Inc. ....................................... 311,387
600 Cincinnati Milacron, Inc. ............................... 15,563
700 Crane Co. ............................................... 29,269
600 Cummins Engine, Inc. .................................... 42,338
4,000 Deere & Co............................................... 219,500
1,700 Dover Corp. ............................................. 104,550
2,800 Dresser Industries, Inc.................................. 104,300
1,700 DSC Communications Corp.(c).............................. 37,825
1,100 Eaton Corp. ............................................. 96,044
6,900 Emerson Electric Co...................................... 379,931
600 Foster Wheeler Corp. .................................... 24,300
51,400 General Electric Co...................................... 3,360,275
700 General Signal Corp. .................................... 30,538
2,700 Genuine Parts Co. ....................................... 91,462
500 Giddings & Lewis, Inc. .................................. 10,438
700 Harnischfeger Industries, Inc. .......................... 29,050
3,800 Illinois Tool Works, Inc................................. 189,762
1,600 Ingersoll-Rand Co. ...................................... 98,800
1,800 ITT Industries Inc.(c)................................... 46,350
1,200 Johnson Controls, Inc.................................... 49,275
10,006 Lucent Technologies, Inc. ............................... 721,057
800 McDermott International, Inc............................. 23,350
6,500 Minnesota Mining & Mfg. Co. ............................. 663,000
700 National Services Industries, Inc. ...................... 34,081
800 Owens Corning Fiberglas Co............................... 34,500
1,900 Pall Corp................................................ 44,175
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PRODUCER OF GOODS--(CONTINUED)
1,100 Parker Hannifin Corp..................................... $ 66,756
600 Perkin Elmer Corp........................................ 47,738
850 Snap-On Tools Corp. ..................................... 33,469
1,300 Stanley Works............................................ 52,000
2,600 Textron, Inc. ........................................... 172,575
2,400 Thermo Electron Corp.(c)................................. 81,600
1,000 Timken Co................................................ 35,563
2,500 TYCO International Ltd. ................................. 173,906
800 W.W. Grainger, Inc....................................... 62,550
------------
7,823,134
------------
PUBLISHING--0.7%
1,100 American Greetings Corp. ................................ 40,838
2,100 Gannet Co., Inc. ........................................ 207,375
1,100 Harcourt General, Inc. .................................. 52,388
500 John H. Harland Co. ..................................... 11,406
600 Jostens, Inc. ........................................... 16,050
1,400 Knight-Ridder, Inc. ..................................... 68,688
1,500 McGraw-Hill Companies, Inc............................... 88,219
800 Meredith Corp. .......................................... 23,200
1,500 Moore Corp., Ltd. ....................................... 29,531
1,400 New York Times Co........................................ 69,300
2,300 R.R. Donnelley & Sons Co................................. 84,237
1,500 Time Mirror Co........................................... 82,875
------------
774,107
------------
RAILROADS & EQUIPMENT--0.9%
2,322 Burlington Northern, Inc. ............................... 208,690
3,400 CSX Corp. ............................................... 188,700
4,900 Laidlaw, Inc............................................. 67,681
1,900 Norfolk Southern Corp.................................... 191,425
3,900 Union Pacific Corp. ..................................... 274,949
------------
931,445
------------
REAL ESTATE--0.0%
300 Pulte Corp............................................... 10,369
------------
RETAIL--4.1%
2,300 Autozone, Inc.(c)........................................ 54,194
1,600 Charming Shoppes, Inc.(c)................................ 8,350
1,500 Circuit City Stores, Inc. ............................... 53,344
2,600 CVS Corp. ............................................... 133,250
3,400 Dayton Hudson Corp....................................... 180,837
1,700 Dillard Department Stores, Inc. ......................... 58,863
3,300 Federated Department Stores(c)........................... 114,675
7,649 Home Depot, Inc.......................................... 527,303
3,800 J.C. Penney Company, Inc. ............................... 198,312
7,500 K-Mart Corp.(c).......................................... 91,875
600 Longs Drug Stores Corp. ................................. 15,713
2,600 Lowes Companies, Inc. ................................... 96,525
3,700 May Department Stores Co. ............................... 174,825
550 Mercantile Stores Co., Inc............................... 34,616
1,200 Nordstrom, Inc. ......................................... 58,875
900 Pep Boys: Manny, Moe & Jack.............................. 30,656
3,339 Price Costco.(c)......................................... 109,770
1,800 Rite Aid Corp. .......................................... 89,775
6,100 Sears, Roebuck & Co...................................... 327,875
900 Tandy Corp. ............................................. 50,400
4,300 The Gap, Inc. ........................................... 167,162
4,293 The Limited, Inc......................................... 86,933
2,400 TJX Companies, Inc. ..................................... 63,300
4,475 Toys R Us, Inc.(c)....................................... 156,625
3,900 Walgreen Co.............................................. 209,137
35,600 Wal-Mart Stores, Inc. ................................... 1,203,725
2,000 Woolworth Corp.(c)....................................... 48,000
------------
4,344,915
------------
RETAIL--FOOD & DRUG--0.6%
3,800 Albertson's, Inc......................................... 138,700
2,200 American Stores Co....................................... 108,625
600 Fleming Companies, Inc. ................................. 10,800
900 Giant Foods, Inc......................................... 29,363
600 Great Atlantic & Pacific Tea Company, Inc................ 16,313
4,000 Kroger Co.(c)............................................ 116,000
1,000 SuperValu Stores, Inc.................................... 34,500
2,700 Sysco Corp. ............................................. 98,550
2,200 Winn-Dixie Stores, Inc. ................................. 81,950
------------
634,801
------------
SOAPS--3.2%
800 Clorox Co................................................ 105,600
4,600 Colgate Palmolive Co. ................................... 300,150
3,600 Corning, Inc............................................. 200,250
1,000 Ecolab, Inc.............................................. 47,750
8,700 Gillette Co.............................................. 824,325
1,600 International Flavours & Fragrances, Inc................. 80,800
100 Nacco Industries, Inc. .................................. 5,644
2,400 Newell Co................................................ 95,100
10,460 Procter & Gamble Co. .................................... 1,477,475
1,600 Ralston Purina Co. ...................................... 131,500
2,400 Rubbermaid, Inc. ........................................ 71,400
900 Tupperware Corp. ........................................ 32,850
------------
3,372,844
------------
STEEL--0.2%
2,632 Allegheny Teldyne, Inc. ................................. 71,064
1,600 Armco, Inc.(c)........................................... 6,200
1,700 Bethlehem Steel Corp.(c)................................. 17,744
700 Inland Steel Industries, Inc............................. 18,288
1,300 Nucor Corp............................................... 73,450
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
STEEL--(CONTINUED)
1,220 USX-U.S. Steel Group..................................... $ 42,776
1,400 Worthington Industries, Inc. ............................ 25,638
------------
255,160
------------
TELECOMMUNICATION--6.1%
7,900 Airtouch Communications(c)............................... 216,263
2,800 ALLTEL Corp.............................................. 93,625
8,500 Ameritech Corp. ......................................... 577,469
25,435 AT&T Corp. .............................................. 891,815
6,800 Bell Atlantic Corp. ..................................... 515,950
15,600 BellSouth Corp. ......................................... 723,450
2,600 Frontier Corp. .......................................... 51,838
15,000 GTE Corp. ............................................... 658,125
10,800 MCI Communications Corp. ................................ 413,437
6,800 NYNEX Corp............................................... 391,850
14,308 SBC Communications, Inc. ................................ 885,307
6,700 Sprint Corp. ............................................ 352,587
7,500 U.S. West, Inc.(c)....................................... 282,656
14,000 Worldcom, Inc. .......................................... 448,000
------------
6,502,372
------------
THRIFT--0.2%
900 Golden West Financial Corp............................... 63,000
2,050 Great Western Financial Corp. ........................... 110,187
1,600 H.F. Ahmanson & Co....................................... 68,800
------------
241,987
------------
TIRES & RUBBER--0.2%
1,200 Cooper Tire & Rubber Co.................................. 26,400
2,300 Goodyear Tire & Rubber Co. .............................. 145,619
------------
172,019
------------
TOBACCO--1.7%
37,900 Philip Morris Companies, Inc............................. 1,681,812
2,800 UST, Inc. ............................................... 77,700
------------
1,759,512
------------
TRUCKING & FREIGHT FORWARDING--0.0%
600 Caliber Systems, Inc. ................................... 22,350
------------
Total Common Stocks
(Identified Cost $61,990,165)........................... 105,338,960
------------
<CAPTION>
- ---------------------------
SHORT-TERM INVESTMENT--1.5%
- ---------------------------
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$1,575,000 Repurchase Agreement with State Street Bank & Trust
Co. dated 6/30/97 at 5.000% to be repurchased at
$1,575,219, on 7/01/97 collateralized by
$1,525,000, U.S. Treasury Bond 7.250% due 5/15/16,
with a value of $1,610,066........................ $ 1,575,000
------------
Total Short-Term Investment
(Identified Cost $1,575,000)...................... 1,575,000
------------
Total Investments--100.8%
(Identified Cost $63,565,165)(b).................. 106,913,960
Other assets less liabilities...................... (807,272)
------------
TOTAL NET ASSETS--100%............................. $106,106,688
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $63,565,165 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..................................... $ 44,216,659
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (867,864)
------------
Net unrealized appreciation........................ $ 43,348,795
============
</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.
See accompanying notes to financial statements.
50
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $106,913,960
Cash.................................................... 235
Receivable for:
Fund shares sold....................................... 170,185
Dividends and interest................................. 123,575
Foreign taxes.......................................... 290
------------
107,208,245
LIABILITIES
Payable for:
Securities purchased................................... $904,678
Fund shares redeemed................................... 79,483
Withholding taxes...................................... 55
Accrued expenses:
Management fees........................................ 58,325
Deferred trustees' fees................................ 51,073
Other expenses......................................... 7,943
--------
1,101,557
------------
$106,106,688
============
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $ 61,597,482
Undistributed net investment income.................... 698,212
Accumulated net realized gains......................... 462,199
Unrealized appreciation on investments................. 43,348,795
------------
NET ASSETS............................................... $106,106,688
============
Computation of offering price:
Net asset value and redemption price per share
($106,106,688 divided by 738,394 shares of beneficial
interest)............................................... $ 143.70
============
Identified cost of investments........................... $ 63,565,165
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................ $ 841,149(a)
Interest............................................. 30,899
-----------
872,048
EXPENSES
Management fees...................................... $113,925
Trustees' fee and expenses........................... 18,844
Custodian............................................ 38,921
Audit and tax services............................... 3,796
Legal................................................ 9,340
Printing............................................. 23,307
Miscellaneous........................................ 1,818
--------
Total expenses..................................... 209,951
Less expenses assumed by the investment adviser.... (27,670) 182,281
-------- -----------
NET INVESTMENT INCOME................................. 689,767
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments--net.................................... 174,769
Unrealized appreciation on:
Investments--net.................................... 16,152,770
-----------
Net gain on investment transactions................... 16,327,539
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............ $17,017,306
===========
</TABLE>
(a) Net of foreign taxes of: $5,811
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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 1,258,557 $ 689,767
Net realized gain on investments.................. 995,215 174,769
Unrealized appreciation on investments............ 11,760,936 16,152,770
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 14,014,708 17,017,306
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (1,270,368) 0
Net realized gain on investments.................. (675,238) 0
------------ ------------
(1,945,606) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 21,863,034 19,366,891
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 1,270,368 0
Distributions from net realized gain.............. 675,238 0
------------ ------------
23,808,640 19,366,891
Cost of shares redeemed........................... (13,784,516) (11,041,357)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 10,024,124 8,325,534
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 22,093,226 25,342,840
NET ASSETS
Beginning of the period........................... 58,670,622 80,763,848
------------ ------------
End of the period................................. $ 80,763,848 $106,106,688
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 20,255 $ 8,445
============ ============
End of the period................................. $ 8,445 $ 698,212
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 198,327 148,139
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 10,371 0
Distributions from net realized gain.............. 5,855 0
------------ ------------
214,553 148,139
Redeemed.......................................... (125,580) (84,891)
------------ ------------
Net change........................................ 88,973 63,248
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09 $ 119.62
------- ------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income.. 8.35 1.54 1.80 1.88 1.91 0.93
Net Realized and
Unrealized Gain (Loss)
on Investments........ 2.02 5.18 (0.92) 25.89 20.58 23.15
------- ------- ------- ------- ------- --------
Total From Investment
Operations............ 10.37 6.72 0.88 27.77 22.49 24.08
------- ------- ------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income..... (8.35) (1.36) (1.82) (1.85) (1.93) 0.00
Distributions in Excess
of Net Investment
Income................ 0.00 (0.18) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital
Gains................. (67.41) (0.55) (0.16) (1.18) (1.03) 0.00
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 (0.15) 0.00 0.00 0.00 0.00
Distributions From
Paid-in Capital....... 0.00 0.00 (0.03) 0.00 0.00 0.00
------- ------- ------- ------- ------- --------
Total Distributions.... (75.76) (2.24) (2.01) (3.03) (2.96) 0.00
------- ------- ------- ------- ------- --------
Net Asset Value, End of
Period................. $ 72.00 $ 76.48 $ 75.35 $100.09 $119.62 $ 143.70
======= ======= ======= ======= ======= ========
TOTAL RETURN (%)........ 7.30 9.72 1.14 36.88 22.47 20.13(a)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.35 0.34 0.33 0.40 0.40 0.40(b)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.63 2.52 2.59 2.20 1.84 1.50(b)
Portfolio Turnover Rate
(%).................... 17 12 2 5 4 4(b)
Average Commission Rate
(c).................... -- -- -- -- $0.0309 $ 0.0304
Net Assets, End of
Period (000)........... $10,172 $28,817 $37,164 $58,671 $80,764 $106,107
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 0.50 0.46(b)
</TABLE>
(a) Not computed on an annualized basis.
(b) 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>
LOOMIS SAYLES BALANCED SERIES
PORTFOLIO MANAGERS: CAROL MCMURTRIE, TRICIA MILLS,MERI ANNE BECK, RODERIC
DILLON, JOHN HYLL AND BARR SEGAL LOOMIS, SAYLES & COMPANY, L.P.
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
Q. HOW DID LOOMIS SAYLES BALANCED SERIES PERFORM IN THE FIRST HALF OF 1997?
A. For the six-month period ending June 30, 1997, the Series generated a total
return of 8.49%.
We're pleased to announce that Lipper ranked the Series in the top 19% (#7 out
of 37) of its balanced fund peer group for the one-year period ended June 30,
1997. Lipper is an independent mutual fund monitor whose rankings do not re-
flect sales charges and may change each month. Past performance doesn't guar-
antee future results.
Q. WHAT FACTORS INFLUENCED YOUR MANAGEMENT OF THE PORTFOLIO'S EQUITY PORTION?
A. An overweighting in strong financial stocks, such as BankAmerica and
NationsBank, helped to boost Series performance in the first half of 1997.
Several other companies, including Philips NV and Federal Express, also en-
joyed returns of 20% or more.
However, developments in specific holdings, such as York International,
Greentree Financial and United Meridian, combined to offset gains contributed
by the high-return stocks. In the case of York International, a commercial
air-conditioner and heating manufacturer and servicer, earnings were impacted
by weaker-than-expected business conditions in Europe and by cooler-than-an-
ticipated weather in the northeastern United States.
We eliminated some positions where our confidence in the fundamentals had de-
creased. We continued to focus on issue selection, adding consumer-related
companies such as Warnaco and Dayton Hudson to the portfolio--demonstrating
our more positive outlook for company prospects.
Q. AND ON THE FIXED-INCOME SIDE OF THE SERIES' PORTFOLIO?
A. Corporate bond yield spreads (the additional yield to maturity over compa-
rable Treasuries) widened in the first quarter after the Federal Reserve Board
raised interest rates in March. We added investments in brokerage-related com-
panies like Smith Barney Holdings, and positive credit trends led us to new
purchases in Archer Daniels Midland, and Northwest Airlines.
In the second quarter, improving credit outlooks spurred opportunities for
price appreciation in a number of issues, and led us to buy Sears, Roebuck Ac-
ceptance Notes, Norfolk Southern Corporation bonds, Loewen Group, and Sprint
Spectrum Senior Notes. We sold Federated Department Stores after spreads nar-
rowed, and we continue to avoid the utility sector as heavy merger and acqui-
sition activity have increased event risk in that area.
From a credit quality viewpoint we increased our holdings in BBB and BB rated
bonds, which outperformed higher-rated corporate bonds. The overall credit
quality of the Series, however, remains very high at AA.
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. While inflation remains well behaved and we expect growth to remain steady,
the Federal Reserve may raise interest rates later this year to keep infla-
tionary pressures at bay. In this environment we expect higher short-term
rates and stable-to-slightly higher long-term rates. Economic activity should
continue to moderate, while the stock market volatility of the past few months
could continue through the rest of the year.
Issue selection will remain key to performance going forward. We'll continue
to keep our focus away from the larger growth stocks and on low price-to-earn-
ings, large and mid-capitalization companies, as is consistent with the Se-
ries' value investment strategy. We plan to retain our corporate bond emphasis
and slightly reduce our U.S. Treasury holdings.
53
<PAGE>
A $10,000 Investment Compared to the S&P 500/18/ and
Lehman Borthers Gov't/Corp./4/ Indices
Average Annual Return
<TABLE>
<CAPTION>
Balanced Lipper Variable Balanced
Series Fund Average/7/
<S> <C> <C>
6 mos.* 8.49% 10.19%
1 year 21.65% 18.94%
Since Inception 18.75% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE
LOOMIS SAYLES BALANCED SERIES COMPARED TO THE SAME IN THE S&P 500 INDEX, THE
PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Balanced Series S&P 500/18/ Leh/Gov't Corp./5/
<S> <C> <C> <C>
10/31/94 10,000 10,000 10,000
12/31/94 9,990 9,779 10,048
12/31/95 12,467 13,449 11,981
12/31/96 14,575 16,535 12,329
6/30/97 15,812 19,942 12,667
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: Reasonable long-term investment return from a combination of long-term
capital appreciation and moderate current income.
START DATE: October 31, 1994
SIZE: $86 million as of June 30, 1997
MANAGERS: Effective August 1997, the Loomis Sayles Balanced Series equity
management team consists of Carol C. McMurtrie, Tricia H. Mills and Roderic
Dillon. The fixed-income team consists of Meri Anne Beck, John Hyll and Barr
Segal. Please refer to the prospectus supplement at the beginning of this report
for more details.
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, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--60.8% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.5%
6,700 Lockheed Martin Corp. .................................... $ 693,869
8,600 Northrop Grumman Corp. ................................... 755,188
13,600 Raytheon Co. ............................................. 693,600
-----------
2,142,657
-----------
APPAREL & TEXTILES--2.5%
23,500 Reebok International, Ltd................................. 1,098,625
33,400 Warnaco Group, Inc........................................ 1,064,625
-----------
2,163,250
-----------
BANKS--4.5%
14,800 BankAmerica Corp. ........................................ 955,525
8,400 Chase Manhattan Corp., New................................ 815,325
18,200 NationsBank Corp.......................................... 1,173,900
16,300 Norwest Corp. ............................................ 916,875
-----------
3,861,625
-----------
BEVERAGES--1.2%
41,400 Whitman Corp.............................................. 1,047,938
-----------
CHEMICALS--4.8%
48,800 Crompton & Knowles Corp. ................................. 1,085,800
24,000 EI du Pont de Nemours & Co................................ 1,509,000
7,500 PPG Industries, Inc....................................... 435,938
20,400 W.R. Grace & Co........................................... 1,124,550
-----------
4,155,288
-----------
COMPUTERS & BUSINESS EQUIPMENT--1.9%
21,300 EMC Corp.(c).............................................. 830,700
18,500 3Com Corp................................................. 832,500
-----------
1,663,200
-----------
CONGLOMERATES--4.2%
14,200 Allied Signal, Inc........................................ 1,192,800
20,000 Dover Corp. .............................................. 1,230,000
17,100 Philips Electronics NV (ADR)(d)........................... 1,229,063
-----------
3,651,863
-----------
ELECTRICAL EQUIPMENT--1.2%
22,200 York International Corp., New............................. 1,021,200
-----------
ELECTRONIC COMPONENTS--0.4%
2,700 Intel Corp. .............................................. 382,894
-----------
FINANCIAL SERVICES--2.8%
30,200 Federal Home Loan Mortgage Corp. ......................... 1,038,125
23,000 Federal National Mortgage Association..................... 1,003,375
11,400 Green Tree Financial Corp. ............................... 406,125
-----------
2,447,625
-----------
FREIGHT TRANSPORTATION--4.3%
13,000 Burlington Northern Santa Fe.............................. 1,168,375
21,700 Canadian Pacific, Ltd., New............................... 617,094
16,400 Federal Express Corp.(c).................................. 947,100
29,400 Ryder Systems, Inc. ...................................... 970,200
-----------
3,702,769
-----------
HEALTH CARE--SERVICES--4.3%
10,500 Aetna, Inc................................................ 1,074,938
33,300 Beverly Enterprises, Inc.................................. 541,125
27,950 Columbia/HCA Healthcare Corp. ............................ 1,098,784
35,340 Foundation Health Corp.(c)................................ 1,071,244
-----------
3,786,091
-----------
HOUSEHOLD PRODUCTS--1.3%
23,300 Kimberly-Clark Corp. ..................................... 1,159,175
-----------
HOUSING & BUILDING MATERIALS--4.6%
16,700 Armstrong World Industries, Inc. ......................... 1,225,363
32,900 Leggett & Platt, Inc...................................... 1,414,700
31,000 Masco Corp. .............................................. 1,294,250
-----------
3,934,313
-----------
INSURANCE--4.9%
16,700 ACE, Ltd.................................................. 1,233,713
10,800 Allstate Corp. ........................................... 788,400
32,900 Everest Reinsurance Holdings, Inc......................... 1,303,663
27,900 TIG Holdings, Inc. ....................................... 871,872
-----------
4,197,648
-----------
LEISURE TIME--3.1%
29,600 American Greetings Corp................................... 1,098,900
37,900 Carnival Corp. ........................................... 1,563,375
-----------
2,662,275
-----------
OIL & GAS--1.5%
28,800 Tosco Corp. .............................................. 862,200
14,100 United Meridian Corp. .................................... 423,000
-----------
1,285,200
-----------
PACKAGING--1.3%
20,600 Crown Cork & Seal Co., Inc. .............................. 1,100,813
-----------
RETAIL--1.9%
19,800 Dayton Hudson Corp........................................ 1,053,113
29,400 Office Depot.............................................. 571,463
-----------
1,624,576
-----------
RETAIL--FOOD & DRUG--1.0%
28,300 The Kroger Co.(c)......................................... 820,700
-----------
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
SOFTWARE--0.4%
16,700 Symantec Corp. ....................................... $ 325,650
-----------
TELECOMMUNICATION--3.9%
17,400 Ameritech Corp. ...................................... 1,182,113
24,400 GTE Corp. ............................................ 1,070,550
18,286 SBC Communications, Inc. ............................. 1,131,443
-----------
3,384,106
-----------
TOBACCO--2.3%
11,000 Loews Corp. .......................................... 1,101,375
30,900 UST, Inc. ............................................ 857,475
-----------
1,958,850
-----------
Total Common Stocks
(Identified Cost $42,684,023)........................ 52,479,706
-----------
<CAPTION>
- ---------------------------------------
MEDIUM & LONG TERM BONDS & NOTES--35.2%
- ---------------------------------------
FACE
AMOUNT
<C> <S> <C>
AIRLINES--0.7%
$ 600,000 Northwest Airlines, 8.375%, 03/15/04.................. 605,160
-----------
BANKS--0.9%
350,000 Capital One Bank, 6.830%, 5/17/99..................... 350,627
50,000 Chase Manhattan Corp., 9.050%, 2/01/02................ 50,122
310,000 Mellon Bank N A, 7.000%, 3/15/06...................... 306,853
50,000 Norwest Corp., 7.650%, 3/15/05........................ 51,940
-----------
759,542
-----------
CABLE & MEDIA--0.4%
350,000 TCI Communications, Inc.,
7.250%, 6/15/99...................................... 352,674
-----------
COMPUTER--0.3%
300,000 Comdisco, Inc., 5.760%, 1/19/99....................... 297,666
-----------
ENERGY--0.2%
125,000 Coastal Corp., 8.125% 9/15/02......................... 131,595
-----------
FINANCE--3.4%
125,000 Associates Corp. NA, 8.350%, 12/22/98................. 128,866
115,000 Avalon Properties, Inc., 7.375%, 9/15/02.............. 116,785
260,000 Dean Witter Discover & Co.,
6.750%, 1/01/16...................................... 239,442
200,000 Ford Motor Credit Corp., 6.850%, 8/15/00.............. 201,646
244,000 General Motors Acceptance Corp.,
5.500%, 12/15/01..................................... 231,229
280,000 Oasis Residential, Inc., 7.000%, 11/15/03............. 275,190
520,000 Sears Roebuck Acceptance Corp.,
6.95% 05/15/02....................................... 522,558
100,000 Secured Finance, 9.050%, 12/15/04..................... 111,059
575,000 Transamerica Finance Corp.,
6.750%, 6/01/00...................................... 575,558
300,000 Western Financial Services,
6.950%, 11/20/03..................................... 302,583
199,854 World Omni Automobile Lease Finance Corp., 6.550%,
6/25/02.............................................. 201,277
-----------
2,906,193
-----------
FOOD & BEVERAGES--0.8%
720,000 Archer Daniels Midland Co.,
7.500%, 03/15/27..................................... 729,461
-----------
FOREST PRODUCTS--0.8%
700,000 MacMillan Bloedel, Ltd.,
7.700%, 02/15/26..................................... 652,071
-----------
GOVERNMENT AGENCIES--14.9%
350,000 Federal Home Loan Bank,
7.151%, 9/13/05...................................... 346,346
1,020,000 United States Treasury Notes,
6.750%, 6/30/99...................................... 1,032,434
455,000 United States Treasury Notes,
6.125%, 7/31/00...................................... 453,435
600,000 United States Treasury Notes,
8.750%, 8/15/00...................................... 641,718
500,000 United States Treasury Notes, 7.500%, 11/15/01........ 521,015
600,000 United States Treasury Notes,
7.250%, 05/15/04..................................... 625,404
910,000 United States Treasury Notes,
6.500%, 8/15/05...................................... 907,443
4,000,000 United States Treasury Notes,
7.000%, 7/15/06...................................... 4,115,000
800,000 United States Treasury Notes,
Zero Coupon 11/15/09................................. 345,408
1,300,000 United States Treasury Bonds,
10.375%, 11/15/12.................................... 1,650,181
1,100,000 United States Treasury Bonds,
9.125%, 5/15/18...................................... 1,373,801
890,000 United States Treasury Bonds,
6.625%, 2/15/27...................................... 870,812
-----------
12,882,997
-----------
HEALTHCARE--0.6%
50,000 Columbia/HCA Healthcare Co.,
8.020%, 8/5/02....................................... 52,568
440,000 National Health Investments, Inc.,
7.300%, 07/16/07..................................... 437,800
-----------
490,368
-----------
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ---------------------------------------------
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
- ---------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
INDUSTRIALS--2.0%
$ 325,000 Amerco, 7.850%, 5/15/03.............................. $ 334,451
535,000 Loewen Group International, Inc.,
7.750%, 10/15/01.................................... 543,025
260,000 Philips Electronics NV, 7.250%, 8/15/13.............. 250,890
420,000 SKF AB, 7.125%, 07/01/07............................. 417,190
200,000 Tektronix, Inc., 7.625%, 8/15/02..................... 203,304
-----------
1,748,860
-----------
INSURANCE--0.3%
275,000 Travelers Aetna, 6.750%, 4/15/01..................... 275,454
-----------
LEISURE & LODGING--0.5%
100,000 Carnival Corp., 7.050%, 5/15/05...................... 99,964
300,000 La Quinta Inns, Inc., 7.400%, 9/15/05................ 289,500
-----------
389,464
-----------
MORTGAGE--1.7%
352,759 Federal National Mortgage Association, 7.000%,
12/01/11............................................ 351,986
271,557 Federal National Mortgage Association, 7.000%,
12/01/11............................................ 270,963
813,859 Federal National Mortgage Association, 7.500%,
2/01/27............................................. 814,022
-----------
1,436,971
-----------
MORTGAGED BACKED--2.0%
200,000 Federal Home Loan Mortgage Corp., 8.000%, 7/15/21.... 204,436
685,812 Federal Home Loan Mortgage Association, 6.000%,
8/15/22............................................. 597,726
620,000 Federal National Mortgage Association, 6.000%,
2/25/24............................................. 544,937
50,000 General Electric Capital Mortgage Services, Inc.,
10.000%, 3/25/24.................................... 51,171
75,000 Westam Mortgage Financial Corp.,
8.950%, 8/01/18..................................... 78,539
200,000 Westam Mortgage Financial Corp.,
9.400%, 12/01/18.................................... 208,062
-----------
1,684,871
-----------
RAILROADS--0.5%
460,000 Norfolk Southern Corp.,
7.050%, 05/01/37.................................... 466,638
-----------
SECURITIES--2.7%
225,000 Alex Brown, Inc., 7.625%, 8/15/05.................... 229,963
200,000 Donaldson Lufkin & Jennrette, Inc.,
6.875%, 11/01/05.................................... 195,754
100,000 Lehman Brothers Holdings, Inc.,
5.750%, 11/15/98.................................... 99,241
200,000 Lehman Brothers Holdings, Inc.,
7.360%, 12/15/03.................................... 201,568
100,000 Merrill Lynch & Co., 8.375%, 2/09/00................. 104,377
390,000 Salomon Brothers, Inc., 7.125%, 8/01/99.............. 392,894
145,000 Salomon, Inc., 7.500%, 2/01/03....................... 146,963
480,000 Smith Barney Holdings, Inc.,
7.000%, 03/15/04.................................... 480,394
450,000 Van Kampen Merritt Companies, Inc., 9.750%, 02/15/03. 475,168
-----------
2,326,322
-----------
TECHNOLOGY--0.2%
200,000 Digital Equipment Corp.,
8.625%, 11/01/12.................................... 203,306
-----------
TELECOMMUNICATION--1.0%
200,000 Southern Bell Telephone & Telegraph Co., 7.625%,
3/15/13............................................. 198,766
950,000 Sprint Spectrum L.P.,
Zero Coupon, 08/15/06............................... 693,500
-----------
892,266
-----------
TRANSPORTATION--0.2%
100,000 AMR Corp., 10.290%, 03/08/21......................... 124,798
25,000 AMR Corp., 10.180%, 1/02/13.......................... 29,951
-----------
154,749
-----------
UTILITIES--1.1%
250,000 Cincinnati Gas & Electric Co.,
7.375%, 11/01/01.................................... 252,780
520,000 Waterford 3 Funding Energy,
8.090%, 1/01/17..................................... 521,508
195,000 Detroit Edison Co., 6.340%, 3/15/00.................. 193,001
-----------
967,289
-----------
Total Bonds & Notes
(Identified Cost $30,334,694)....................... 30,353,917
-----------
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ---------------------------
SHORT-TERM INVESTMENT--4.3%
- ---------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$3,714,000 Associates Corp. of North America,
5.450%, 7/01/97.................................... $ 3,714,000
-----------
Total Short-Term Investment
(Identified Cost $3,714,000)....................... 3,714,000
-----------
Total Investments--100.3%
(Identified Cost $76,732,717(b).................... 86,547,623
Other assets less liabilities....................... (230,952)
-----------
TOTAL NET ASSETS--100%.............................. $86,316,671
===========
</TABLE>
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation
on investments based on cost of $76,732,717 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...................................... $10,513,851
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (698,945)
-----------
Net unrealized appreciation......................... $ 9,814,906
===========
</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.
58
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $86,547,623
Cash................................................... 66
Receivable for:
Fund shares sold...................................... 400,704
Securities sold....................................... 616,563
Dividends and interest................................ 536,087
Foreign taxes......................................... 44
Unamortized organization............................... 4,691
-----------
88,105,778
LIABILITIES
Payable for:
Securities purchased.................................. $1,424,425
Fund shares redeemed.................................. 255,503
Miscellaneous......................................... 347
Accrued expenses:
Management fees....................................... 81,685
Deferred trustees' fees............................... 1,564
Other expenses........................................ 25,583
----------
1,789,107
-----------
$86,316,671
===========
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $74,038,468
Undistributed net investment income................... 978,331
Accumulated net realized gains........................ 1,484,951
Unrealized appreciation on investments and foreign
currency............................................. 9,814,921
-----------
NET ASSETS.............................................. $86,316,671
===========
Computation of offering price:
Net asset value and redemption price per share
($86,316,671 divided by 5,872,879 shares of beneficial
interest).............................................. $ 14.70
===========
Identified cost of investments.......................... $76,732,717
===========
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $ 323,890(a)
Interest............................................... 943,092
----------
1,266,982
EXPENSES
Management fees........................................ $ 246,414
Trustees' fees and expenses............................ 11,113
Custodian.............................................. 25,475
Audit and tax services................................. 6,901
Legal.................................................. 9,340
Printing............................................... 6,170
Amortization of organization expenses.................. 997
Miscellaneous.......................................... 1,819
----------
Total expenses....................................... 308,229
Less expenses assumed by the
investment adviser.................................. (9,012) 299,217
---------- ----------
NET INVESTMENT INCOME................................... 967,765
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Realized gain on:
Investments--net...................................... 963,269
----------
Unrealized appreciation on:
Investments--net...................................... 4,306,472
Foreign currency transactions--net.................... 16
----------
Total unrealized appreciation on
investments and foreign
currency transactions............................... 4,306,488
----------
Net gain on investment transactions..................... 5,269,757
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............. $6,237,522
==========
</TABLE>
(a) Net of foreign taxes of: $1,470
See accompanying notes to financial statements.
59
<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,
1996 1997
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 1,121,822 $ 967,765
Net realized gain on investments and foreign
currency transactions.............................. 940,791 963,269
Unrealized appreciation on investments and foreign
currency transactions.............................. 4,480,648 4,306,488
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 6,543,261 6,237,522
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (1,114,677) 0
Net realized gain on investments.................... (557,561) 0
----------- -----------
(1,672,238) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 41,044,288 31,028,607
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 1,114,677 0
Distributions from net realized gain................ 557,561 0
----------- -----------
42,716,526 31,028,607
Cost of shares redeemed............................. (7,885,382) (9,474,301)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 34,831,144 21,554,306
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 39,702,167 27,791,828
NET ASSETS
Beginning of the period............................. 18,822,676 58,524,843
----------- -----------
End of the period................................... $58,524,843 $86,316,671
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 1,050 $ 10,566
=========== ===========
End of the period................................... $ 10,566 $ 978,331
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 3,250,311 2,238,651
Issued in connection with the reinvestment of:
Distributions from net investment income............ 82,445 0
Distributions from net realized gain................ 30,535 0
----------- -----------
3,363,291 2,238,651
Redeemed............................................ (619,940) (684,216)
----------- -----------
Net change.......................................... 2,743,351 1,554,435
=========== ===========
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................. $10.00 $ 9.94 $ 11.95 $ 13.55
------ ------- ------- -------
Income From Investment
Operations
Net Investment Income...... 0.05 0.26 0.27 0.16
Net Realized and Unrealized
Gain (Loss) on
Investments............... (0.06) 2.20 1.73 0.99
------ ------- ------- -------
Total From Investment
Operations................ (0.01) 2.46 2.00 1.15
------ ------- ------- -------
Less Distributions
Distributions From Net
Investment Income......... (0.05) (0.26) (0.27) 0.00
Distributions From Net
Realized Capital Gains.... 0.00 (0.19) (0.13) 0.00
------ ------- ------- -------
Total Distributions........ (0.05) (0.45) (0.40) 0.00
------ ------- ------- -------
Net Asset Value, End of
Period..................... $ 9.94 $ 11.95 $ 13.55 $ 14.70
====== ======= ======= =======
TOTAL RETURN (%)............ (0.10)(b) 24.79 16.91 8.49(b)
Ratio of Operating Expenses
to Average Net Assets (%).. 0.85 (c) 0.85 0.85 0.85(c)
Ratio of Net Investment
Income to Average Net
Assets (%)................. 4.16 (c) 4.03 3.08 2.72(c)
Portfolio Turnover Rate (%). 0 (c) 72 59 46(c)
Average Commission Rate (d). -- -- $0.0594 $0.0594
Net Assets, End of Period
(000)...................... $2,722 $18,823 $58,525 $86,317
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 (c) 1.85 0.99 0.88(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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.
60
<PAGE>
BACK BAY ADVISORS MANAGED SERIES
PORTFOLIO MANAGER: PETER PALFREY BACK BAY ADVISORS, L.P.
[PICTURE APPEARS HERE]
The Zenith Managed Series is a "Flexible" managed Series, typically targeting
a 65/35 split between stocks and bond/money market holdings. As market condi-
tions dictate, the stock allocation can vary from 50% to 80% of the total,
based on market outlook, and the relative valuation between stocks and bonds.
During the first half of 1997, the stock allocation ranged from 68-73%. Over
the past five years, the stock allocation has ranged from 50-78%.
Q. HOW DID THE SERIES PERFORM DURING THE FIRST HALF OF THE YEAR?
A. The Managed Series continued its strong relative and absolute performance
during the first six months of 1997, returning 15.60% versus 10.46% for the
median Lipper "Flexible Portfolio Fund." This represented 514 basis points of
outperformance. This should be viewed in the context of a 2.74% return for the
Lehman Government/Corporate Index/5/ (the Series' fixed income benchmark), and
a 20.59% return for the S&P 500 Index/18/, including the reinvestment of
dividends (the Series' equity benchmark), during the first half of 1997. The
Managed Series now ranks among the top six Lipper Variable Products Flexible
Portfolio Funds for 1, 3, 5 and 10 year periods.
During the first quarter, above-trend economic growth, an increasingly tight
labor market, and strong gains in personal income and consumer expenditures
prompted the Federal Reserve to preemptively raise short term interest rates
as an insurance policy against "persisting strength in consumer demand." While
the rate increase was widely anticipated by the market, investors subsequently
began to price in a series of Federal Reserve rate hikes, despite the absence
of any measurable increase in inflationary pressures. Over the next several
weeks, stocks corrected nearly 10% and the 30-year bond yield rose above 7%,
before recovering a part of their losses late in March. However, by early in
the second quarter, growing evidence of significantly less robust economic
growth, coupled with continued benign inflation data, caused an "about face"
in investor expectations for additional Federal Reserve monetary policy tight-
ening. This allowed financial markets to stage a dramatic rally throughout the
quarter. While bonds posted respectable gains during this period, stocks were
the real beneficiary of the change in investor sentiment. Under the backdrop
of the moderate decline in interest rates and very solid corporate earnings,
stocks turned in one of their best quarterly performances ever, gaining more
than 17% during the second quarter alone.
The Managed Series benefited from its relative overweight position in stocks.
Additionally, large capitalization, growth stocks, which are well-represented
in the Series, continued to perform very well relative to the broader market.
Bonds also turned in a solid total return during the second quarter, recover-
ing from the sharp selloff in March, as fears of a monetary tightening "proc-
ess" by the Federal Reserve proved unfounded. Long duration US and Canadian
pay securities performed very well, as did crossover (Baa/Ba)* and emerging
market issues. The Series' issue selection and yield curve positioning allowed
it to significantly outperform the Lehman Index during the first half of the
year.
With stock market technicals and fundamentals remaining strong through the
first half of 1997, I maintained the portfolio equity allocation at a 3 to 8
percent overweight level versus my normally "targeted" 65 percent stock/35
percent bond/money market holdings split. Despite considerable volatility
caused by investor angst over the possibility of additional Federal Reserve
action after strong first quarter GDP growth, stock market capital flows re-
sumed in force in the second quarter (after a brief hiatus during the March
market correction), providing a ready "bid" for any market dip. Corporate
earnings have also continued to surprise to the upside, particularly among
larger capitalization, industry sales leaders, supporting our corporate earn-
ings outlook of 12-14 percent growth per year through 1998.
As interest rate concerns abated late in the first quarter, I modestly length-
ened the bond portfolio duration, but maintained the defensive structure of
the portfolio through a barbelled combination of short and intermediate higher
yielding US and Yankee securities and long-dated Canadian pay issues. This
structure provides a hedge against a resurgence in upward pressure on US in-
terest rates. Throughout this period, a substantial portion of the portfolio
duration has been achieved with 30-year Canadian Government and Provincial
zero coupon bonds--a strategy that has added substantially to the superior
performance of the bond portfolio thus far in 1997. The Series' overweight po-
sition in cable/media bonds also contributed significantly to its overall per-
formance, as improving sector and individual credit fundamentals drove issue
spreads considerably tighter through the second quarter.
61
<PAGE>
Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MONTHS AHEAD?
A. After a pronounced slowdown in economic activity in the second quarter
(largely due to a sharp pullback in consumer demand), and with continued be-
nign inflationary pressures, market sentiment has become increasingly bullish
in recent weeks for both stocks and bonds. Many analysts are now looking for a
sidelined Federal Reserve, perhaps through year-end. As of June 30, 1997 the
2-year Treasury was currently trading around 5.9 percent (only 40 basis points
over the Fed Series' Rate) and the 30-year was flirting with 6.5%--back to
levels last seen in February of this year, before the Federal Reserve tight-
ened.
While bonds should remain in the current trading range over the near term,
perhaps with a yield curve flattening bias, I believe there is now an in-
creased risk that a rebound in consumer activity (housing, retail) later in
the third quarter or early in the fourth quarter could reignite fears of an-
other preemptive strike by the Federal Reserve in its bid to contain demand-
pull price pressures. With current equity valuations very full by most histor-
ical measures, not only will investors scrutinize quarterly earnings results,
severely penalizing underperformers, but they will also keep a watchful eye
towards any sign of a reversal in the recent downward trend in interest rates.
Therefore, despite a strong start to the "earnings reporting season," I be-
lieve additional upside over the near term in stocks will be largely dependent
upon a well-behaved bond market.
A $10,000 Investment Compared to the S&P 500 and
Lehman Brothers Government/Corporation Index
Average Annual Return
<TABLE>
<CAPTION>
Lipper Variable Flexible
Zenith Managed Series Portfolio Fund Average/8/
<S> <C> <C>
6 mos.* 15.60% 10.35%
1 year 26.35% 19.40%
5 years 15.28% 13.18%
10 years 12.59% 11.01%
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE BACK-
BAY MANAGED SERIES COMPARED TO THE SAME IN THE S&P 500 INDEX AND THE
LEHMAN/GOVERNMENT CORP. INDEX OF WHICH THE PLOT POINTS ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Managed Series S&P 500/19/ Leh/Gov't Corp./5/
<S> <C> <C> <C>
6/30/87 10,000 10,000 10,000
12/31/87 9,545 8,251 10,356
12/31/88 10,450 10,205 11,141
12/31/89 12,444 13,020 12,728
12/31/90 12,844 16,988 13,782
12/31/91 15,435 18,283 16,004
12/31/92 16,469 20,121 17,217
12/31/93 18,223 20,386 19,117
12/31/94 18,020 20,386 18,448
12/31/95 23,653 28,037 21,997
12/31/96 27,210 34,470 22,636
6/30/97 31,455 41,571 23,256
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: A favorable total return through investment in diversified portfolio. The
Series' portfolio is expected to include a mix of (1) common stocks, (2) notes
and bonds and (3) money market instruments.
START DATE: May 1, 1987
SIZE: $177 million as of June 30, 1997
MANAGER: Peter Palfrey has managed the Series since January 1994 and joined Back
Bay Advisors in 1993. Mr. Palfrey also manages several other fixed income and
separate accounts.
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.
LOGO
62
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
COMMON STOCKS--69.6% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.2%
11,276 Boeing Co................................. $ 598,333
5,400 Lockheed Martin Corp. .................... 559,237
14,600 Rockwell International Corp............... 861,400
------------
2,018,970
------------
AIR TRANSPORTATION--0.3%
2,900 Delta Air Lines, Inc. .................... 237,800
10,100 Southwest Airlines Co. ................... 261,338
------------
499,138
------------
AUTOMOBILE & RELATED--1.7%
37,764 Chrysler Corp. ........................... 1,239,131
12,500 General Motors Corp....................... 696,094
10,125 Genuine Parts Co. ........................ 342,984
4,500 Goodyear Tire & Rubber Co. ............... 284,906
7,200 Paccar, Inc............................... 334,350
------------
2,897,465
------------
BANKS--5.5%
15,186 Banc One Corp. ........................... 735,572
20,288 BankAmerica Corp.......................... 1,309,844
10,600 Bankers Trust New York Corp. ............. 922,200
8,700 Chase Manhattan Corp. New................. 844,444
9,400 Citicorp ................................. 1,133,287
7,800 First Chicago Corp. ...................... 471,900
10,900 J.P. Morgan & Co., Inc. .................. 1,137,687
14,400 NationsBank Corp. ........................ 928,800
17,100 Norwest Corp.............................. 961,875
5,000 Republic NY Corp.......................... 537,500
2,800 Wells Fargo & Co.......................... 754,600
------------
9,737,709
------------
BEVERAGES--0.3%
20,000 Whitman Corp. ............................ 506,250
------------
BUSINESS MACHINES--2.0%
8,500 Apple Computer............................ 121,125
28,400 Digital Equipment Corp.(c).................. 1,006,425
27,400 International Business Machines Corp. .... 2,471,138
------------
3,598,688
------------
BUSINESS SERVICES--0.7%
28,500 Browning Ferris Industries, Inc. ......... 947,625
9,200 H & R Block, Inc.......................... 296,700
------------
1,244,325
------------
CHEMICALS--2.7%
14,200 Allied-Signals, Inc. ..................... 1,192,800
8,200 Dow Chemical Co........................... 714,425
27,400 E.I. Du Pont de Nemours & Co.............. 1,722,775
11,000 Great Lakes Chemical Corp................. 576,125
3,900 Pitney Bowes, Inc. ....................... 271,050
5,100 Union Carbide Corp. ...................... 240,019
------------
4,717,194
------------
COMMUNICATION--5.0%
15,500 Airtouch Communications, Inc. ............ 424,313
13,100 Ameritech Corp. .......................... 889,981
39,261 AT&T Co................................... 1,376,589
16,200 BellSouth Corp. .......................... 751,275
10,600 GTE Corp. ................................ 465,075
6,400 Harris Corp. ............................. 537,600
8,834 Lucent Technologies, Inc. ................ 636,600
11,900 Northern Telecom LTD...................... 1,082,900
14,600 NYNEX Corp................................ 841,325
14,137 SBC Communications, Inc. ................. 874,727
23,900 US West, Inc.............................. 900,731
------------
8,781,116
------------
CONGLOMERATES--1.0%
11,100 Frontier Corp. ........................... 221,306
2,200 ITT Corp. ................................ 134,338
13,800 Minnesota Mining & Manufacturing.......... 1,407,600
------------
1,763,244
------------
CONSTRUCTION--0.9%
13,400 Home Depot, Inc. ......................... 923,763
14,900 Masco Corp. .............................. 622,075
------------
1,545,838
------------
CONSUMER DURABLES--2.2%
7,300 Black & Decker Corp....................... 271,469
53,400 General Electric Co....................... 3,491,025
800 Whirlpool Corp............................ 43,650
------------
3,806,144
------------
CONTAINERS--0.2%
6,000 Bemis, Inc. .............................. 259,500
------------
DATA PROCESSING--2.6%
16,100 Intel Corp. .............................. 2,283,181
17,900 Microsoft Corp............................ 2,262,113
100 Oracle Sys Corp........................... 5,038
------------
4,550,332
------------
DOMESTIC OIL--1.2%
4,300 Amerada Hess Corp. ....................... 238,919
2,800 Amoco Corp. .............................. 243,425
5,400 Atlantic Richfield Co..................... 380,700
3,600 Halliburton Co. .......................... 285,300
934 Santa Fe Energy, Inc.(c).................. 13,718
3,601 Sun, Inc. ................................ 111,631
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
DOMESTIC OIL--(CONTINUED)
7,000 Tenneco, Inc............................................. $ 316,312
15,600 Unocal Corp. ............................................ 605,475
------------
2,195,480
------------
DRUGS & MEDICINE--6.3%
8,800 Abbott Laboratories...................................... 587,400
10,600 American Home Products Corp. ............................ 810,900
12,800 Bausch & Lomb, Inc....................................... 603,200
17,500 Baxter International, Inc. .............................. 914,375
9,600 Becton Dickerson & Co.................................... 486,000
17,000 C. R. Bard, Inc.......................................... 617,312
12,600 Corning, Inc............................................. 700,875
15,200 Eli Lilly & Co. ......................................... 1,661,550
11,200 Mallinckrodt, Inc........................................ 425,600
19,500 Merck & Co., Inc. ....................................... 2,018,250
10,400 Pfizer, Inc. ............................................ 1,242,800
21,600 Schering-Plough Corp. ................................... 1,034,100
------------
11,102,362
------------
ELECTRONICS--2.5%
21,400 AMP, Inc................................................. 893,450
18,800 Emerson Electric Co...................................... 1,035,175
20,000 Hewlett-Packard.......................................... 1,120,000
15,400 Raytheon Co. ............................................ 785,400
9,600 Tektronix, Inc. ......................................... 576,000
------------
4,410,025
------------
ENERGY & UTILITIES--2.3%
11,700 Consolidated Edison Co. ................................. 344,419
40,200 Edison International..................................... 999,975
45,700 Pacific Gas & Electric Corp.............................. 1,108,225
10,700 Pepco Energy Co.......................................... 224,700
7,700 Public Service Enterprise Group.......................... 192,500
8,900 Texas Utilities Co....................................... 306,494
38,500 Unicom Corp. ............................................ 856,625
------------
4,032,938
------------
ENERGY RAW MATERIALS--0.8%
27,200 Occidental Petroleum Corp. .............................. 681,700
------------
ENTERTAINMENT--0.0%
2,200 ITT Industry, Inc........................................ 56,650
------------
FINANCE--2.5%
10,400 American Express Co...................................... 774,800
21,800 Federal Home Loan Mortgage Corp. ........................ 749,375
21,400 Federal National Mortgage Association.................... 933,575
14,508 Morgan Stanley/Dean Witter............................... 624,751
25,100 Salomon, Inc............................................. 1,396,188
------------
4,478,689
------------
FOOD & AGRICULTURE--3.8%
36,900 Coca Cola Co. ........................................... 2,490,750
20,450 H. J. Heinz Co........................................... 943,256
11,200 Kellogg Co. ............................................. 959,000
30,700 PepsiCo, Inc. ........................................... 1,153,169
16,000 Sara Lee Corp. .......................................... 666,000
15,200 Supervalu, Inc........................................... 524,400
------------
6,736,575
------------
GAS UTILITIES--0.3%
14,200 Eastern Enterprises...................................... 492,562
------------
GOLD--0.1%
8,900 Barrick Gold Corp........................................ 195,800
------------
INSURANCE--2.7%
11,500 Aetna Life & Casualty Co. ............................... 1,177,312
10,568 Allstate Corp. .......................................... 771,464
14,400 American General Corp. .................................. 687,600
6,468 American International Group, Inc. ...................... 966,157
2,700 Cigna Corp............................................... 479,250
2,200 Hartford Financial Services Group........................ 182,050
4,600 Loews Corp. ............................................. 460,575
------------
4,724,408
------------
INTERNATIONAL OIL--4.4%
11,000 Chevron Corp............................................. 813,312
38,400 Exxon Corp. ............................................. 2,361,600
15,600 Mobil Corp. ............................................. 1,090,050
39,200 Royal Dutch Petroleum Co. (ADR)(d)....................... 2,131,500
11,900 Texaco, Inc. ............................................ 1,294,125
------------
7,690,587
------------
LEISURE--0.3%
17,000 Brunswick Corp. ......................................... 531,250
------------
LIQUOR--0.4%
6,600 Anheuser-Busch Companies, Inc. .......................... 276,787
11,700 Seagram, Ltd. ........................................... 470,925
------------
747,712
------------
MEDIA--1.1%
3,000 Gannett Company, Inc..................................... 296,250
15,200 Tele-Communications, Inc. ............................... 226,100
26,500 Time Warner, Inc. ....................................... 1,278,625
9,700 US West, Inc. ........................................... 196,425
------------
1,997,400
------------
MISCELLANEOUS--1.1%
8,000 American Greetings Corp. ................................ 297,000
10,000 Cognizant Corp. ......................................... 405,000
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
MISCELLANEOUS--(CONTINUED)
10,900 EG & G, Inc.............................................. $ 245,250
8,500 Fortune Brands, Inc. .................................... 317,156
8,500 Gallaher Group PLC....................................... 156,719
4,400 Nacco Industries, Inc. .................................. 248,325
7,926 Newmont Mining Corp...................................... 309,114
------------
1,978,564
------------
NON-FERROUS METALS--0.0%
14,000 Aluminum Company of America.............................. 1,055,250
------------
OFFICE EQUIPMENT--1.1%
24,000 Xerox Corp. ............................................. 1,893,000
------------
OPTICAL PHOTO, EQUIPMENT--0.2%
3,600 Eastman Kodak Co. ....................................... 276,300
------------
PAPER & FOREST PRODUCTS--1.1%
3,300 Burlington Northern Santa Fe............................. 296,587
3,600 Georgia-Pacific Corp. ................................... 307,350
19,000 Kimberly-Clark Corp. .................................... 945,250
8,400 Westvaco Corp. .......................................... 264,075
4,050 Weyerhaeuser Co.......................................... 210,600
------------
2,023,862
------------
POLLUTION CONTROL--0.2%
9,500 Waste Management, Inc.................................... 305,188
------------
PRODUCER OF GOODS--0.3%
21,200 Cincinnati Milacron, Inc. ............................... 549,875
1,100 Deere & Co............................................... 60,363
------------
610,238
------------
PUBLISHING--0.3%
12,000 Knight Ridder, Inc. ..................................... 588,750
------------
RAILROADS & SHIPPING--0.6%
5,100 CSX Corp. ............................................... 283,050
4,500 Norfolk Southern Corp.................................... 453,375
4,200 Union Pacific Corp. ..................................... 296,100
3,557 Union Pacific Resources Group............................ 88,480
------------
1,121,005
------------
RESTAURANTS--0.3%
9,200 McDonald's Corp. ........................................ 444,475
------------
RETAIL--3.5%
19,000 Albertsons, Inc. ........................................ 693,500
5,000 J. C. Penney, Inc........................................ 260,938
38,900 Kmart Corp.(c)........................................... 476,525
26,400 Mattel, Inc. ............................................ 894,300
7,800 May Department Stores Co. ............................... 368,550
10,000 Mercantile Stores, Inc................................... 629,375
11,600 Nike, Inc. .............................................. 677,150
11,400 Sears Roebuck & Co. ..................................... 612,750
5,400 The Limited, Inc. ....................................... 109,350
44,900 Wal-Mart Stores, Inc. .................................. 1,518,181
------------
6,240,619
------------
SOAPS & COSMETICS--4.1%
17,000 Alberto Culver Co. ...................................... 476,000
3,900 Avon Products, Inc. ..................................... 275,194
26,920 Bristol-Myers Squibb Co. ................................ 2,180,520
1,900 Clorox Co. .............................................. 250,800
9,000 Gillette Co.............................................. 852,750
26,100 Johnson & Johnson........................................ 1,680,187
10,300 Procter & Gamble Co. .................................... 1,454,875
------------
7,170,326
------------
STEEL--0.2%
7,720 USX-US Steel Group....................................... 270,683
------------
TOBACCO--1.0%
40,800 Philip Morris Companies, Inc. ........................... 1,810,500
------------
TRAVEL & RECREATION--0.6%
13,235 Walt Disney Co. ......................................... 1,062,109
------------
Total Common Stocks
(Identified Cost $74,776,354)........................... 122,850,920
------------
<CAPTION>
- --------------------
BONDS & NOTES--29.4%
- --------------------
FACE
AMOUNT
<C> <S> <C>
CORPORATE BONDS--15.5%
$ 2,000,000 Comcast Cellular Holding, Inc,
9.500%, 5/01/07, 144A(e)........................... 2,010,000
3,000,000 Comcast Corp.,
10.625%, 7/15/12................................... 3,540,000
3,000,000 Conseco Financial Trust III,
8.796%, 4/01/27.................................... 3,102,030
1,000,000 Maxus Energy Corp.,
9.375%, 11/01/03................................... 1,075,000
4,525,000 News America Holdings, Inc.,
10.125%, 10/15/12.................................. 5,099,358
3,750,000 Norfolk Southern Corp.,
7.050%, 5/01/37.................................... 3,804,113
900,000 Owens Illinois, Inc.,
8.100%, 5/15/07.................................... 918,207
10,000,000 Time Warner, Inc.,
Zero Coupon, 12/17/12.............................. 3,925,000
2,000,000 Total Access Communication,
8.375%, 11/04/06................................... 1,932,720
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
BONDS & NOTES--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--(CONTINUED)
$ 30,000 Viacom, Inc.,
8.000%, 7/07/06................................... $ 29,100
2,000,000 Worldcom, Inc.,
7.750%, 4/01/27................................... 2,045,060
------------
27,480,588
------------
FOREIGN--7.6%
5,000,000 Government of Canada,
Zero Coupon, 3/15/21(d)........................... 696,984
11,500,000 Government of Canada,
Zero Coupon, 12/01/20(d).......................... 1,633,875
5,000,000 Government of Canada,
8.000%, 6/01/23(d)................................ 4,109,490
30,000,000 Ontario Province,
Zero Coupon, 09/08/23(d).......................... 3,334,661
4,250,000 Quebec Province,
Zero Coupon, 03/03/23(d).......................... 454,868
3,600,000 Quebec Province,
8.50%, 4/01/26(d)................................. 2,991,419
------------
13,221,297
------------
YANKEE--5.8%
3,250,000 Republic of Argentina,
11.375%, 1/30/17.................................. 3,656,250
5,000,000 Republic of Panama,
7.875%, 2/13/02, 144A(e).......................... 4,938,850
1,500,000 United Mexican States,
9.750%, 2/06/01................................... 1,586,250
------------
10,181,350
------------
U.S. GOVERNMENT BONDS--0.5%
373,822 Government National Mortgage Association, 10.000%,
9/15/18........................................... 410,879
455,992 Government National Mortgage Association, 11.500%
with various maturities to 2013................... 517,249
------------
928,128
------------
Total Bonds & Notes
(Identified Cost $48,433,755)..................... 51,811,363
------------
<CAPTION>
- ---------------------------
SHORT-TERM INVESTMENT--0.2%
- ---------------------------
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$356,000 Household Finance Corp.,
6.080%, 7/01/97...................................... $ 356,000
------------
Total Short-Term Investment
(Identified Cost $356,000)........................... 356,000
------------
Total Investments--99.2%
(Identified Cost $123,566,109)(b).................... 175,018,283
Other assets less liabilities......................... 1,487,233
------------
TOTAL NET ASSETS--100%................................ $176,505,516
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $123,566,109 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....................................... $ 52,880,667
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value.......................................... (1,428,493)
------------
Net unrealized appreciation.......................... $ 51,452,174
============
</TABLE>
(c) Non-income producing security.
(d) Denominated in Canadian dollars.
(e) 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.
See accompanying notes to financial statements.
66
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.............................. $175,018,283
Cash.............................................. 907
Receivable for:
Fund shares sold................................. 125,864
Securities sold.................................. 2,480,026
Dividends and interest........................... 1,133,162
Foreign taxes.................................... 632
------------
178,758,874
LIABILITIES
Payable for:
Securities purchased............................. $2,048,500
Fund shares redeemed............................. 47,996
Accrued expenses:
Management fees.................................. 72,099
Deferred trustees' fees.......................... 42,361
Other expenses................................... 42,402
----------
2,253,358
------------
$176,505,516
============
NET ASSETS
Net Assets consist of:
Capital paid in.................................. $110,792,028
Undistributed net investment income.............. 2,780,345
Accumulated net realized gains................... 11,480,706
Unrealized appreciation on investments and foreign
currency........................................ 51,452,437
------------
NET ASSETS......................................... $176,505,516
============
Computation of offering price:
Net asset value and redemption price per share
($176,505,516 divided by 896,183 shares of
beneficial interest).............................. $ 196.95
============
Identified cost of investments..................... $123,566,109
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................... $ 1,222,980(a)
Interest.......................................... 2,035,297
-----------
3,258,277
EXPENSES
Management fees................................... $ 414,226
Trustees' fees and expenses....................... 19,367
Custodian......................................... 41,400
Audit and tax services............................ 5,176
Legal............................................. 9,340
Printing.......................................... 26,636
Miscellaneous..................................... 1,816
-----------
Total expenses................................... 517,961
-----------
NET INVESTMENT INCOME.............................. 2,740,316
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net................................. 11,341,982
Foreign currency transactions--net............... (2,092)
-----------
Total realized gain on investments and foreign
currency transactions........................... 11,339,890
-----------
Unrealized appreciation on:
Investments--net................................. 10,238,831
Foreign currency transactions--net............... 1,185
-----------
Total unrealized appreciation on investments and
foreign currency transactions................... 10,240,016
-----------
Net gain on investment transactions................ 21,579,906
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......... $24,320,222
===========
</TABLE>
(a) Net of foreign taxes of: $5,990
See accompanying notes to financial statements.
67
<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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 5,527,070 $ 2,740,316
Net realized gain on investments and foreign
currency transactions............................ 9,531,773 11,339,890
Unrealized appreciation on investments, and
foreign currency transactions.................... 6,443,761 10,240,016
------------ ------------
Increase in net assets from operations............ 21,502,604 24,320,222
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (5,442,217) 0
Net realized gain on investments.................. (9,837,965) 0
------------ ------------
(15,280,182) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 20,225,126 10,804,763
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 5,442,217 0
Distributions from net realized gain.............. 9,837,965 0
------------ ------------
35,505,308 10,804,763
Cost of shares redeemed........................... (28,375,038) (19,507,897)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM
CAPITAL SHARE TRANSACTIONS....................... 7,130,270 (8,703,134)
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 13,352,692 15,617,088
NET ASSETS
Beginning of the period........................... 147,535,736 160,888,428
------------ ------------
End of the period................................. $160,888,428 $176,505,516
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 45,930 $ 40,029
============ ============
End of the period................................. $ 40,029 $ 2,780,345
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 120,220 59,463
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 31,471 0
Distributions from net realized gain.............. 55,351 0
------------ ------------
207,042 59,463
Redeemed.......................................... (164,939) (107,650)
------------ ------------
Net change........................................ 42,103 (48,187)
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $127.87 $ 130.26 $ 137.18 $ 130.30 $ 163.52 $ 170.37
------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 5.14 4.35 5.42 6.34 6.43 3.06
Net Realized and
Unrealized Gain (Loss)
on Investments........ 3.45 9.58 (6.92) 34.33 18.21 23.52
------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 8.59 13.93 (1.50) 40.67 24.64 26.58
------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... (5.13) (4.36) (5.38) (6.34) (6.34) 0.00
Distributions in Excess
of Net Investment
Income................ 0.00 0.00 0.00 (0.23) 0.00 0.00
Distributions From Net
Realized Capital
Gains................. (1.07) (2.65) 0.00 (0.88) (11.45) 0.00
------- -------- -------- -------- -------- --------
Total Distributions.... (6.20) (7.01) (5.38) (7.45) (17.79) 0.00
------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $130.26 $ 137.18 $ 130.30 $ 163.52 $ 170.37 $ 196.95
======= ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 6.70 10.65 (1.11) 31.26 15.01 15.60(a)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.54 0.53 0.54 0.64 0.62 0.63(b)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 5.32 3.65 3.98 4.06 3.64 3.28(b)
Portfolio Turnover Rate
(%).................... 36 22 76 51 72 66(b)
Average Commission Rate
(c).................... -- -- -- -- $ 0.0318 $ 0.0247
Net Assets, End of
Period (000)........... $77,575 $121,339 $121,877 $147,536 $160,888 $176,506
</TABLE>
(a) Not computed on an annualized basis.
(b) 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.
68
<PAGE>
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
PORTFOLIO MANAGERS: STEVEN GUTERMAN, PETER WILBY AND DAVID SCOTT SALOMON
BROTHERS ASSET MANAGEMENT INC
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
Q. HOW DID THE PORTFOLIO PERFORM DURING THE FIRST HALF OF 1997?
A. For the six month period ending June 30, 1997, the Series posted a 5.08%
return versus 3.6% for the Lipper Variable Annuity General Bond Average.
Major government bond market yields ended the first half of the year at simi-
lar levels to those prevailing at the beginning of 1997. However, this appar-
ent calmness masks significant volatility in the interim period. The U.S.
Treasury market experienced upward pressure on yields early in the year sup-
ported by evidence of an exceptionally robust economy driven by above-trend
consumer expenditures. The strength of activity prompted the Federal Reserve
to hike its key Fed Funds target rate by 25 basis points to 5.50% in March.
European bond markets continued to be dominated by the moves towards European
Monetary Union. Despite a widespread perception that several European Adminis-
trations would have to "fudge" their fiscal arithmetic in order to comply with
the Maastricht Treaty criteria, yields spreads generally tightened within Eu-
rope.
Q. HOW DID YOU MANAGE THE SERIES?
A. The Series' allocation to the high yield and emerging markets debt sectors
had a positive affect on performance. High yield bonds continued to be star
performers, spurred by the anticipated heavy issuance of Collateralized Bond
Obligations (CBOs). CBOs are structured securities that pass through principal
and interest payments from high yield bonds to investors via distinct
tranches. The issuance of CBOs has increased the demand for high yield securi-
ties and tightened yield spreads to Treasuries. The sector has been supported
by strong credit quality and healthy corporate profitability. Similarly, yield
spreads in the emerging markets debt sector have narrowed to record levels
versus Treasuries. This has been led by 1) strong institutional demand, 2)
positive fundamentals, and 3) large scale programs to retire secured Brady
Bonds and issue unsecured Eurobonds. We expect to trim our allocation to this
sector over the next six months based on current spread levels.
Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MONTHS AHEAD?
A. Our outlook for the global investment grade bond markets remains cautious.
In the U.S., the underlying fundamentals for the consumer including high con-
fidence levels, strong disposable income growth, and low unemployment support
a snap-back in consumer activity over the balance of this year. This will
likely prompt further Federal Reserve tightening. In Europe the debate over
EMU will continue to dominate activity in the fixed income and currency mar-
kets. Recent events, such as the Bundesbank dispute over reserve revaluation
with the Kohl Administration, only serve to increase the uncertainty surround-
ing the move towards monetary union.
We expect the global high yield markets to perform well supported by positive
fundamentals and institutional investors seeking incremental yield.
69
<PAGE>
A $10,000 Investment Compared to the Lehman Brothers Aggregate Bond Index
Average Annual Return
<TABLE>
<CAPTION>
Strategic Lipper Variable General
Bond Opp. Bond Fund Average/9/
<S> <C> <C>
6 mos.* 5.08% 3.64%
1 year 13.87% 10.09%
Since Inception 13.89% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN STRATEGIC
BOND OPPORTUNITIES SERIES COMPARED TO THE SAME IN THE LEHMAN AGGREGATE BOND
INDEX PLOT POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Strategic Bond Lehman Aggregate
Opp. Series Bond/3/
<S> <C> <C>
10/31/94 10,000 10,000
12/31/94 9,860 10,047
12/31/95 11,771 11,902
12/31/96 13,461 12,332
6/30/97 14,145 12,716
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: A high level of total return consistent with the preservation of capital.
START DATE: October 31, 1994
SIZE: $54 million as of June 30, 1997
MANAGERS: Peter Wilby, Beth Semmel, Steven Guterman and David Scott have managed
the Series since its inception in October of 1994. Mr. Wilby and Mr. Scott also
have managed the Salomon Brothers Investment Series--Strategic Bond Fund since
March 1995. Mr. Wilby has also managed the Salomon Brothers Investment Series--
High Yield Bond Fund since March 1995. They have also managed the North American
Strategic Income Fund since March 1995.
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.
70
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
BONDS & NOTES--81.8% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--43.9%
$ 125,000 Airplane Pass Thru Trust, 10.875%, 3/15/19............. $ 143,804
150,000 Alvey Systems, Inc., 11.375%, 1/31/03.................. 155,250
400,000 Allied Waste Industries, Inc., 6/01/07(j).............. 248,000
250,000 American Builders 10.625%, 5/15/07..................... 257,500
150,000 American Media Operations 11.625%, 11/15/04............ 163,500
250,000 Atlantic Express Transportation Corp. 10.750%, 2/01/04. 260,937
250,000 Bellwether Exploration Co. 10.875%, 4/01/07............ 268,125
200,000 Benton Oil & Gas Co. 11.625%, 5/01/03.................. 219,500
150,000 Berry Plastics 12.250%, 4/15/04........................ 165,000
150,000 Borg Warner Security Corp. 9.125% 5/01/03.............. 150,000
250,000 CFP Holdings, Inc. 11.625%, 1/15/04.................... 259,688
150,000 CSK Auto, Inc. 11.000%, 11/01/06....................... 156,750
150,000 Cablevision Systems Corp. 10.500%, 5/15/16............. 166,125
150,000 Carr Gottstein Foods Co. 12.000%, 11/15/05............. 167,063
166,000 Central Transportation Rental Finance Corp.
9.500%, 4/30/03....................................... 161,435
150,000 Clark Schwebel, Inc.
10.500%, 4/15/06...................................... 160,125
150,000 Cobb Theatres 10.625%, 3/01/03......................... 164,813
250,000 Cole National Group, Inc. 9.875%, 12/31/06............. 263,750
400,000 Coleman Escrow Corp. Zero Coupon, 5/15/01.............. 253,000
250,000 Collins & Aikman Floorcovering 10.000%, 1/15/07........ 253,125
250,000 Commonwealth Aluminum Corp. 10.750%, 10/1/06........... 264,375
150,000 Cross Timbers Oil Co.
9.250%, 4/01/07....................................... 153,375
200,000 Crown Paper Co. 11.000%, 9/01/05....................... 201,500
250,000 DVI, Inc. 9.875%, 2/01/04.............................. 255,313
250,000 Dawson Production Services, Inc. 9.375%, 2/01/07....... 256,250
200,000 Dole Foods, Inc. 6.750%, 7/15/00....................... 200,262
150,000 Dollar Financial Group, Inc. 10.875%, 11/15/06......... 160,875
200,000 Envirosource, Inc. 9.750%, 6/15/03..................... 197,750
100,000 Exide Electronics Group, Inc. 11.500%, 3/15/06(h)...... 106,000
200,000 Eye Care Centers of America, Inc. 12.000%, 10/01/03.... 218,750
100,000 Finlay Fine Jewelry Corp. 10.625%, 5/01/03............. 106,000
250,000 Foamex L.P/Foamex Cap. Corp. 9.875%, 6/15/07........... 257,500
250,000 Freedom Chemical Co. 10.625%, 10/15/06................. 258,125
250,000 French Fragrances, Inc. 10.375%, 5/15/07............... 258,125
150,000 Fresenius Medical Care Cap 9.000%, 12/01/06............ 153,000
400,000 Harnischfeger Industries, Inc. 6.875%, 2/15/27......... 396,092
150,000 Harveys Casino Resorts 10.625%, 6/01/06................ 160,500
100,000 Herff Jones, Inc. 11.000%, 8/15/05..................... 108,500
150,000 Hills Stores Co. 12.500%, 7/01/03...................... 117,750
150,000 Hines Horticulture 11.750%, 10/15/05................... 160,875
150,000 Hollinger International
9.250%, 2/01/06....................................... 153,750
275,000 ICG Holdings, Inc. 13.500%, 9/15/05(j)................. 200,750
200,000 Imed Corp. 9.750%, 12/01/06............................ 203,500
250,000 Integrated Health Services, Inc. 9.500%, 9/15/07....... 258,125
200,000 Intermedia Communications 12.500%, 5/15/06............. 140,000
350,000 International Cabletel, Inc., 2/01/06(j)............... 242,375
250,000 Intertek Financial PLC 10.250%, 11/01/06............... 259,375
150,000 Iron Mountain, Inc. 10.125%, 10/01/06.................. 160,500
200,000 Jacor Communications Co. 9.750%, 12/15/06.............. 211,500
150,000 Jitney Jungle Stores 12.000%, 3/01/06.................. 167,250
250,000 Jordan Industries, Inc. 10.375%, 8/01/03............... 262,500
150,000 KCS Energy, Inc. 11.000%, 1/15/03...................... 163,500
200,000 Lamar Advertising Co. 9.625%, 12/01/06................. 205,500
250,000 Loomis Fargo & Co. 10.000%, 1/15/04.................... 255,000
350,000 Marcus Cable Co. 0/14.250%, 12/15/05(j)................ 278,250
150,000 Maxxim Medical, Inc. 10.500%, 8/01/06.................. 162,750
150,000 Mesa Operating Co.
10.625%, 7/01/06...................................... 171,000
3,000,000 Mid State Trust 0/13.000%, 7/01/35(j).................. 3,016,875
250,000 NL Industries, Inc., 10/15/05(j)....................... 236,875
200,000 National Energy Group, Inc. 10.750%, 11/01/06.......... 207,500
250,000 Norcal Waste Systems, Inc. 13.250%, 11/15/05........... 280,000
400,000 Occidental Petroleum Corp. 9.250%, 8/01/19............. 466,236
</TABLE>
See accompanying notes to financial statements.
71
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
BONDS & NOTES--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--(CONTINUED)
$ 250,000 Packard Bioscience, Inc. 9.375%, 3/01/07.............. $ 254,375
450,000 Paine Webber Group, Inc. 7.000%, 3/01/00.............. 453,074
150,000 Parker Drilling Co. 9.750%, 11/15/06.................. 156,750
250,000 Pen Tab Industries, Inc. 10.875%, 2/01/07............. 256,250
200,000 Pierce Leahy Corp. 11.125%, 7/15/06................... 220,000
150,000 Printpack, Inc. 10.625%, 8/15/06...................... 159,187
250,000 Pueblo Xtra International 9.500%, 8/01/03............. 242,500
200,000 Radnor Holdings Corp. 10.000%, 12/01/03............... 202,500
150,000 Rayovac Corp. 10.250%, 11/01/06....................... 157,875
150,000 Renco Metals, Inc. 11.500%, 7/01/03................... 160,500
350,000 Revlon Worldwide Corp. Zero Coupon, 3/15/01........... 237,125
250,000 Riddell Sports, Inc. 10.500%, 7/15/07................. 256,250
150,000 Rogers Cablesystems, LTD 10.000%, 3/15/05............. 163,125
200,000 Ryder Transportation, Inc. 10.000%, 12/01/06.......... 206,000
150,000 SFX Broadcasting, Inc. 10.750%, 5/15/06............... 164,250
150,000 Selmer, Inc. 11.000%, 5/15/05......................... 164,250
150,000 Shop Vac Corp. 10.625%, 9/01/03....................... 159,750
125,000 Southdown, Inc. 10.000%, 3/01/06...................... 136,562
150,000 Specialty Equipment Companies, Inc. 11.375%, 12/01/03. 161,437
250,000 Speedy Muffler King, Inc. 10.875%, 10/01/06........... 255,000
250,000 Stone Container Corp. 12.250%, 4/01/02................ 256,875
150,000 Stroh Brewery Co. 11.100%, 7/01/06.................... 156,562
200,000 Sun International, Ltd. 9.000%, 3/15/07............... 204,000
200,000 Synthetic Industries, Inc. 9.250%, 2/15/07............ 204,500
400,000 TFM SA DE CV, 6/15/09(j).............................. 230,500
250,000 Talley Manufacturing & Technology, Inc. 10.750%,
10/15/03............................................. 261,250
250,000 Tekni Plex, Inc. 11.250%, 4/01/07..................... 271,250
250,000 Texas Petrochemicals Corp. 11.125%, 7/01/06........... 269,375
350,000 Transamerican Energy Corp., 6/15/02(j)................ 252,000
150,000 Trump Atlantic City Associates 11.250%, 5/01/06....... 147,000
150,000 Twin Laboratories, Inc. 10.250%, 5/15/06.............. 159,000
350,000 U.S. West Capital Funding, Inc. 6.850%, 1/15/02....... 350,795
250,000 United Refining Co. 10.750%, 6/15/07.................. 252,500
100,000 United States Leasing International
8.450%, 1/25/05...................................... 107,003
150,000 Universal Outdoor, Inc. 9.750%, 10/15/06.............. 155,625
250,000 Urohealth Systems, Inc. 12.500%, 4/01/04.............. 244,375
250,000 William Scotsman, Inc.
9.875%, 6/01/07...................................... 252,500
150,000 Wyndham Hotel Corp. 10.500%, 5/15/06.................. 165,750
-----------
23,839,138
-----------
FOREIGN CORPORATE BONDS--4.2%
150,000 Algoma Steel, Inc.,12.375%, 7/15/05................... 168,375
250,000 Costilla Energy, Inc.
10.250%, 10/01/06.................................... 260,000
250,000 Diamond Cable Communication 0/11.750%, 12/15/05(j).... 172,500
250,000 Doane Products Co. 10.625%, 3/01/06................... 264,375
250,000 Doman Industries, Ltd.
8.750%, 3/15/04...................................... 241,875
300,000 International Semi Tech. 0/11.500%, 8/15/03(e)(j)..... 183,000
400,000 Korea Development Bank 9.600%, 12/01/00............... 434,152
300,000 Midland Bank PLC 7.650%, 5/01/25...................... 313,623
250,000 Nextlink Communications, Ltd. 12.500%, 4/15/06........ 266,250
-----------
2,304,150
-----------
FOREIGN GOVERNMENT BONDS--17.5%
40,000 Commonwealth of Australia 10.000%, 10/15/07(c)........ 36,553
174,000 Federal Republic of Brazil 6.500%, 1/01/01............ 171,716
1,288,748 Federal Republic of Brazil 8.000%, 4/15/14(k)......... 1,035,831
250,000 Federal Republic of Brazil 5.250%, 4/15/24............ 170,312
50,000 Federal Republic of Brazil 10.125%, 5/15/27........... 48,125
80,000 Federal Republic of Germany 8.250%, 9/20/01(f)........ 52,524
120,000 Federal Republic of Germany 6.000%, 7/04/07(f)........ 70,343
330,000 Government of Canada 7.500%, 9/01/00(d)............... 253,643
60,000 Government of Canada 7.000%, 12/01/06(d).............. 45,577
710,000 Kingdom of Denmark 8.000%, 3/15/06(e)................. 120,338
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
BONDS & NOTES--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FOREIGN GOVERNMENT BONDS--(CONTINUED)
$1,300,000 Kingdom of Morocco 6.812%, 1/01/09................... $ 1,187,063
3,700,000 Republic of Argentina 5.250%, 3/31/23................ 2,516,000
500,000 Republic of Ecuador 3.500%, 2/28/25.................. 235,938
210,000 Republic of Ireland 6.250%, 4/01/99(g)............... 319,212
500,000 Republic of Panama 3.500%, 7/17/14................... 386,250
750,000 Republic of Venezuela 6.750%, 12/18/07............... 695,888
1,100,000 Russian Ian, 6.812%, 6/30/2016....................... 840,813
250,000 United Mexican States 6.250%, 12/31/19............... 191,875
750,000 United Mexican States 6.250%, 12/31/19............... 575,625
500,000 United Mexican States 11.500%, 5/15/26............... 570,625
-----------
9,524,251
-----------
U.S. GOVERNMENT BONDS--16.2%
500,000 Federal Home Loan Bank 6.490%, 9/08/97............... 500,650
257,920 Federal Home Loan Mortgage 10.000%, 5/15/20.......... 277,280
500,000 Federal National Mortgage Association 7.000%,
1/01/99............................................. 489,840
600,000 Federal National Mortgage Association 7.000%,
1/01/99............................................. 587,808
25,092 Federal National Mortgage Association 13.000%,
11/15/15............................................ 29,702
500,000 Federal National Mortgage Association 7.000%,
11/18/15............................................ 503,828
103,770 Federal National Mortgage Association 10.400%,
4/25/19............................................. 110,699
4,204,700 Federal National Mortgage Association 0.639%,
3/17/20(j).......................................... 132,546
144,879 Federal National Mortgage Association 7.000%,
5/01/26............................................. 142,162
8,591,000 Federal National Mortgage Association 0.569%,
10/17/36(j)......................................... 258,066
750,000 Government National Mortgage Association
7.000%, 11/15/99.................................... 736,170
180,000 United States Treasury Bonds 6.625%, 2/15/27......... 176,213
2,000,000 United States Treasury Notes 5.750%, 12/31/98........ 1,994,340
730,000 United States Treasury Notes 6.250%, 5/31/99......... 732,154
1,000,000 United States Treasury Notes 5.625%, 2/28/01......... 978,180
250,000 United States Treasury Notes 6.500%, 8/31/01......... 251,233
140,000 United States Treasury Notes 6.125%, 12/31/01........ 138,622
500,000 United States Treasury Notes 6.625%, 3/31/02......... 504,475
210,000 United States Treasury Notes 3.375%, 1/15/07......... 205,012
60,000 United States Treasury Notes 6.625%, 5/15/07......... 60,490
-----------
8,809,470
-----------
Total Bonds & Notes
(Identified Cost $43,312,558)....................... 44,477,009
-----------
- --------------
WARRANTS--0.0%
- --------------
100 Exide Electronics Group, Inc......................... 2,500
-----------
Total Warrants
(Identified Cost $1,815)............................ 2,500
-----------
- ----------------------------
SHORT-TERM INVESTMENT--21.2%
- ----------------------------
11,499,000 Repurchase agreement with UBS Securities dated
6/30/97 at 5.875% to be repurchased at $11,500,877
on 7/1/97 collateralized by $11,628,000. U. S.
Treasury Note 5.625% due 10/31/97 with a value of
$11,729,745......................................... 11,499,000
-----------
Total Short-Term Investments
(Identified Cost $11,499,000)....................... 11,499,000
-----------
Total Investments--103.0%
(Identified Cost $54,813,373)(b).................... 55,978,509
Other assets less liabilities(i)..................... (1,639,701)
-----------
TOTAL NET ASSETS--100%............................... $54,338,808
===========
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ---------------------------------------------
FORWARD CONTRACT OUTSTANDING AT JUNE 30, 1997
- ---------------------------------------------
<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
(sold) 07/16/97 38,546 $ 29,913 $ 29,137 $ 776
Canadian Dollar (sold) 07/16/97 2,323,705 1,678,977 1,684,553 (5,576)
Canadian Dollar
(bought) 07/16/97 1,995,503 1,436,647 1,446,625 9,978
Canadian Dollar (sold) 10/03/97 12,334 8,912 8,983 (71)
Deutsche Mark (bought) 10/06/97 119,064 69,628 68,753 (875)
Danish Krone (sold) 07/16/97 1,283,014 196,902 193,411 3,491
Danish Krone (bought) 07/16/97 549,587 84,959 82,864 (2,095)
French Franc (sold) 07/03/97 1,008,060 180,333 171,571 8,762
French Franc (bought) 07/03/97 1,013,562 174,466 172,507 (1,959)
Irish Pound (sold) 10/03/97 212,003 321,609 320,533 1,076
-------
Total Appreciation on Forward Currency Contracts............... $13,507
=======
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation
on investments based on cost of $54,813,373 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.............. $1,340,505
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (175,369)
----------
Net unrealized appreciation................................... $1,165,136
==========
</TABLE>
(c) Denominated in Australian Dollars.
(d) Denominated in Canadian Dollars.
(e) Denominated in Danish Krone.
(f) Denominated in German Marks.
(g) Denominated in Irish Pounds.
(h) Rights attached.
(i) Including deposits in foreign denominated currencies with a value of $2,845
and a cost of $2,912.
(j) Step Bond; Coupon rate is zero or below market for an initial period and
then increased to a higher coupon rate at a specified date and rate.
(k) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
See accompanying notes to financial statements.
74
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $55,978,509
Cash................................................... 108,101
Foreign cash at value.................................. 2,845
Receivable for:
Fund shares sold...................................... 232,510
Securities sold....................................... 3,218,238
Open forward currency contracts--net.................. 13,507
Dividends and interest................................ 736,480
Miscellaneous......................................... 399
Unamortized organization............................... 4,699
-----------
60,295,288
LIABILITIES
Payable for:
Securities purchased.................................. $5,814,466
Fund shares redeemed.................................. 65,041
Withholding taxes..................................... 258
Accrued expenses:
Management fees....................................... 55,256
Deferred trustees' fees............................... 1,264
Other expenses........................................ 20,195
----------
5,956,480
-----------
$54,338,808
===========
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $51,216,568
Undistributed net investment income................... 1,699,013
Accumulated net realized gains........................ 244,816
Unrealized appreciation on investments, forward
contracts and foreign currency....................... 1,178,411
-----------
NET ASSETS.............................................. $54,338,808
===========
Computation of offering price:
Net asset value and redemption price per share
($54,338,808 divided by 4,449,078 shares of beneficial
interest).............................................. $ 12.21
===========
Identified cost of investments.......................... $54,813,373
===========
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $ 304(a)
Interest............................................... 1,871,303
----------
1,871,607
EXPENSES
Management fees........................................ $145,939
Trustees' fees and expenses............................ 8,399
Custodian.............................................. 25,028
Audit and tax services................................. 6,556
Legal.................................................. 9,340
Printing............................................... 2,143
Amortization of organization expenses.................. 996
Miscellaneous.......................................... 1,817
--------
Total expenses....................................... 200,218
Less expenses assumed by the investment
adviser............................................. (9,373) 190,845
-------- ----------
NET INVESTMENT INCOME................................... 1,680,762
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FORWARD CURRENCY CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net...................................... 319,891
Foreign currency transactions--net.................... (53,872)
--------
Total realized gain on investments and foreign
currency transactions............................... 266,019
--------
Unrealized appreciation on:
Investments--net...................................... 362,910
Foreign currency transactions--net.................... 42,806
--------
Total unrealized appreciation on investments and
foreign currency transactions....................... 405,716
--------
Net gain on investment transactions..................... 671,735
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............. $2,352,497
==========
</TABLE>
(a) Net of foreign taxes of: $258.
See accompanying notes to financial statements.
75
<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, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 1,559,506 $ 1,680,762
Net realized gain on investments and foreign
currency transactions.............................. 587,758 266,019
Unrealized appreciation on investments and foreign
currency transactions.............................. 619,201 405,716
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 2,766,465 2,352,497
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (1,704,472) 0
Net realized gain on investments.................... (518,385) 0
----------- -----------
(2,222,857) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 29,554,662 23,490,552
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 1,704,472 0
Distributions from net realized gain................ 518,385 0
----------- -----------
31,777,519 23,490,552
Cost of shares redeemed............................. (5,997,600) (7,311,892)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 25,779,919 16,178,660
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 26,323,527 18,531,157
NET ASSETS
Beginning of the period............................. 9,484,124 35,807,651
----------- -----------
End of the period................................... $35,807,651 $54,338,808
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 50,354 $ 18,251
=========== ===========
End of the period................................... $ 18,251 $ 1,699,013
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 2,532,646 1,985,587
Issued in connection with the reinvestment of:
Distributions from net investment income............ 144,891 0
Distributions from net realized gain................ 42,731 0
----------- -----------
2,720,268 1,985,587
Redeemed............................................ (513,384) (617,870)
----------- -----------
Net change.......................................... 2,206,884 1,367,717
=========== ===========
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------ ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.74 $ 10.85 $ 11.62
------ ------ ------- -------
Income From Investment
Operations
Net Investment Income........ 0.12 0.58 0.51 0.38
Net Realized and Unrealized
Gain (Loss) on Investments.. (0.26) 1.30 1.05 0.21
------ ------ ------- -------
Total From Investment
Operations.................. (0.14) 1.88 1.56 0.59
------ ------ ------- -------
Less Distributions
Distributions From Net
Investment Income........... (0.12) (0.55) (0.60) 0.00
Distributions From Net
Realized Capital Gains...... 0.00 (0.22) (0.19) 0.00
------ ------ ------- -------
Total Distributions.......... (0.12) (0.77) (0.79) 0.00
------ ------ ------- -------
Net Asset Value, End of
Period....................... $ 9.74 $10.85 $ 11.62 $ 12.21
====== ====== ======= =======
TOTAL RETURN (%).............. (1.40)(b) 19.38 14.36 5.08(b)
Ratio of Operating Expenses to
Average Net Assets (%)....... 0.85 (c) 0.85 0.85 0.85(c)
Ratio of Net Investment Income
to Average Net Assets (%).... 7.05 (c) 8.39 7.79 7.43(c)
Portfolio Turnover Rate (%)... 403 (c) 202 176 239(c)
Net Assets, End of Period
(000)........................ $3,450 $9,484 $35,808 $54,339
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 (c) 2.44 1.19 0.89(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
See accompanying notes to financial statements.
76
<PAGE>
BACK BAY ADVISORS BOND INCOME SERIES
PORTFOLIO MANAGER: CATHERINE L. BUNTING
BACK BAY ADVISORS, L.P.
[PICTURE APPEARS HERE]
Q. WHAT WAS THE INVESTMENT BACKDROP FOR BACK BAY ADVISORS BOND INCOME SERIES
DURING THE PERIOD?
A. Interest rates were relatively volatile on the heels of the Federal Re-
serve's March hike in short-term interest rates, though fluctuations were gen-
erally contained within a narrow range. Rising interest rates during the first
quarter tended to push bond prices lower and yields higher, as reflected in
the Series' total return of -0.24% for the first three months of this year. As
interest rates stabilized during the second quarter, the Series more than made
up for lost ground, finishing the six-month period ended June 30, 1997 with a
positive total return of 3.90%. Select investments in corporate bonds also
helped the Series' performance, which was significantly better than that of
the 2.84% average total return of the Series' peer group of A-Rated Corporate
Bond Funds, as measured by Lipper Analytical Services.
Q. HOW DID YOU STRUCTURE THE SERIES DURING THE PERIOD?
A. Corporate bonds encompassed 60% of the portfolio--and were the biggest con-
tributor to the Series' performance. Strong economic conditions helped these
bonds perform better than U.S. Government Securities. Among the portfolio's
standout corporate issues were those whose credit ratings had been upgraded to
what major ratings agencies, such as Standard & Poor's, consider investment-
grade terrain--the four highest bond ratings categories. (Lower-quality bonds
are limited to no more than 20% of the portfolio.) Improving fundamentals in
certain industries and companies fostered credit upgrades in select holdings,
subsequently translating into higher bond prices.
Utility bonds also contributed positively to the Series' performance. These
bonds, which constituted about 14% of the portfolio at the end of the period,
recently completed a round of consolidation, paving the way for credit-upgrade
opportunities.
We also maintained holdings in Canadian dollar securities, whose prices rose
as yields fell across the maturity spectrum. Thanks to Canada's low inflation
rate, these bonds provided better inflation-adjusted returns than comparable
U.S. Securities. Mortgage-backed securities and Treasury issues continued to
make up the high-quality component of the Series. During the period, lower
volatility levels enhanced their performance.
Q. WHERE DO YOU SEE OPPORTUNITY IN THE MONTHS AHEAD?
A. We continue to favor Yankee bonds (U.S. dollar-denominated bonds issued by
foreign companies), which worked well for the Series during the period. The
universe of Yankees continues to look promising, having expanded from primar-
ily Canadian issues to a competitive market that now covers the globe. Yankee
bonds represent an opportunity to participate in global bond markets without
exposure to currency risk.
Other investments that remain attractive include the Series' cable/media hold-
ings, given our expectations for credit upgrades in the cable industry. This
industry continues to benefit from global consolidation.
Q. WHAT IS YOUR OUTLOOK FOR THE SERIES?
A. Slowing economic growth and well contained inflation levels will probably
keep the Fed from raising interest rates--this translates into a stable envi-
ronment for bonds, especially select corporate securities.
Going forward, we expect to increase emphasis on higher-grade securities. The
yield gap between bonds at different credit levels has narrowed substantial-
ly--so investors are not compensated for taking added credit risk. This means
the Series can invest in better-quality securities, such as investment-grade
corporate bonds and Treasury securities, without giving up much in yield.
77
<PAGE>
A $10,000 Investment Compared to the Lehman Brothers Intermediate Government
Corporate Bond Index and the Cost of Living
Average Annual Report
<TABLE>
<CAPTION>
Zenith Lipper Variable A-Rate
Bond Income Corp. Bond Fund Avg.
<S> <C> <C>
6 mos.* 3.90% 2.84%
1 year 10.47% 7.80%
5 years 8.56% 7.04%
10 years 9.39% 8.55%
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE BACK
BAY BOND INCOME SERIES COMPARED TO THE SAME IN THE LEHMAN INTERMEDIATE
GOV'T/CORP. INDEX AND THE COST OF LIVING, THE PLOT POINTS OF WHICH ARE AS
FOLLOWS:]
<TABLE>
<CAPTION>
Bond Income Lehman Intermediate Cost of
Series Gov't/Corp./5/ Living/1/
<S> <C> <C> <C>
6/30/87 10,000 10,000 10,000
12/31/87 10,198 10,321 10,167
12/31/88 11,051 11,009 10,617
12/31/89 12,410 12,415 11,110
12/31/90 13,414 13,551 11,789
12/31/91 15,822 15,533 12,150
12/31/92 17,117 16,647 12,502
12/31/93 19,275 18,110 12,846
12/31/94 18,627 17,761 13,189
12/31/95 22,575 20,484 13,524
12/31/96 23,616 21,313 13,974
6/30/97 24,537 21,916 14,106
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: A high level of current income consistent with the protection of capital
and moderate investment risk.
START DATE: August 26, 1983
SIZE: $185 million as of June 30, 1997
MANAGER: Catherine Bunting has managed the Series since 1989 she has also acted
as portfolio manager of New England Bond Income Fund since 1989. She joined Back
Bay Advisors in April 1987.
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.
78
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
BONDS & NOTES--93.6% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
BROADCASTING--5.3%
$ 2,050,000 Cablevision Industrial Corp.,
9.250%, 4/01/08................................... $ 2,173,000
4,520,000 Continental Cablevision, Inc.,
11.000%, 6/01/07.................................. 5,065,202
2,300,000 Continental Cablevision, Inc.,
9.500%, 8/01/13................................... 2,610,684
------------
9,848,886
------------
CONTAINERS--0.6%
1,000,000 Owens Illinois, Inc., 8.100%, 5/15/07.............. 1,020,230
------------
ELECTRIC UTILITIES--3.8%
5,800,000 Arizona Public Service Corp.,
8.000%, 12/30/15.................................. 6,007,814
1,000,000 Ohio Edison Corp., 8.680%, 6/01/17................. 1,035,670
------------
7,043,484
------------
FEDERAL AGENCIES--8.6%
34,536 Federal Home Loan Bank,
9.000%, 5/01/01................................... 35,734
13,395 Federal Home Loan Bank,
9.000%, 9/01/01................................... 13,859
7,482,108 Government National Mortgage Association, 7.000%
with various maturities to 2025................... 7,353,491
6,366,826 Government National Mortgage Association, 7.500%
with various maturities to 2025................... 6,390,701
1,849,881 Government National Mortgage Association, 8.5000%
with various maturities to 2022................... 1,923,876
221,350 Government National Mortgage Association, 9.000%,
10/15/16.......................................... 234,078
------------
15,951,739
------------
FINANCIAL--11.6%
2,500,000 American General Financing,
8.450%, 10/15/09.................................. 2,779,650
5,660,000 Associates Corporation of North America, 8.550%,
7/15/09........................................... 6,310,051
2,972,000 EIP Funding Corp.,
10.250%, 10/01/12................................. 3,373,131
3,000,000 Intermediate American Development Bank, 6.950%,
8/01/26........................................... 3,082,560
1,800,000 Pitney Bowes Credit Corp.,
8.550%, 9/15/09................................... 2,026,080
3,750,000 Toronto Dominion Bank,
7.875%, 8/15/04................................... 3,803,138
------------
21,374,610
------------
FOREIGN--6.9%
4,500,000 British Columbia Province Canada, 7.750%,
6/16/03(c)........................................ 3,534,632
8,665,000 Government of Canada,
8.000%, 6/01/23(c)................................ 7,121,746
15,000,000 Ontario Hydro,
Zero Coupon, 11/27/20(c).......................... 1,987,762
1,050,000 Ontario Hydro,
Zero Coupon, 8/06/21(c)........................... 132,300
------------
12,776,440
------------
LEISURE--0.9%
1,500,000 Time Warner, Inc., 9.150%, 2/01/23................. 1,651,350
------------
OIL AND GAS--2.4%
1,900,000 Gulf CDA Res. LTD., 8.350%, 8/01/06................ 2,014,000
2,250,000 Mitchell Energy & Development Corp., 9.250%,
1/15/02........................................... 2,430,113
------------
4,444,113
------------
PAPER--0.5%
1,000,000 Pope and Talbot, Inc.,
8.375%, 6/01/13................................... 953,180
------------
PUBLISHING--3.1%
2,150,000 Golden Books Publishing, Inc.,
7.650%, 9/15/02................................... 2,031,750
1,500,000 News America Holdings, Inc.,
7.750%, 2/01/24................................... 1,424,160
2,300,000 News America Holdings, Inc.,
8.250%, 8/10/18................................... 2,318,032
------------
5,773,942
------------
RAILROADS--1.1%
2,000,000 Norfolk Southern Corp.,
7.050%, 5/01/37................................... 2,028,860
------------
TELECOMMUNICATIONS--10.7%
3,300,000 AT&T Corp., 8.350%, 1/15/25........................ 3,450,249
3,000,000 Bellsouth Telecomm, Inc.,
5.850%, 11/15/45.................................. 2,962,020
1,500,000 LCI International, Inc.,
7.250%, 6/15/07................................... 1,485,750
4,420,000 MFS Communications, Inc.,
Zero Coupon, 1/15/06.............................. 3,499,712
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- --------------------------
BONDS & NOTES--(CONTINUED)
- --------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
TELECOMMUNICATIONS--(CONTINUED)
$ 1,500,000 Tele-Communications, Inc.,
9.800%, 2/01/12................................... $ 1,711,485
2,935,000 Tele-Communications, Inc.,
9.250%, 1/15/22................................... 3,077,494
1,000,000 Total Access Communication,
8.375%, 11/04/06.................................. 966,360
2,500,000 Worldcom, Inc., 7.750%, 4/01/07.................... 2,556,700
------------
19,709,770
------------
U.S. GOVERNMENT--18.2%
10,000,000 U.S. Treasury Notes,
5.750%, 8/15/03................................... 9,659,700
1,500,000 U.S. Treasury Notes,
6.375%, 7/15/99................................... 1,508,865
2,500,000 U.S. Treasury Notes,
6.500%, 8/15/05................................... 2,493,525
6,500,000 U.S. Treasury Notes,
6.875%, 7/30/99................................... 6,595,160
3,500,000 U.S. Treasury Notes,
8.000%, 5/15/01................................... 3,697,295
9,000,000 U.S. Treasury Notes,
8.500%, 11/15/00.................................. 9,596,700
------------
33,551,245
------------
UTILITIES--(DIVERSIFIED)--8.7%
2,000,000 Long Island Lighting Co.,
9.000%, 11/01/22.................................. 2,194,380
4,400,000 Long Island Lighting Co.,
8.200%, 3/15/23................................... 4,513,960
4,250,000 New York State Electric & Gas Co., 8.875%,
11/01/21.......................................... 4,498,200
5,000,000 Tennessee Valley Authority,
6.125%, 7/15/03................................... 4,849,400
------------
16,055,940
------------
UTILITIES--(ELECTRIC)--1.6%
1,700,000 Texas Utilities Electric Co.,
8.875%, 2/01/22................................... 1,797,903
1,100,000 Toledo Edison Co., 7.875%, 8/01/04................. 1,116,214
------------
2,914,117
------------
YANKEE--9.6%
900,000 British Columbia Hydro & Power, 12.500%, 9/01/13... 994,302
1,000,000 British Columbia Hydro & Power, 12.500%, 1/15/14... 1,125,530
2,000,000 Hydro Quebec, 8.050%, 7/07/24...................... 2,170,560
2,500,000 Petroleos Mexicanos,
9.000%, 6/01/07................................... 2,521,875
4,400,000 Petroleos Mexicanos,
8.625%, 12/01/23.................................. 3,899,500
1,000,000 Province of Quebec,
8.625%, 12/01/26.................................. 1,104,300
750,000 Republic of Argentina,
11.375%, 1/30/17.................................. 843,750
2,900,000 Republic of Columbia,
8.660%, 10/07/16.................................. 3,075,189
2,000,000 Republic of Columbia,
7.250%, 2/23/04................................... 1,945,040
------------
17,680,046
------------
Total Bonds and Notes
(Identified Cost $171,634,263).................... 172,777,952
------------
<CAPTION>
- ----------------------------
SHORT-TERM INVESTMENTS--4.7%
- ----------------------------
<C> <S> <C>
COMMERCIAL PAPER--4.7%
2,680,000 American Express Credit Corp.,
6.150%, 7/01/97................................... 2,680,000
6,000,000 Household Finance Corp.,
6.080%, 7/01/97................................... 6,000,000
------------
Total Short-Term Investments
(Identified Cost $8,680,000)...................... 8,680,000
------------
Total Investments--98.3%
(Identified Cost $180,314,263)(b)................. 181,457,952
Other assets less liabilities...................... 3,040,116
------------
TOTAL NET ASSETS--100%............................. $184,498,068
============
</TABLE>
(a) See Note 1A.
(b) Federal Tax Information:
At June 30, 1997 the net unrealized appreciation on investments based on
cost of $180,314,263 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.................................... $ 2,899,898
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value.................................. (1,756,209)
------------
Net unrealized appreciation....................... $ 1,143,689
============
</TABLE>
(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.
See accompanying notes to financial statements.
80
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $181,457,952
Cash.................................................... 2,075
Receivable for:
Fund shares sold....................................... 289,202
Dividends and interest................................. 3,197,069
------------
184,946,298
LIABILITIES
Payable for:
Fund shares redeemed................................... $290,840
Withholding taxes...................................... 1,989
Miscellaneous.......................................... 27,647
Accrued expenses:
Management fees........................................ 60,499
Deferred trustees' fees................................ 38,926
Other expenses......................................... 28,329
--------
448,230
------------
$184,498,068
============
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $176,077,594
Undistributed net investment income.................... 6,493,914
Accumulated net realized gains......................... 782,754
Unrealized appreciation on investments................. 1,143,806
------------
NET ASSETS............................................... $184,498,068
============
Computation of offering price:
Net asset value and redemption price per share
($184,498,068 divided by 1,681,122 shares of beneficial
interest)............................................... $ 109.75
============
Identified cost of investments........................... $180,314,263
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Interest................................................ $6,820,008(a)
EXPENSES
Management fees......................................... $358,529
Trustees' fees and expenses............................. 15,577
Custodian............................................... 43,301
Audit and tax services.................................. 4,831
Legal................................................... 9,340
Printing................................................ 39,689
Miscellaneous........................................... 1,821
--------
Total expenses......................................... 473,088
----------
NET INVESTMENT INCOME.................................... 6,346,920
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net....................................... 442,126
Foreign currency transactions--net..................... (87,473)
--------
Total realized gain on investments and foreign
currency transactions................................ 354,653
--------
Unrealized appreciation on:
Investments--net....................................... 259,160
Foreign currency transactions--net..................... 297
--------
Total unrealized appreciation on investments and
foreign currency transactions........................ 259,457
--------
Net gain on investment transactions...................... 614,110
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............... $6,961,030
==========
</TABLE>
(a) Net of foreign taxes of: $1,989.
See accompanying notes to financial statements.
81
<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,
1996 1997
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 12,169,158 $ 6,346,920
Net realized gain on investments and foreign
currency transactions............................ 1,434,380 354,653
Unrealized appreciation (depreciation) on
investments, and foreign currency transactions... (5,669,381) 259,457
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 7,934,157 6,961,030
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (12,191,823) 0
Net realized gain on investments.................. (496,515) 0
------------ ------------
(12,688,338) 0
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 53,162,089 23,818,271
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 12,191,823 0
Distributions from net realized gain.............. 496,515 0
------------ ------------
65,850,427 23,818,271
Cost of shares redeemed........................... (43,449,240) (26,640,189)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM
CAPITAL SHARE TRANSACTIONS....................... 22,401,187 (2,821,918)
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 17,647,006 4,139,112
NET ASSETS
Beginning of the period........................... 162,711,950 180,358,956
------------ ------------
End of the period................................. $180,358,956 $184,498,068
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period........................... $ 53,292 $ 146,994
============ ============
End of the period................................. $ 146,994 $ 6,493,914
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 491,882 222,770
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 114,880 0
Distributions from net realized gain.............. 4,700 0
------------ ------------
611,462 222,770
Redeemed.......................................... (401,180) (249,171)
------------ ------------
Net change........................................ 210,282 (26,401)
============ ============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $103.44 $ 103.47 $ 106.14 $ 95.53 $ 108.67 $ 105.63
------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 7.96 5.70 7.05 7.34 7.72 3.78
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.51 7.38 (10.61) 12.85 (2.70) 0.34
------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 8.47 13.08 (3.56) 20.19 5.02 4.12
------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... (6.87) (6.20) (7.05) (7.05) (7.74) 0.00
Distributions in Excess
of Net Investment
Income................ 0.00 (0.05) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital
Gains................. (1.57) (4.16) 0.00 0.00 (0.32) 0.00
------- -------- -------- -------- -------- --------
Total Distributions.... (8.44) (10.41) (7.05) (7.05) (8.06) 0.00
------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $103.47 $ 106.14 $ 95.53 $ 108.67 $ 105.63 $ 109.75
======= ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 8.18 12.61 (3.36) 21.20 4.61 3.90(a)
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.44 0.43 0.44 0.55 0.52 0.53(b)
Ratio of Net Investment
Income to Average Net
Assets (%)............. 7.70 6.47 6.75 7.22 7.22 7.00(b)
Portfolio Turnover Rate
(%).................... 71 177 82 73 98 42(b)
Net Assets, End of
Period (000)........... $83,057 $131,242 $126,234 $162,712 $180,359 $184,498
</TABLE>
(a) Not computed on an annualized basis.
(b) 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.
82
<PAGE>
SALOMON BROTHERS U.S. GOVERNMENT SERIES
PORTFOLIO MANAGERS: STEVEN GUTERMAN AND ROGER LAVAN SALOMON BROTHERS ASSET
MANAGEMENT INC
[PICTURE APPEARS HERE] [PICTURE APPEARS HERE]
Q. HOW DID THE PORTFOLIO PERFORM DURING THE FIRST HALF OF 1997?
A. For the six months of 1997, the Series posted a 3.05% return outperforming
the 2.76% return of the Lehman Intermediate Government index.
The first half of 1997 was a turbulent period for the U.S. financial markets.
Economic growth surged in the first quarter, forcing the Federal Reserve to
raise the Federal funds target rate 25 basis points to 5.5% in March. The move
marked the first tightening in monetary policy in more than two years. In the
second quarter, with the economy showing almost no signs of inflation, and the
Federal Reserve remaining on the sidelines, interest rates fell 30-40 basis
points across the yield curve. Although, most believe the Federal Reserve is
content for now, many market participants speculate that wage pressures will
boost inflation and the chances for a Federal Reserve tightening later this
year.
Q. HOW DID YOU MANAGE THE SERIES?
A. For the six month period ending June 30, 1997 the Series continued to over-
weight mortgage backed securities and underweight Treasuries. Over the period,
mortgage backed securities outperformed Treasuries supported by the threat of
higher rates. The Series' interest rate sensitivity was reduced from 4.0 years
to 3.2 years. We remained defensive believing that the US economy was not
weakening, but pausing. First half GDP growth is likely to be close to 4%.
Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MONTHS AHEAD?
A. Our outlook for the US fixed income markets remains cautious. The under-
lying fundamentals for the consumer; high confidence levels, strong disposable
income growth, and low unemployment, remain very supportive, suggesting a
snap-back in consumer activity over the balance of this year. This will likely
prompt further Federal Reserve tightening.
A $10,000 Investment Compared to Lehman Intermediate Gov't. Index
Average Annual Return
<TABLE>
<CAPTION>
US Gov't Lipper Variable US Mortgage
Series and GNMA Average/18/
<S> <C> <C>
6 mos.* 3.05% 3.18%
1 year 7.63% 7.95%
Since Inception 8.14% n/a
* not annualized
</TABLE>
[GRAPH APPEARS HERE ILLUSTRATING THE GROWTH OF A $10,000 INVESTMENT IN THE U.S.
GOV'T SERIES COMPARED TO THE SAME IN THE LEHMAN INTERMEDIATE INDEX, THE PLOT
POINTS OF WHICH ARE AS FOLLOWS:]
<TABLE>
<CAPTION>
Salomon US Gov't Lehman Intermediate
<S> <C> <C>
10/31/94 10,000 10,000
12/31/94 10,060 9,989
12/31/95 11,571 11,430
12/31/96 11,955 11,912
6/30/97 12,319 12,241
</TABLE>
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: A high level of current income consistent with the preservation of capital
and maintenance of liquidity.
START DATE: October 31, 1994
SIZE: $16 million as of June 30, 1997
MANAGERS: Steven Guterman and Roger Lavan have managed the Series since its
inception in 1994. Mr. Guterman and Mr. Lavan have also managed the Salomon
Brothers Investment Series--U.S. Government Income Fund 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 in-
surance, 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.
83
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------
BONDS & NOTES--83.1% OF TOTAL NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FEDERAL AGENCY--81.8%
$ 250,000 Federal Home Loan Banks 6.490%, 9/08/97............... $ 250,325
300,000 Federal Home Loan Banks 5.940%, 6/13/00............... 296,883
301,288 Federal Home Loan Mortgage 7.500%, 5/01/07............ 304,301
21,089 Federal Home Loan Mortgage 6.000%, 10/01/10........... 20,357
389,295 Federal Home Loan Mortgage 7.000%, 7/01/11............ 389,175
68,860 Federal Home Loan Mortgage 11.750%, 1/01/12........... 77,791
431,898 Federal Home Loan Mortgage 8.250%, 4/01/17............ 450,556
59,288 Federal Home Loan Mortgage 6.500%, 5/01/26............ 56,860
62,140 Federal Home Loan Mortgage 6.500%, 6/01/26............ 59,596
882,852 Federal Home Loan Mortgage 6.500%, 7/01/26............ 846,708
600,000 Federal National Mortgage Association 7.148%,
10/17/09............................................. 605,555
18,474 Federal National Mortgage Association 12.500%, 8/01/15
..................................................... 21,626
82,445 Federal National Mortgage Association
13.000%, 11/15/15.................................... 97,594
33,221 Federal National Mortgage Association 14.500%,
11/01/14............................................. 41,070
83,888 Federal National Mortgage Association 12.500%,
9/01/15.............................................. 98,568
719,164 Federal National Mortgage Association 12.000%,
10/01/15............................................. 821,199
43,580 Federal National Mortgage Association 12.000%,
1/01/16.............................................. 50,498
422,467 Federal National Mortgage Association 12.500%,
1/01/16.............................................. 495,607
28,443 Federal National Mortgage Association 11.500%,
9/01/19.............................................. 32,425
635,929 Federal National Mortgage Association 11.000%,
9/01/20.............................................. 709,747
429,923 Federal National Mortgage Association 6.500%, 3/01/26. 411,518
1,830,000 Federal National Mortgage Association
TBA 6.500%, 1/01/2099................................ 1,793,400
1,250,000 Federal National Mortgage Association
TBA 7.000%, 12/01/2099............................... 1,224,600
1,550,000 Federal National Mortgage Association
Pool TBA 7.500%, 1/01/2099........................... 1,553,379
281,978 Government National Mortgage Association TBA 9.000%,
12/15/16............................................. 299,881
1,500,000 Government National Mortgage Association TBA 7.000%,
12/15/2099........................................... 1,472,340
300,000 Student Loan Marketing Association 7.500%, 3/08/00.... 308,727
-----------
12,790,286
-----------
U.S. TREASURY--1.3%
200,000 U.S. Treasury Notes 6.500%, 5/31/01................... 201,146
-----------
Total Bonds & Notes
(Identified Cost $12,971,623)........................ 12,991,432
-----------
<CAPTION>
- -----------------------------
SHORT-TERM INVESTMENTS--55.0%
- -----------------------------
<C> <S> <C>
1,000,000 Federal Farm Credit, Discount Note, 5.380%, 7/01/97... 1,000,000
2,000,000 Federal Farm Credit, Discount Note, 5.400%, 7/11/97... 1,997,000
2,000,000 Student Loan Marketing, Discount Note, 5.380%,
7/31/97.............................................. 1,991,033
1,808,000 Repurchase agreement with J.P. Morgan Securities
dated 6/30/97 at 5.950% to be repurchased at
$1,808,299 on 7/1/97. Collaterized by $1,823,000
U.S. Treasury Note 7.375% due 11/15/97 with a value
of $1,850,345........................................ 1,808,000
1,808,000 Repurchase agreement with UBS Securities dated
6/30/97 at 5.875% to be repurchased at $1,808,295
on 7/1/97. Collaterized by $1,229,000 U.S. Treasury
Bond 11.250% due 2/15/15 with a value of
$1,845,036........................................... 1,808,000
-----------
Total Short-Term Investments
(Identified Cost $8,604,033)......................... 8,604,033
-----------
Total Investments--138.1%
(Identified Cost $21,575,656)(b)..................... 21,595,465
Liabilities........................................... (5,953,747)
-----------
TOTAL NET ASSETS--100%................................ $15,641,718
===========
</TABLE>
(a) See Note 1a.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation
on investments based on cost of $21,575,656 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...................................... $ 55,704
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (35,895)
-----------
Net unrealized appreciation......................... $ 19,809
===========
</TABLE>
See accompanying notes to financial statements.
84
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $21,595,465
Cash.................................................. 233
Receivable for:
Fund shares sold..................................... 92,113
Securities sold...................................... 512,538
Dividends and interest............................... 76,861
Due from advisor..................................... 6,102
Unamortized organization.............................. 4,699
-----------
22,288,011
LIABILITIES
Payable for:
Securities purchased................................. $6,544,332
Fund shares redeemed................................. 68,929
Accrued expenses:
Management fees...................................... 3,240
Deferred trustees' fees.............................. 1,195
Other expenses....................................... 28,597
----------
6,646,293
-----------
$15,641,718
===========
NET ASSETS
Net Assets consist of:
Capital paid in...................................... $15,177,499
Undistributed net investment income.................. 509,743
Accumulated net realized losses...................... (65,333)
Unrealized appreciation on investments............... 19,809
-----------
NET ASSETS............................................. $15,641,718
===========
Computation of offering price:
Net asset value and redemption price per share
($15,641,718 divided by 1,401,348 shares of beneficial
interest)............................................. $ 11.16
===========
Identified cost of investments......................... $21,575,656
===========
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $473,184(a)
Interest.............................................. 82,677
--------
555,861
EXPENSES
Management fees....................................... $ 41,558
Trustees' fees and expenses........................... 8,158
Custodian............................................. 8,202
Audit and tax services................................ 6,211
Legal................................................. 9,340
Printing.............................................. 820
Amortization of organization expenses................. 996
Miscellaneous......................................... 1,821
--------
Total expenses...................................... 77,106
Less expenses assumed by the
investment adviser................................. (24,212) 52,894
-------- --------
NET INVESTMENT INCOME.................................. 502,967
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized loss on:
Investments--net..................................... (85,947)
Unrealized appreciation on:
Investments--net..................................... 40,345
--------
Net loss on investment transactions.................... (45,602)
--------
NET INCREASE IN NET ASSETS FROM
OPERATIONS............................................ $457,365
========
</TABLE>
(a) Net of foreign taxes of:
See accompanying notes to financial statements.
85
<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,
1996 1997
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................... $ 664,231 $ 502,967
Net realized gain (loss) on investments and foreign
currency transactions.............................. 1,275 (85,947)
Unrealized appreciation (depreciation) on
investments, and foreign currency transactions..... (214,900) 40,345
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS.............. 450,606 457,365
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................... (639,626) 0
Net realized gain on investments.................... (16,259) 0
----------- -----------
(655,885) 0
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares........................ 9,363,646 5,683,610
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income............ 639,626 0
Distributions from net realized gain................ 16,259 0
----------- -----------
10,019,531 5,683,610
Cost of shares redeemed............................. (4,145,624) (3,709,921)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS....................................... 5,873,907 1,973,689
----------- -----------
TOTAL INCREASE IN NET ASSETS........................ 5,668,628 2,431,054
NET ASSETS
Beginning of the period............................. 7,542,036 13,210,664
----------- -----------
End of the period................................... $13,210,664 $15,641,718
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period............................. $ 735 $ 6,776
=========== ===========
End of the period................................... $ 6,776 $ 509,743
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares...................... 852,094 520,825
Issued in connection with the reinvestment of:
Distributions from net investment income............ 58,698 0
Distributions from paid in capital.................. 0 0
Distributions from net realized gain................ 0 0
----------- -----------
910,792 520,825
Redeemed............................................ (374,295) (339,436)
----------- -----------
Net change.......................................... 536,497 181,389
=========== ===========
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
OCTOBER 31, 1994(A) SIX MONTHS
THROUGH YEAR YEAR ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
1994 1995 1996 1997
------------------- ------ ------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.96 $ 11.04 $ 10.83
------ ------ ------- -------
Income From Investment
Operations
Net Investment Income........ 0.10 0.33 0.58 0.36
Net Realized and Unrealized
Gain (Loss) on Investments.. (0.04) 1.16 (0.21) (0.03)
------ ------ ------- -------
Total From Investment
Operations.................. 0.06 1.49 0.37 0.33
------ ------ ------- -------
Less Distributions
Distributions From Net
Investment Income........... (0.10) (0.33) (0.56) 0.00
Distributions From Net
Realized Capital Gains...... 0.00 (0.08) (0.02) 0.00
------ ------ ------- -------
Total Distributions.......... (0.10) (0.41) (0.58) 0.00
------ ------ ------- -------
Net Asset Value, End of
Period....................... $ 9.96 $11.04 $ 10.83 $ 11.16
====== ====== ======= =======
TOTAL RETURN (%).............. 0.60(b) 15.02 3.31 3.05(b)
Ratio of Operating Expenses to
Average Net Assets (%)....... 0.70(c) 0.70 0.70 0.70(c)
Ratio of Net Investment Income
to Average Net Assets (%).... 5.70(c) 5.62 6.13 6.62(c)
Portfolio Turnover Rate (%)... 1,409(c) 415 388 578(c)
Net Assets, End of Period
(000)........................ $2,012 $7,542 $13,211 $15,642
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(c) 2.90 1.37 1.02(c)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
See accompanying notes to financial statements.
86
<PAGE>
BACK BAY ADVISORS MONEY MARKET SERIES
PORTFOLIO MANAGER: JOHN MALONEY BACK BAY ADVISORS, L.P.
[PICTURE APPEARS HERE]
Q. HOW DID BACK BAY ADVISORS MONEY MARKET SERIES PERFORM OVER THE LAST SIX
MONTHS?
A. Back Bay Advisors Money Market Series performed as it is intended, provid-
ing shareholders with a high degree of safety and liquidity. The Series main-
tained a constant share price of $100.00* and generated competitive money mar-
ket returns. For the six months ended June 30, 1997, the Money Market Series
produced a return of 2.55%. The seven-day effective yield on June 30 was
5.43%.
Q. WHAT WAS THE ENVIRONMENT LIKE FOR THE SERIES?
A. Short-term interest rates--the chief influence on money market perfor-
mance--ended the period largely unchanged from one year ago, although they
fluctuated significantly during the period. Throughout the past year, invest-
ors were concerned that stronger-than-expected economic growth would stimulate
inflation. As a preemptive strike against inflation, the Federal Reserve Board
raised the benchmark federal funds rate--the rate at which banks lend to each
other overnight--by one quarter percentage point to 5.5% in March 1997. De-
spite these concerns, inflation has remained well-contained, and with the
economy slowing from its frantic first quarter pace, investors have become
less concerned about the prospect of rising prices.
Q. WHAT STRATEGIES DID YOU USE IN MANAGING THE SERIES?
A. We managed the Series' average maturity and targeted attractive relative
value among money market instruments. We sought to shorten the average matu-
rity when interest rates were rising and lengthen when we thought rates would
decline. A shorter average maturity enables the portfolio to benefit faster
from the higher rate environment. A longer average maturity helps preserve the
Series' yield for an extended period of time. As of June 30, 1997, the Series'
average maturity stood at 43 days; we were investing primarily in instruments
with two- to four-month maturities.
Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. We expect investors' expectations of economic activity and its effect on
inflation will continue to guide the direction of short-term rates. While eco-
nomic growth appears to have slowed considerably in the second quarter, we are
anticipating a rebound later this year. We think the magnitude of that rebound
will be key to any changes in short-term rates.
[CHECK MARK APPEARS HERE] FUND FACTS
GOAL: The highest possible level of current income consistent with the
preservation of capital.
START DATE: August 1, 1983
SIZE: $120 million as of June 30, 1997
MANAGER: John Maloney has served as portfolio manager since 1996. Mr. Maloney
also manages the New England Tax Exempt Money Market Fund.
* Past performance does not guarantee future results. Money market funds are
neither insured nor guaranteed by the U.S. government. These Series seek but
cannot assure a stable share price of $100.00.
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.
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.
87
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ---------------------------------------
INVESTMENTS--100.0% OF TOTAL NET ASSETS
- ---------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
BANK NOTE--2.5%
$3,000,000 Morgan Guarantee Trust New York... 6.150% 02/19/98 $ 2,998,982
------------
Total Bank Note (Cost $2,998,982). 2,998,982
------------
CERTIFICATES OF DEPOSIT--11.3%
1,000,000 Mitsubishi Bank, Ltd. ............ 5.810% 07/07/97 1,000,000
2,000,000 Sanwa Bank, Ltd. ................. 5.680% 07/10/97 2,000,005
2,000,000 Dai Ichi Kangyo Bank.............. 5.850% 07/18/97 2,000,122
2,000,000 Morgan Guaranty Trust Co. ........ 5.900% 09/30/97 2,000,921
3,000,000 Societe Generale.................. 5.740% 10/07/97 2,997,374
1,500,000 Deutsche Bank AG.................. 5.690% 10/28/97 1,498,007
2,000,000 Deutsche Bank Finance, Inc. ...... 5.690% 10/28/97 2,001,010
------------
Total Certificates of Deposit
(Cost $13,497,439)............... 13,497,439
------------
CERTIFICATES OF DEPOSIT--EURO
DOLLAR--7.5%
3,000,000 Sanwa Bank........................ 5.730% 07/31/97 3,000,024
4,000,000 Mitsubishi........................ 5.700% 08/20/97 4,000,055
2,000,000 Canadian Imperial Bank............ 5.710% 09/24/97 1,999,284
------------
Total Certificate of Deposit--Euro
Dollar (Cost $8,999,363)......... 8,999,363
------------
COMMERCIAL PAPER--78.7%
AUTOMOTIVE--12.1%
1,600,000 General Motors Acceptance Corp. .. 5.600% 07/02/97 1,599,751
2,500,000 Ford Motor Credit Corp. .......... 5.520% 07/08/97 2,497,317
2,000,000 American Honda Finance............ 5.420% 07/21/97 1,993,978
1,000,000 American Honda Finance............ 5.420% 07/22/97 996,838
2,365,000 General Motors Acceptance Corp. .. 5.660% 07/23/97 2,356,820
2,000,000 American Honda Finance............ 5.620% 07/24/97 1,992,819
1,050,000 General Motors Acceptance Corp. .. 5.690% 08/22/97 1,041,370
2,000,000 Ford Motor Credit Corp. .......... 5.570% 10/09/97 1,969,055
------------
14,447,948
------------
BANKING--13.7%
2,915,000 Bank of Montreal.................. 5.370% 07/03/97 2,914,130
1,950,000 Societe General Canada............ 5.640% 07/07/97 1,948,167
4,150,000 Bankers Trust Corp. .............. 5.410% 07/17/97 4,140,022
2,000,000 Svenska Handelsbanken, Inc. ...... 5.680% 07/25/97 1,992,427
1,125,000 Commerzbank U.S. Finance.......... 5.300% 08/01/97 1,119,866
595,000 Svenska Handelsbanken, Inc. ...... 5.650% 08/01/97 592,105
500,000 Banque National de Paris.......... 5.400% 08/20/97 496,250
2,315,000 Banque National de Paris.......... 5.650% 12/10/97 2,256,141
1,000,000 Banque National de Paris.......... 5.650% 12/10/97 974,575
------------
16,433,683
------------
DRUGS--2.4%
1,000,000 American Home Products Corp. ..... 5.650% 08/08/97 994,036
1,855,000 American Home Products Corp. ..... 5.560% 08/21/97 1,840,389
------------
2,834,425
------------
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ------------------------
INVESTMENTS--(CONTINUED)
- ------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
FINANCE--17.9%
$1,500,000 General Electric Capital Corp. .... 5.360% 07/07/97 $ 1,498,660
425,000 CIT Group Holdings, Inc. .......... 5.520% 07/14/97 424,153
2,285,000 American Express Credit Corp. ..... 5.530% 07/24/97 2,276,927
1,000,000 Heller Financial, Inc. ............ 5.680% 07/24/97 996,371
1,300,000 Heller Financial, Inc. ............ 5.600% 07/28/97 1,294,540
500,000 Heller Financial, Inc. ............ 5.620% 07/31/97 497,658
1,120,000 General Electric Capital Corp. .... 5.550% 08/12/97 1,112,748
1,465,000 Avco Financial Services, Inc. ..... 5.620% 08/13/97 1,455,166
1,260,000 American General Corp. ............ 5.550% 08/18/97 1,250,676
2,145,000 CIT Group Holdings, Inc. .......... 5.550% 08/19/97 2,128,796
3,000,000 Household Finance Corp. ........... 5.570% 08/26/97 2,974,007
2,200,000 Heller Financial, Inc. ............ 5.610% 08/28/97 2,180,116
1,900,000 Avco Financial Services, Inc. ..... 5.600% 09/03/97 1,881,084
1,500,000 Avco Financial Services, Inc. ..... 5.570% 09/15/97 1,482,362
------------
21,453,264
------------
FOOD & TOBACCO--3.9%
2,125,000 BAT Capital Corp. ................. 5.580% 07/22/97 2,118,083
1,035,000 BAT Capital Corp. ................. 5.580% 07/23/97 1,031,471
1,500,000 BAT Capital Corp. ................. 5.570% 08/01/97 1,492,805
------------
4,642,359
------------
INSURANCE--3.5%
1,885,000 Prudential Funding Corp. .......... 5.530% 07/09/97 1,882,683
2,365,000 Prudential Funding Corp. .......... 5.520% 07/11/97 2,361,374
------------
4,244,057
------------
MISCELLANEOUS--5.5%
1,500,000 PHH Corp. ......................... 5.550% 07/14/97 1,496,994
3,000,000 PHH Corp. ......................... 5.600% 07/15/97 2,993,467
2,090,000 Clipper Receivables Corp. ......... 5.580% 08/07/97 2,078,014
------------
6,568,475
------------
RETAIL--4.3%
1,500,000 Sears Roebuck Acceptance Corp. .... 5.560% 07/16/97 1,496,525
2,610,000 Sears Roebuck Acceptance Corp. .... 5.630% 07/18/97 2,603,061
1,000,000 Sears Roebuck Acceptance Corp. .... 5.650% 10/08/97 984,462
------------
5,084,048
------------
SECURITIES--11.5%
1,000,000 Lehman Brothers, Inc. ............. 6.400% 07/01/97 1,000,000
2,000,000 Merrill Lynch & Co., Inc. ......... 5.650% 07/15/97 1,995,605
1,890,000 Lehman Brothers, Inc. ............. 5.650% 09/08/97 1,869,533
2,000,000 Goldman Sachs Group................ 5.650% 07/09/97 1,997,489
2,000,000 Merrill Lynch & Co., Inc. ......... 5.570% 09/11/97 1,977,720
1,000,000 Lehman Brothers, Inc. ............. 5.660% 09/08/97 989,152
1,000,000 Merrill Lynch & Co., Inc. ......... 5.700% 10/08/97 984,325
3,000,000 Goldman Sachs Group................ 5.820% 11/17/97 2,932,585
------------
13,746,409
------------
</TABLE>
See accompanying notes to financial statements.
89
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
- ------------------------
INVESTMENTS--(CONTINUED)
- ------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
TELECOMMUNICATION--3.9%
$1,730,000 Bell Atlantic Financial Services.. 5.560% 07/01/97 $ 1,730,000
1,000,000 Bell Atlantic Financial Services.. 5.650% 07/02/97 999,843
500,000 Bell Atlantic Financial Services.. 5.550% 07/11/97 499,229
1,500,000 Bell Atlantic Financial Services.. 5.550% 07/14/97 1,496,994
------------
4,726,066
------------
Total Commercial Paper (Cost
$94,180,734)..................... 94,180,734
------------
Total Investments--100.0% (Cost
$119,676,518)(b)................. 119,676,518
Other assets less liabilities..... 46,414
------------
TOTAL NET ASSETS--100%............ $119,722,932
============
</TABLE>
(a) See Note 1A.
(b) The aggregate cost for federal income tax purposes was $119,676,518.
See accompanying notes to financial statements.
90
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
- ---------------------------------
STATEMENT OF ASSETS & LIABILITIES
- ---------------------------------
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $119,676,518
Cash................................................. 2,328
Receivable for:
Fund shares sold..................................... 1,329,044
Dividends and interest............................... 471,826
------------
121,479,716
LIABILITIES
Payable for:
Fund shares redeemed................................. $1,184,103
Withholding taxes.................................... 23,792
Dividends declared................................... 474,609
Accrued expenses:
Management fees...................................... 33,869
Deferred trustees' fees.............................. 30,762
Other expenses....................................... 9,649
----------
1,756,784
------------
$119,722,932
============
NET ASSETS
Net Assets consist of:
Capital paid in...................................... $119,722,932
------------
NET ASSETS............................................ $119,722,932
============
Computation of offering price:
Net asset value and redemption price per share
($119,722,932 divided by 1,197,230 shares of
beneficial interest)................................. $ 100.00
============
Cost of investments................................... $119,676,518
============
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Interest............................................. $3,267,968
EXPENSES
Management fees...................................... $204,467
Trustees' fees and expenses.......................... 14,051
Custodian............................................ 20,102
Audit and tax services............................... 3,451
Legal................................................ 9,340
Printing............................................. 9,655
Miscellaneous........................................ 1,821
--------
Total expenses...................................... 262,887
----------
NET INVESTMENT INCOME................................ 3,005,081
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $3,005,081
==========
</TABLE>
See accompanying notes to financial statements.
91
<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,
1996 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income........................... $ 5,024,507 $ 3,005,081
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS.......... 5,024,507 3,005,081
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income........................... (5,024,507) (3,005,081)
------------- -------------
(5,024,507) (3,005,081)
------------- -------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................... 234,677,851 156,004,363
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income........ 4,966,805 2,986,843
------------- -------------
239,644,656 158,991,206
Cost of shares redeemed......................... (212,794,096) (156,266,993)
------------- -------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS............................. 26,850,560 2,724,213
------------- -------------
TOTAL INCREASE IN NET ASSETS.................... 26,850,560 2,724,213
NET ASSETS
Beginning of the period......................... 90,148,159 116,998,719
------------- -------------
End of the period............................... $ 116,998,719 $ 119,722,932
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................. 2,346,128 1,560,050
Issued in connection with the reinvestment of:
Distributions from net investment income........ 50,319 29,868
------------- -------------
2,396,447 1,589,918
Redeemed........................................ (2,127,942) (1,562,675)
------------- -------------
Net change...................................... 268,505 27,243
============= =============
<CAPTION>
- --------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS
-------------------------------------------- ENDED JUNE 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $100.00 $100.00 $100.00 $100.00 $ 100.00 $ 100.00
------- ------- ------- ------- -------- --------
Income From Investment
Operations
Net investment income.. 3.73 2.93 3.89 5.50 4.99 2.38
------- ------- ------- ------- -------- --------
Total from Investment
Operations............ 3.73 2.93 3.89 5.50 4.99 2.38
Distributions from net
investment income...... (3.73) (2.93) (3.89) (5.50) (4.99) (2.38)
------- ------- ------- ------- -------- --------
Total Distribution..... (3.73) (2.93) (3.89) (5.50) (4.99) (2.38)
------- ------- ------- ------- -------- --------
Net asset value, end of
period................. $100.00 $100.00 $100.00 $100.00 $ 100.00 $ 100.00
======= ======= ======= ======= ======== ========
TOTAL RETURN (%)........ 3.79 2.97 4.01 5.64 5.11 2.55(a)
Ratio of operating
expenses to average net
assets (%)............. 0.38 0.38 0.40 0.50 0.50 0.45(b)
Ratio of net investment
income to average net
assets (%)............. 3.71 2.93 3.89 5.50 4.99 2.38(b)
Net Assets, End of
Period (000)........... $61,607 $59,044 $73,960 $90,148 $116,999 $119,723
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 --
</TABLE>
(a) Not computed on an annualized basis.
(b) Computed on an annualized basis.
See accompanying notes to financial statements.
92
<PAGE>
NEW ENGLAND ZENITH FUND
- --------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997 (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 of Metropolitan
Life Insurance Company ("MetLife") and New England Life Insurance Company
("NELICO"), a subsidiary of MetLife, as an investment vehicle for variable
life insurance or variable annuity products, although not all Series are
available to all such separate accounts.
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. Each Series (or their predecessors)
commenced operations on the date 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
Growth and Income Series....................................... April 30, 1993
Small Cap Series............................................... May 1, 1994
Balanced Series................................................ October 31, 1994
International Magnum Equity Series............................. October 31, 1994
U.S. Government Series......................................... October 31, 1994
Strategic Bond Opportunities 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,
approximates 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, GROWTH AND INCOME, SMALL
CAP, BALANCED, INTERNATIONAL MAGNUM 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 reported at fair
value as determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees, although
93
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
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 Fund 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. Such fluctuations are included with the net realized
and unrealized gain or loss on investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities resulting from changes in the exchange
rate.
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 Contracts Outstanding." 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.
All contracts are "marked-to-market" daily at the applicable translation
rates, and any gains or losses are recorded for financial statement purposes
as unrealized until settlement date. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
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 Growth and Income, Stock Index, Managed, Balanced,
International Magnum Equity, U.S. Government, Strategic Bond Opportunities
and Venture Value Series each may enter into futures contracts on the S&P
500 Index or other indices of stocks or on interest-bearing securities or
indices thereof, 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 or index, 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
94
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
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 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.
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, 1997.
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, 1997 MetLife held 21,464,006 shares in separate investment
accounts for annuity contracts issued by MetLife. NELICO, held the remaining
22,487,480 shares then outstanding in separate investment accounts for life
insurance and annuity contracts issued by NELICO.
As long as MetLife owns (directly or through NELICO) 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.
95
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
3. For the six months ended June 30, 1997, 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................. $ 32,614,159 $ 8,508,242 $ 30,998,206 $ 3,842,239
Capital Growth.......... 1,440,358,981 -- 1,405,305,600 --
Westpeak Stock Index.... 10,553,307 -- 1,819,233 --
Back Bay Advisors
Managed................ 54,965,963 -- 61,503,589 89,439
Loomis Sayles Avanti
Growth................. 25,228,594 -- 15,929,125 --
Westpeak Growth &
Income................. 51,369,069 -- 37,325,189 --
Loomis Sayles Small Cap. 64,686,580 -- 39,128,161 --
Loomis Sayles Balanced.. 24,408,519 12,245,926 8,193,053 7,145,416
Morgan Stanley
International Magnum
Equity................. 44,648,721 -- 37,986,035 --
Salomon Brothers U.S.
Government............. -- 39,000,974 -- 38,688,875
Salomon Brothers
Strategic Bond
Opportunities.......... 33,822,626 24,318,057 18,255,910 29,214,003
Davis Venture Value..... 62,478,110 -- 16,103,183 --
Alger Equity Growth..... 97,292,045 -- 73,776,891 --
</TABLE>
Purchases and sales of corporate short-term obligations for the Back Bay
Advisors Money Market Series aggregated $421,940,372 and $420,167,306,
respectively.
4. MANAGEMENT FEES.
TNE Advisers, Inc. ("TNE Advisers") acts as adviser to all of the Series
except the Capital Growth Series, for which Capital Growth Management Limited
Partnership ("CGM") serves as adviser. Separate advisory agreements for each
Series provide for fees as set forth below:
<TABLE>
<CAPTION>
GROSS FEES EARNED
BY TNE ADVISERS FOR
THE SIX MONTHS ENDED MANAGEMENT FEE RATE
JUNE 30, 1997 PAYABLE BY SERIES TO
BEFORE REDUCTION DUE TNE ADVISERS
SERIES TO EXPENSE LIMITS (A) (BASED ON % OF AVERAGE NET ASSETS)
------ --------------------- ---------------------------------------
<S> <C> <C>
Loomis Sayles Small Cap
Series................. $540,630 1.00% all assets
Morgan Stanley
International Magnum
Equity Series(b) ...... 184,136 0.90% all assets
Alger Equity Growth
Series................. 517,190 0.75% all assets
Loomis Sayles Avanti
Growth Series.......... 319,398 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million
Davis Venture Value
Series................. 554,852 0.75% all assets
Westpeak Growth and
Income Series.......... 332,622 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million
Westpeak Stock Index
Series................. 113,925 0.25% all assets
Loomis Sayles Balanced
Series................. 246,414 0.70% of all assets
Back Bay Managed Series. 414,226 0.50% of all assets
Salomon Brothers
Strategic Bond
Opportunities Series... 145,939 0.65% of all assets
Back Bay Advisors Bond
Income Series.......... 358,529 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...... 41,558 0.55% all assets
Back Bay Advisors Money
Market Series.......... 204,467 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.
(b) Effective May 1, 1997 the Draycott International Equity Series was renamed
the Morgan Stanley International Magnum Equity Series.
96
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(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,
1997, CGM was paid at an annual rate of 0.64% of the Capital Growth Series'
average net assets, totaling $3,872,900.
SUB-ADVISORY FEES. TNE Advisers has sub-contracted day-to-day portfolio
management responsibilities for the Series to each of the following sub-
advisers: Loomis, Sayles & Company, L.P. ("Loomis Sayles") for the Loomis
Sayles Small Cap, Loomis Sayles Avanti Growth and Loomis Sayles Balanced
Series, Draycott Partners, Ltd. for the Draycott International Equity Series
(for the period January 1, 1997 through April 30, 1997) and Morgan Stanley
Asset Management Inc. for the Morgan Stanley International Magnum Equity
Series; Fred Alger Management, Inc. for the Alger Equity Growth Series; Davis
Selected Advisers, L.P. for the Davis Venture Value Series; Westpeak
Investment Advisors, L.P. ("Westpeak") for the Westpeak Growth and Income and
Westpeak Stock Index Series; Back Bay Advisors, L.P. ("Back Bay Advisors") 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 pays each sub-adviser at the following rates
for providing sub-advisory services to the Series:
<TABLE>
<CAPTION>
FEES
PAYABLE TO ANNUAL
SUB-ADVISER BY TNE PERCENTAGE
ADVISERS RATES PAID BASED ON
FOR SIX MONTHS ENDED TO SUB- SERIES AVERAGE DAILY NET ASSET
SERIES JUNE 30, 1997 ADVISER VALUE LEVELS
------ -------------------- ---------- ------------------------------------
<S> <C> <C> <C>
Loomis Sayles Small Cap
Series................. $273,978 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
Morgan Stanley
International Magnum
Equity Series*......... 53,355 0.75% of the first $30 million
(Period May 1, 1997
through June 30, 1997) 0.60% of the next $40 million
0.45% of the next $30 million
0.40% of amounts in excess of $100 million
Draycott International
Equity Series *........ 81,855 0.75% of the first $10 million
(Period January 1, 1997
through April 30, 1997) 0.60% of the next $40 million
0.45% of amounts in excess of $50 million
Alger Equity Growth
Series................. 268,630 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.......... 194,807 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
Davis Venture Value
Series................. 308,655 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Westpeak Growth and
Income Series.......... 201,985 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
Series................. 45,570 0.10% of all assets
Loomis Sayles Balanced
Series................. 153,206 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
Managed Series......... 178,087 0.25% of the first $50 million
0.20% of amounts in excess of $50 million
</TABLE>
- -------
* Effective May 1, 1997 the Draycott International Equity Series was renamed
the Morgan Stanley International Magnum Equity Series and a new Sub-advisory
agreement between TNE Advisers and Morgan Stanley Asset Management Inc. went
into effect, replacing the prior Sub-advisory agreement between TNE Advisers
and Draycott Partners, Ltd. The Sub-advisory fees listed above reflect all
agreements which were in place during the six months ended June 30, 1997.
97
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
FEES
PAYABLE TO ANNUAL
SUB-ADVISER BY TNE PERCENTAGE
ADVISERS RATES PAID BASED ON
FOR SIX MONTHS ENDED TO SUB- SERIES AVERAGE DAILY NET ASSET
SERIES JUNE 30, 1997 ADVISER VALUE LEVELS
------ -------------------- ---------- ------------------------------------
<S> <C> <C> <C>
Salomon Brothers
Strategic Bond
Opportunities Series... $ 78,468 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.......... 191,662 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...... 17,001 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.......... 83,214 0.15% of the first $100 million
0.10% of amounts in excess of $100 million
</TABLE>
TNE Advisers, which acts as adviser to each Series except the Capital Growth
Series, is a direct wholly-owned subsidiary of New England Life Holdings, Inc.
which in turn is a wholly-owned subsidiary of NELICO. Loomis Sayles, Westpeak
and Back Bay Advisors are each independently operated subsidiaries, and CGM is
an independently operated affiliate, of New England Investment Companies, L.P.
("NEIC"). The general partners of each of Loomis Sayles, Westpeak and Back Bay
Advisors are special purpose corporations which are indirect wholly-owned
subsidiaries of NEIC. NEIC's sole general partner, New England Investment
Companies, Inc., is an indirect wholly-owned subsidiary of MetLife, which also
owns a majority of the limited partnership interest in NEIC. NEIC is the owner
of a majority limited partnership interest in the Capital Growth Series'
investment adviser, CGM. Consequently, the subadvisers (Loomis Sayles,
Westpeak and Back Bay Advisors) of eight Series of the Fund are currently
wholly-owned subsidiaries of NEIC and an additional Series is advised by a
majority-owned subsidiary (CGM) of NEIC. The sub-advisers of the remaining
five Series are not affiliated with MetLife or NEIC.
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, Loomis
Sayles Small Cap Series, Westpeak Growth and Income Series, Westpeak Stock
Index Series, Back Bay Advisors Managed Series, Back Bay Advisors Bond Income
Series and Back Bay Advisors Money Market Series. Pursuant to this arrangement
TNE Advisers bears expenses (other than advisory fees and any brokerage costs,
interest, taxes or extraordinary expenses) of each Series (except the Loomis
Sayles Small Cap Series) in excess of 0.15% of average daily net assets. In
the case of the Loomis Sayles Small Cap Series, TNE Advisers bears all the
expenses (other than any brokerage costs, interest, taxes or extraordinary
expenses) in excess of 1.00% of the Series' average daily net assets. Similar
Voluntary Expense Limitations with New England Mutual Life Insurance Company
("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 Growth & Income Series from December 1, 1994 to April 30,
1995.
98
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
The Voluntary Expense Limitations currently limit total expenses for each of
the affected series to the following levels:
<TABLE>
<CAPTION>
TOTAL EXPENSE RATIO
UNDER CURRENT VOLUNTARY
SERIES EXPENSE LIMITATION
------ -----------------------
<S> <C>
Back Bay Advisors Money Market Series............ 0.50%
Back Bay Advisors Bond Income Series............. 0.55%
Back Bay Advisors Managed Series................. 0.65%
Westpeak Growth and Income Series................ 0.85%
Westpeak Stock Index Series...................... 0.40%
Loomis Sayles Small Cap Series................... 1.00%
Loomis Sayles Avanti Growth Series............... 0.85%
</TABLE>
TNE Advisers may terminate these expense arrangements at any time. If these
expense arrangements were terminated, some of the expense ratios would be
higher.
Prior to November 1, 1994, The New England had agreed to pay the charges and
expenses of preparing, printing and distributing prospectuses and reports to
shareholders, custodian and transfer agent charges and expenses of
shareholders' and trustees' meetings.
The second form of expense limit is an Expense Deferral Agreement which has
been in effect since November 1, 1994 and relates to the Morgan Stanley
International Magnum Equity Series, Alger Equity Growth Series, Davis Venture
Value Series, Loomis Sayles Balanced Series, Salomon Brothers Strategic Bond
Opportunities Series and Salomon Brothers U.S. Government Series. Under this
Agreement, which TNE Advisers can terminate at any time, TNE Advisers 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 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 more than two years after the end of the fiscal year in which such
expenses were incurred. The percentage applicable to each Series is as
follows:
<TABLE>
<CAPTION>
% OF
AVERAGE
SERIES NET ASSETS
------ ----------
<S> <C>
Morgan Stanley International Magnum Equity Series............. 1.30%
Alger Equity Growth Series.................................... 0.90%
Davis 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>
99
<PAGE>
NEW ENGLAND ZENITH FUND
- ---------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997--(CONTINUED) (UNAUDITED)
- ---------------------------------------------------------------------
For the period January 1, 1997 to June 30, 1997, the effective expense ratios
for each Series after giving effect to the foregoing arrangements, the amounts
of expenses assumed by TNE Advisers for those Series to which the Voluntary
Expense Limitation applies, and the amounts of expenses deferred for those
Series to which the Expense Deferral Agreement applies, are as follows:
<TABLE>
<CAPTION>
TOTAL EXPENSE RATIO
UNDER CURRENT EXPENSES ASSUMED
VOLUNTARY EXPENSE BY TNE ADVISERS AS A EXPENSES DEFERRED IN EXPENSES DEFERRED IN
LIMITATION OR RESULT OF THE SERIES 1995 (SUBJECT TO 1996 (SUBJECT TO
EXPENSE DEFERRAL EXCEEDING THE REPAYMENT UNTIL REPAYMENT UNTIL
SERIES AGREEMENT VOLUNTARY EXPENSE LIMIT DECEMBER 31, 1997) DECEMBER 31, 1998)
------ ------------------- ----------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Back Bay Advisors Money
Market Series.......... 0.45% -- not applicable not applicable
Back Bay Advisors Bond
Income Series.......... 0.53% -- not applicable not applicable
Back Bay Advisors
Managed Series......... 0.63% -- not applicable not applicable
Westpeak Growth & Income
Series................. 0.85% -- not applicable not applicable
Westpeak Stock Index
Series................. 0.40% $27,670 not applicable not applicable
Loomis Sayles Small Cap
Series................. 1.00% 82,574 not applicable not applicable
Loomis Sayles Avanti
Growth Series.......... 0.85% 13,619 not applicable not applicable
Morgan Stanley
International Magnum
Equity Series.......... 1.30% not applicable $176,796 $102,652
Alger Equity Growth
Series................. 0.89%* not applicable 77,254 --
Davis Venture Value
Series................. 0.90% not applicable 88,357 41,906
Loomis Sayles Balanced
Series................. 0.85% not applicable 96,085 52,078
Salomon Brothers
Strategic Bond
Opportunities Series... 0.85% not applicable 88,120 68,374
Salomon Brothers U.S.
Government Series...... 0.70% not applicable 84,623 72,404
</TABLE>
- -------
* Effective May 1, 1996, Fred Alger Management, Inc. has agreed with TNE
Advisers that the sub-advisory fee payable by TNE Advisers 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 and does not reduce the
management fee payable by the Series. The fee reduction agreement will
expire on (a) January 1, 1998 or (b) at such time as TNE Advisers has
recovered certain expenses (generally those expenses borne by TNE Advisers
under the Expense Deferral Arrangement prior to January 1, 1996 which were
not recovered from the Series), whichever occurs first.
For the period January 1, 1997 to June 30, 1997 the amounts of expense
deferral recovered from each Series by TNE Advisers is:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
RECOVERED RECOVERED
SERIES EXPENSES DEFERRED EXPENSES DEFERRED
------ ----------------- -----------------
<S> <C> <C>
Alger Equity Growth Series........... None None
Davis Venture Value Series........... $22,614 None
Loomis Sayles Balanced Series........ None None
Salomon Brothers Strategic Bond
Opportunities Series................ None None
Salomon Brothers U.S. Government
Series.............................. None None
</TABLE>
100
<PAGE>
5. The Fund does not pay any compensation to its officers or to any trustees
who are directors, officers or employees of MetLife, NELICO, 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 GROWTH AND SMALL
INCOME GROWTH MARKET INDEX MANAGED GROWTH INCOME CAP
------ ------- ------ ------ ------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $1,766 $3,183 $1,672 $1,119 $1,737 $1,122 $1,121 $1,131
Meeting Fee............. $ 133 $ 133 $ 133 $ 133 $ 133 $ 133 $ 133 $ 133
Committee Chairman
Annual Retainer
(Contract Review)...... $ 228 $1,442 $ 148 $ 102 $ 203 $ 104 $ 104 $ 113
Committee Chairman
Annual Retainer
(Audit)................ $ 152 $ 962 $ 98 $ 68 $ 135 $ 70 $ 69 $ 75
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC
INTERNATIONAL U.S. BOND VENTURE EQUITY
BALANCED MAGNUM EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH
-------- ------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $1,086 $558 $520 $553 $1,659 $1,677
Meeting Fee............. $ 133 $133 $133 $133 $ 133 $ 133
Committee Chairman
Annual Retainer
(Contract Review)...... $ 74 $ 50 $ 17 $ 45 $ 137 $ 152
Committee Chairman
Annual Retainer
(Audit)................ $ 49 $ 33 $ 11 $ 30 $ 91 $ 101
</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.
6. SHAREHOLDER MEETING (UNAUDITED)
At a Special Meeting of shareholders of the Morgan Stanley International
Magnum Equity Series held on April 24, 1997, such shareholders voted for the
following proposals:
<TABLE>
<CAPTION>
VOTED VOTED TOTAL
FOR AGAINST VOTES
---------- --------- ----------
<S> <C> <C> <C>
1. To approve a new Sub-Advisory Agreement
(the "New Sub-Advisory Agreement") relating
to the Morgan Stanley International Magnum
Equity Series (the "Series") by and between
TNE Advisers, Inc. and Morgan Stanley Asset
Management Inc. ("MSAM")................... 427,434.82 15,401.04 442,835.86
2. To approve a second new Sub-Advisory
Agreement relating to the Series by and
between TNE Advisers, Inc. and MSAM, such
Sub-Advisory Agreement to replace the New
Sub-Advisory Agreement at the time of the
merger of MSAM's parent company, Morgan
Stanley Group Inc. with Dean Witter,
Discover & Co.............................. 426,196.37 14,600.41 440,795.78
</TABLE>
101
<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 fund
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
applicable sales charges applicable to mutual fund investment.
(4) 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 applicable
sales charges applicable to mutual fund investment.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
(13) 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.
(14) 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.
(15) 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.
102
<PAGE>
(16) 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.
(17) Russell 2000 Index consists of 2000 small market capitalization stocks
having an average market cap of $160 million.
(18) 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.
103
<PAGE>
[LOGO OF NEW ENGLAND Bulk Rate
APPEARS HERE] U.S.
Postage
PAID
Hudson, MA
Permit No.
19
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
EQUAL OPPORTUNITY EMPLOYER M/F
(C) 1997 NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
This booklet has been prepared for variable contract owners of
New England Life Insurance Company and Zenith Accumulator contract owners of
Metropolitan Life Insurance Company.
VA 1
